201355120900Income Tax - Ans. (Illustrations Questions) .

8/13/2019 201355120900Income Tax - Ans. (Illustrations Questions) .

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CA. Ajay Jain 9310167881 Handout No. 8|1SALARY

A.324. Answer already given in question bank.

A.325 Computation of Total Basic salary

(i) Salary on 1.4.11 5,000

Salary on 1.4.12 6,000Salary for P/Y 12-131.4.2012 to 31.3.2013 = 6,000 x 12 72,000

(ii) Salary on 1.2.11 2,000Salary on 1.2.12 2,500Salary on 1.2.13 3,000Salary for P/Y 12-131.4.12 to 31.1.13 = 2,500 x 10 25,0001.2.13 to 31.3.13 = 3,000 x 2 6,000Total Salary 31,000

(iii) Salary on 1.6.08 10,000Salary on 1.6.09 11,000Salary on 1.6.10 12,000Salary on 1.6.11 13,500Salary on 1.6.12 15,000Salary for P/Y 12-131.4.12 to 31.5.12 = 13,500 x 2 27,0001.6.12 to 31.3.13 = 15,000 x 10 1,50,000

1,77,000(iv)Salary on 1.3.08 15,000

Salary on 1.3.09 20,000Salary on 1.3.10 25,000Salary on 1.3.11 32,000Salary on 1.3.12 39,000Salary on 1.3.13 46,000Salary for P/Y 12- 131.4.12 to 28.2.13 = 39,000 x 11 4,29,0001.3.13 to 31.3.13 = 46,000 x 1 46,000

4,75,000

A.326 (A) Since, no rent has been paid, no exemption of HRA shall be given.

(B) 1. Received =2,4002. Rent paid - 10% of salary = 2,000 10% of 12,000 = 8003. 40% of salary = 40% of 12,000= 4,800Least of the above is 800. Therefore, 800x12 = 9,600 shall be Exempt.

(C) 1. Received = 10,0002. Rent paid - 10% of salary = 12,000-10% of 16,000 = 10,4003. 50% of salary = 50% of 16,000 = 8,000Least of the above is 8,000. Therefore, 8,000x12 = 96,000 shall be Exempt.

(D) 1. Received = 2,0002. Rent paid - 10% of salary = 1600 - 10% of 6,000 = 1,000


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CA. Ajay Jain 9310167881 Handout No. 8|23. 40% of salary = 40% of 6,000 = 2,400Least of the above is 1,000. Therefore, 1,000x12 = 12,000 shall be Exempt.

(E) 1. Received = 3,0002. Rent paid - 10% of salary = 800-10% of 10,000 = Nil3. 40% of salary = 40% of 10,000 = 4,000

Nothing shall be Exempt.

A.327 (A) 1. Received = 3,000

2. Rent paid - 10% of salary = 2,000 - 10% of 6,000 = 1,4003. 50% of salary = 50% of 6,000 = 3,000Least of the above is 1,400. Therefore 1,400x12 = 16,800 shall be Exempt.

(B) Since, no rent has been paid, no exemption of HRA shall be given.

(C) 1. Received =1,0002. Rent paid - 10% of salary = 1,200 - 10% of 8,000 = 4003. 50% of salary = 50% of 8,000 = 4,000Least of the above is 400. Therefore, 400x12 = 4,800 shall be Exempt.

(D) 1. Received = 2,0002. Rent paid - 10% of salary = 800 - 10% of 7,000 = 1003. 40% of salary = 40% of 7,000 = 2,800Least of the above is 100. Therefore 100x12 = 1,200 shall be Exempt.

(E) 1. Received = 3,0002. Rent paid - 10% of salary = 3,000 - 10% of 10,000 = 2,0003. 40% of salary = 40% of 10,000 = 4,000

Least of the above is 2,000. Therefore, 2,000x12 = 24,000 shall be Exempt.

A.328 Amount Received (5,000x12) 60,000

Less: Exempt (Note) NilTaxable Amount 60,000

Note:-Least of the following shall be exempt:1. Received = 5,0002. Rent paid 10% of salary = 2,000 - 10% of 30,000 = Nil

No need to compute any further. Therefore, Exemption shall be Nil.


Less: Exempt (Note) (12,000)Taxable Amount 48,000

Note:-Least of the following shall be exempt:1. Received = 5,0002. Rent paid 10% of salary = 4,000 - 10% of 30,000 = 1,0003. 40% of salary = 40% of 30,000 = 12,000


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CA. Ajay Jain 9310167881 Handout No. 8|3Least of the above is 1,000. Therefore, Exemption shall be 1,000x12 = 12,000


Less: Exempt (Note) (60,000)Taxable Amount Nil

Note:-Least of the following shall be exempt:1. Received = 5,0002. Rent paid 10% of salary = 20,000 - 10% of 30,000 = 17,0003. 40% of salary = 40% of 30,000= 12,000

Least of the above is 5,000. Therefore, Exemption shall be 5,000x12 = 60,000


A.332 Answer already given in question bank.


A.334. Computation of income under head salary

1. Basic Salary (16,000 x 12) 1, 92,0002. Transport allowance (Note 2) Nil3. Children Education Allowance [(150 x 3 100 x 2) x 12] 3,0004. Conveyance allowance [(1,000-600) x12] 4,8005. Tribal Area allowance (200 200) Nil6. Allowance for Research (500 x12) 6,0007. HRA (Note 1) 25,200

8. City compensatory allowance (400x12) 4,800Gross Salary 2,35,800

Note:-1. Calculation of HRA(i) Received = 3,000(ii) Rent paid 10% of salary = 2,500 - 10% of 16,000 = 900(iii) 50% of salary = 50% of 16,000 = 8,000

Least of the above is 900. Therefore, Exemption shall be 900 x 12 = 10,800Received Amount (3,000 x 12) 36,000

Less: Exempt (900 x 12)(10,800)

Taxable Amount 25,200

(2) Nothing shall be taxable because transport allowance given to the assessee is less than the limitof 800. Therefore full amount shall be exempt.

A.335. Calculation of value of benefit taxable in the hands of TiwariFor P/Y 2012-13

Value of benefit (7,00,000x10/100 x 59/365) 11,315

No. of days for which the asset was used = 28(Feb.) + 31(March) = 59 days


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CA. Ajay Jain 9310167881 Handout No. 8|4A.336. Calculation of value of benefit taxable in the hands of Tiwari

For P/Y 2012-13Value of benefit (2,000 x 2) [Feb. & March] 4,000

Note: In this case actual hire charges shall become taxable.

A.337. Value of benefit NilNote: If Laptop is given for personal use or official use, then Nil value shall be taxable.

A.338. Calculation of taxable amount in the hands of Mr.J`

Value of benefit (12,000 x 10/100 x 304/365) 999No. of days for which the asset was used = 30+31+31+30+31+30+31+31+28+31= 304 days



A.341 He can claim only 2 exemptions because 1 LTC of previous block cannot be claimed after 1 st year andas this is the second year in the block. The journey exemption brought forward cannot be utilized.It was to be utilized in the calendar year 2011 itself.

A.342 Calculation of Taxable amount in the hands of JBusiness class ticket 10,000

Less: Economy class ticket(7,000)


A.343 First AC rail fare by shortest route is exempt as per Income Tax Act, but exemption can neverexceed the amount of benefit.Hence, in this case nothing shall be taxable and exemption shall be restricted upto `2,000.

A.344 Expenses Exempt Expenses Exempt Taxable(without limit) (with limit)

(i) 25,000(ii) 20,000(iii) 17,000(iv) 18,000(v) 22,000(vi) 35,000

60,000 37,000 40,000Less: Exempt (15,000) Nil

22,000 40,000

Total Taxable perquisite = 22,000+40,000 = 62,000

A.345.


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CA. Ajay Jain 9310167881 Handout No. 8|5Gross Total Income 2, 00,000

Add: Boarding & Lodging expenses 5,000Total Income 2,05,000

Since, Total Income is greater than 2,00,000, Travelling Expenses shall be Taxable.Total Income 2, 05,000Add: Travelling expenses 30,000

2,35,000

A.346. Gross total income 1,90,000

Add: Boarding & Lodging expenses 5,000Total Income 1,95,000Since, Total Income of Bimari Ram is less than 2,00,000 i.e. 1,90,000. Therefore travelling expensesshall be exempt.


A.348. (i) Nil Taxable as fully used for official purpose(ii) Value of Perquisite

Salary of Driver met by Employer 3,000x12 36,000Add: Wear & tear 10% of 2, 00,000 20,000

56,000(iii) Since the car is used partly official and partly personal, actual expenses are irrelevant

Value of Perquisite(2,400+900)x12 39,600

(iv) Same as above(v) (900+900)x12 21,600

(vi)

(a) Actual Expenditure i.e., 70,000 shall be taxable(b) Nil Taxable(c) Total actual expenses 70,000Less: 1,800x12 21,600

Or90% of 70,000 63,000 whichever is higher (63,000)Taxable 7,000

(d) Total expenses 70,000Less: 1,800x12 21,600

Or20% of 70,000 14,000 whichever is higher (21,600)Taxable 48,400

Car 1 Car 2(vii) 1. Let car 1 be partly official and partly personal 39,600 54,000

And car 2 for personal use (2,400+900x12) (20,000+4,000 +10% of 3Lakh)Total (39,600+54,000) = 93,6002. Let car 1 be for personal use & car 2 be partly 74,000 32,400

Official and partly personal (60,000+4,000+10,000) (1,800+900x12)Total (74,000+32,400) = 1,06,400

It is better to avail option A.


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CA. Ajay Jain 9310167881 Handout No. 8|6Note: 1. If nothing mentioned about cubic capacity, then we assumed it to be below 1.6 liters.

A.349 Actual Expenses (5,000x12) 60,000

Less: 1,800 x 12 21,600Less: 900 x 12 (for chauffer) 10,800 32,400

Or

Less: 90% of 60,000 54,000 whichever is higher (54,000)Taxable Amount 6,000

A.350 Actual Expenses (5,000x12) 60,000

Less: 1,800 x 12 21,600Less: 900 x 12 (for chauffer) 10,800 32,400

OrLess: 40% of 60,000 24,000 whichever is higher 32,400)


A.351 (A) Nil(B) (4,000 + 10,000 + 8,000) = 22,000 x 12 = 2,64,000(C) (1,800 + 900 = 2,700) = 2,700 x 12 = 32,400

A.352 (A) Nil(B) (4,000 + 8,000) = 12,000 x 12 = 1,44,000(C) 4,000 + 8,000 = 12,000

2,400(20% of 12,000) or 1,800 + 900 = 2,700

(12,000 2,700 = 9,300) 9,300 x 12 = 1,11,600A.353

Calculation of salary1. Basic pay (Note 1) 96,0002. Dearness allowance (96,000 x 40% x 30%) 11,5203. Commission ( `300 x 9) 2,7004. Children Education Allowance [(250 x 6 x 9) (100 x 2 x 9)] 11,7005. Allowance for personal expenses [(12,000-8,400) x 9] 32,4006. Domestic servant NIL

7. Overtime allowance (200 x 9) 1,8008. Dress Allowance (400-50) x 9 3,150

Salary for the purposes of House Rent Allowance 1,59,270

Value of house taxable in the hands of employee:-(i) Rent paid by employer = 8,000 x 9 = 72,000(ii) 15% of salary 1,59,270 = 23,890

Whichever is less23,890 4,500 = 19,390


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CA. Ajay Jain 9310167881 Handout No. 8|7Note: 1. Computation of basic salary

Salary on 1.11.2009 5,000Salary on 1.11.2010 7,000Salary on 1.11.2011 9,000Salary on 1.11.2012 12,000Salary on 1.11.2013 15,000Salary for the purpose of house:

1.7.2012 to 31.10.2012 = 9,000 x 4 = 36,0001.11.2012 to 31.3.2013 = 12,000 x 5 = 60,000Total salary for the year = 96,000

A.354 Calculation of salary

1. Basic[Note 1] 74,0002. Dearness Allowance (74,000 x 30%) 22,2003. Reimbursement of income tax of employee 8,000

4. Tribal Area Allowance [(300 - 200) x 12] 1,2005. Rent free house [Note 2] 6,0276. Furniture(2,00,000 x10% x 151/365) 8,274

Income u/h salary 1,19,701

Notes:-1. Basic salary:- 1-2-2009 3,500

1-2-2010 4,0001-2-2011 5,0001-2-2012 6,0001-2-2013 7,000

Salary for the P/Y 2012-13From 1.4.2012 to 31.1.2013 (6,000 x 10) 60,000From 1.2.2013 to 31.3.2013 (7,000 x 2) 14,000

Total Salary 74,000

2. Computation of Value of RFA:-From 1-11-12 to 31-3-13

40,180 x 15% 6,027Or 3,000 x 5 15,000Whichever is lower i.e., 6,027

Salary for RFA:-

(i) Basic Salary [(6,000 x 3) + (7000 x 2)] 32,000(ii) DA (32,000 x 30% x 80%) 7,680(iii) Tribal Area Allowance (100 x 5) 500

40,180

A.355 Mumbai House Chennai House

(i) Rent paid = 2,000(ii) 15% of salary = 15% of 50,000 = 7,500 15% of salary = 15% of 50,000 = 7,500

Whichever is lower 7,500 x 12 = 90,0002,000 x 12 = 24000


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CA. Ajay Jain 9310167881 Handout No. 8|8

A.356 First 90 days(April, May & June)

Mumbai House(i) 15% of salary = 15% of 50,000 = 7,500 x 3 = 22,500(ii) 2,000 x 3 months = 6,000

Whichever is less i.e.6,000

Chennai House15% of salary = 15% of 50,000 = 7,500 x 3 = 22,500

More beneficial to the assessee is to taxable Mumbai House.

After 90 days(July to March)Mumbai House Chennai House

2,000 x 9 = 18,000 + 7,500 x 9 = 67,500

Computation of taxable value of rent free houseUpto 90 daysMumbai House (April, May, June) 6,000After 90 daysMumbai House (July to March) 18,000

Chennai House (July to March) 67,500 Total Amount of Rent free accommodation 91,500

A.357

(i) 10% of salary = 10% of 20,000 = 2,000 x 12 24,000

(ii) 7.5% of salary = 7.5% of 20,000 = 1,500 x 12 18,000

A.358 (i) Rent paid = 8,000

(ii) 15% of salary = 15% of 1,00,000 = 15,000

Least of the above is 8,000. Therefore, taxable amount shall be 8,000 x 12 = 96,000.

Note: If house is taken on rent then population of city is not relevant.

A.359 (i) Rent paid = 18,000

(ii) 15% of salary = 15% of 1,00,000 = 15,000

Least of the above is 15,000. Therefore, taxable amount shall be, 15,000 x 12 = 1,80,000.

A.360 Value fixed by Govt. (license fees) = 500 x 12 = 6,000

A.361


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CA. Ajay Jain 9310167881 Handout No. 8|9(i) Rent paid = 24,000

(ii) 24% of salary = 24% of 2,00,000 = 48,000

Least of the above is 24,000. Therefore, taxable amount shall be, 24,000 x 12 = 2,88,000.

A.362 Taxable amount 2,88,000Less: Recovered from employee (12,000)

Taxable amount 2,76,000

Note: It is assumed that the value fixed by government is being recovered from the employee.

A.363 Calculation of rent free accommodation

RFA shall be taxable from 1-1-2013 to 31-3-2013

Taxable Value of Rent free House (Note 1) 22,500

Add: Taxable value of furniture (Note 2) 592

Total amount of rent free accommodation 23,092

Less: Amount recovered from employee

(3,000) Taxable amount of rent free accommodation 20,092

Note: 1. Calculation of taxable amount of house15% of salary

15% of 50,000 = 7,500 x 3 = 22,500

2. Calculation of taxable amount of furniture

10% of 24,000 x 90/365 = 592

A.364 (i) Rent Paid = 4,000(ii) 15% of salary = 15% of 30,000 = 4,500

Least of the above is 4,000. Therefore, taxable amount shall be = 4,000 x 12 = 48,000






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CA. Ajay Jain 9310167881 Handout No. 8|10A.369. Answer already given in question bank.

A.370. Computation of Interest Free Loan

Rate of Interest shall be (10% - 7%) = 3%For the month of June = 3,00,000 x 3/100 x 1/12 750For the month of July = 4,00,000 x 3/100 x 1/12 1,000August to December = 4,00,000 x 3/100 x 5/12 5,000

January to March = 9,00,000 x 3/100 x 3/12 6,750Taxable Amount 13,500

A.371. Calculation of benefit of interest For the month of March = 1, 00,000 x 12% x 1/12 = 1,000

A.372. Calculation of benefit of interest For the month of Feb. (5,00,000 x 10% x 1/12) 4,167

For the month of March (Note) NIL

Total Value of benefit 4,167

Note: Interest for the month of March will be Nil as there is no outstanding balance on the last day of

month of March.

A.373.

Answer will remain same.

A.374. Calculation of benefit of interestRate of interest shall be (10% - 2%) = 8%Interest for the month of February (5,00,000 x 8% x 1/12) 3,333Interest for the month of March (Note) NILTotal value of benefit 3,333

Note: Interest for the month of March will be Nil as there is no outstanding balance on the last day ofmonth of March.


A.376. Pension receive during the P/Y 2012-13

1,000 x 5 = 5,000

A.377. Computation of Pension received during the P/Y 2012-13(i) Uncommuted Pension (2 x 2,000) 4,000(ii) Commuted Pension 1,00,000

Total Pension received 1,04,000


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A.378. Computation of pension received during the P/Y 2012-13(i) Uncommuted pension

1-7-2012 to 31-12-2012 (6 x 3,000) 18,0001-1-2013 to 31-3-2013 (3,000 x 70% x 3) 6,300 24,300

(iii) Commuted pension 2,00,000Total pension received 2,24,300

Computation of pension taxable during the yearCommuted Pension:

(i) Commuted value of 100% pension (2,00,000/30% x 100%) 6,66,667(ii) of step(i) is exempt (6,66,667 x ) 3,33,334

Taxable amount of commuted pension2,00,000 3,33,334 = NILTaxable amount of uncommuted pension18,000 + 6,300 = 24,300


A.380. Computation of taxable Gratuity(i) Amount received = 15,00,000(ii) 10, 00,000(iii) 52,000 x 15/26 x 40 years = 12,00,000

Least of the above is 10,00,000. Therefore, 10,00,000 shall be Exempt.

Amount received 15,00,000Less: Exemption (10,00,000)

Taxable amount of Gratuity 5,00,000

A.381. Computation of taxable Gratuity(i) Amount received = 15,00,000(ii) 10, 00,000(iv) 26,000/26 x 15 x 40 years = 6,00,000




A.382. Computation of taxable Gratuity



Note: (1) Least of the following shall be exempt:(i) Amount received = 7,00,000(ii) 10, 00, 000


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CA. Ajay Jain 9310167881 Handout No. 8|12(iii) 27,000/30 x 15 x 30 years = 4,05,000


(2) Average salary for the last 10 months = (25,000 x 6)+(4 x 30,000) = 27,00010

A.383. Answer will remain same, because for employee who is not covered under gratuity act, only

complete 12 month period shall be taken.

A.384. Answer already given in question bank. A.385. Answer already given in question bank.




A.389. Calculation of taxable salary for P/Y 12-13

Salary (Excluding Employees contribution) (44,000 x 12) 5,28,000 Add: Employees contribution (6,000 x 12) 72,000

Taxable Salary 6,00,000

Note:- Employees contribution is taxable in all the case be it SPF, URPF or RPF.

A.390. Calculation of taxable salary for P/Y 12-13Taxable income = 30,000 x 12 = 3,60,000

A.391. Calculation of taxable salary for P/Y 12-13 Salary (Excluding Mrs. Ts contribution) (10,000 x 12) 1,20,000

Add: Mrs. Ts Contribution (1,000 x 12) 12,000Taxable Salary 1,32,000

A.392. Yes, deduction shall be available of such contributions u/s 80C of chapter VI-A. (This topic willbe discuss later on under chapter deduction).




A.396. Calculation of taxable amount of Leave Salary(iii) 60,000 x 10 = 6,00,000


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CA. Ajay Jain 9310167881 Handout No. 8|13(iv) Leaves allowed = 50 days or 30 days whichever is less i.e. 30 days

Less: Leaves actually taken = 25 days

Balance leaves = 5 days

Converted into rupees = 15 years x 60,000 x 5/30 days = 1,50,000

A.397. Calculation of taxable amount of Leave Salary(iii) 15,000 x 10 = 1,50,000(iv) Leaves allowed = 70 days or 30 days whichever is less i.e. 30 days





(iv) Leaves allowed = 60 days or 30 days whichever is less i.e. 30 daysLess: Leaves actually taken = 55 days

Balances leaves = Nil

Since 4 th limit is nil, hence exemption shall be nil. Therefore, full amount shall be taxable.


(iv) Leaves allowed = 45 days or 30 days whichever is less i.e. 30 days

Less: Leaves actually taken (Note) = 20 daysBalance leaves = 10 days

Converted into rupees = 35 x 90,000 x 10/30 days = 10,50,000

Note:- Leaves Allowed = 45 days

Less: Leaves accumulated (not taken) = 25 days

Leaves taken = 20 days

A.400. Calculation of taxable amount of Leave Salary(iii) 30,000 X 10 = 3,00,000

(iv) Leaves allowed = 60 days or 30 days whichever is less i.e. 30 days

Less: Leave actually taken = 5 days

Balances leaves = 25 days


Note: - Leaves Allowed = 60 days

Less: Leaves standing to credit (not taken) = 55 days


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CA. Ajay Jain 9310167881 Handout No. 8|14Leaves taken = 5 days

A.401. Calculation of taxable amount of Leave Salary(i) Leaves allowed = 40 days or 30 days whichever is less i.e.30 days

Less: Leaves taken =22 days

Balance leaves = 8 daysConverted into rupees = 7 years x 6,000 x 8/30 days = 11,200

(ii) Leaves allowed = 40 days or 30 days whichever is less i.e. 30 days

Less: Leaves taken = 25 days


Converted into rupees = 7 years x 6,000 x 5/30 days = 7,000

Note:- Leaves allowed = 40 days

Less: Leaves standing to his credit (not taken) = 15 days

Leaves taken = 25 days

A.402. Calculation of taxable amount of Leave Salary Leaves allowed = 12 days or 30 days whichever is less i.e.12 days


Leave not taken = 2 days

Converted into rupees = 2 days x 20 = 40

40 shall be fully taxable because A has not yet retired.

A.403. The answer will remain same as the employee has not yet retired and we are computing leavesalary during continuity of his job.

A.404. Nil, because leave salary of government employee at the time of retirement is wholly exempt.

A.405. Calculation of taxable amount of Leave Salary Amount received 2,00,000

Less: Exemption (Note) Nil

Taxable amount 2, 00,000

Note:- Least of the following shall be Exempt:-

1. Amount received = 2,00,000

2. 3,00,000

3. 6,000x10 = 60,000


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CA. Ajay Jain 9310167881 Handout No. 8|154. Leaves allowed = 50 days or 30 days whichever is less i.e.30 days


Balance leaves = Nil

Least of the above is Nil, therefore, Exemption shall be Nil.












A.417 Answer already given in question bank. [

A.418 Computation of Income under head salary 1. Basic salary (Note 1) 2,78,0002. Dearness Allowance(30% of 2,78,000)(Note 2) 83,4003. Transport Allowance [(900 - 800) x 12] 1,2004. Conveyance Allowance (300x12) (Note 3) 3,6005. Gift (9,000 - 5,000) 4,0006. Free Meal [(1,500 x 12) - (50 x 25 x 12)] (Note 4) 3,0007. Medical Expenses (18,000 - 15,000) 3,0008. Professional tax 3,0009. HRA (Note 5) 25,20010. RFA (Note 6) 9,33011. Electricity and water charges (1,000x3) 3,00012. Furniture [(200x3)+(30,000x10/100x90/365)] 1,340

Gross Salary 4,18,070Less: Deduction u/s 16 (3,000)

Income u/h Salary 4,15,070Notes:- 1. Computation of basic salary

Salary on 1.2.2009 20,000Salary on 1.2.2010 21,000Salary on 1.2.2011 22,000Salary on 1.2.2012 23,000


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CA. Ajay Jain 9310167881 Handout No. 8|16Salary on 1.2.2013 24,000

Salary for the P/Y 2012-131.4.2012 to 31.1.2013 23,0001.2.2013 to 31.3.2013 24,000

Total salary [(23,000 x 10)+(24,000 x 2)] 2,78,000

2. It is assumed that DA is not under contract.3. It is assumed that nothing has been spent on conveyance.4. It is assumed that there are 25 working days in a month.5. Computation of HRA(a) Received = 4,000(b) Rent paid 10% of salary = 3,500 - 10% of 23,000 = 1,200(c) 40% of salary = 40% of 23,000 = 9,200

Least of the above is 1,200. Therefore, Exemption shall be 1,200 x 9 = 10,800Taxable amount = 36,000 - 10,800 = 25,200

6. Computation of RFAFrom 1-1-13 to 31-3-13Salary for the purpose of RFA1. Basic Salary (23,000+24,000 x 2) 71,0002. Transport allowance (100x3) 3003. Conveyance (300x3) 900

72,20015% of salary = 15% of 72,200 10,830

Less: Received from employee (1,500)Taxable amount 9,330

7. It is assumed that population of the city is more than 25 lakhs.









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CA. Ajay Jain 9310167881 Handout No. 8|17A.426 Answer already given in question bank.






HOUSE PROPERTY

A.435

Gross Annual Value (Note 1) 2,16,000(-)Municipal taxes (2,000)

Annual value u/s 23(1)(a) 2,14,000

(-) Deductions u/s 24Standard deduction 30% of 2, 14,000 64,200Interest 80,000 (1,44,200)Income u/h House Property u/s 22 69,800

Note: (1) Gross Annual Value(a) Expected Rent (MV ` 2,16,000 or FRV `1,92,000 whichever is higher ) 2,16,000(b) Actual Rent (10,000 x 10 months) 1, 00,000

Whichever is higher `2,16,000

Gross annual value as per Sec 23(1)(a) shall be 2, 16,000


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(2) In this case Sec23(1)(c) will not apply because even if house would not have been vacant,then AR would have been 10,000x12 = 1,20,000 which is still less than ER, thus theshortfall of rent is not due to vacancy.

Relief under this section is available only if the difference is due to Vacancy.

(3) Deductions for expenses like repair ,insurance ,land revenue ,ground rent ,etc areincluded in standard deduction of 30% and hence no separate deduction shall beallowed for these expenses.

A.436 Answer already given in question bank


A.438 Gross Annual Value [Refer Note1] 2,00,000

(-)Municipal taxes 2,000

Annual value u/s 23(1)(c) 1,98,000(-) Deductions u/s 24Standard deduction (30% of 1,98,000) 59,400Interest on loan 80,000 (1,39,400)

Income u/h House Property u/s 22 58,600Notes:

(1) Gross Annual Value:-(a) Expected rent (higher of MV ` 2,16,000 or FRV ` 1, 92,000) 2, 16,000

(ER is always taken for the entire p/y)(b) Actual Rent 2, 00,000

[20,000x10] AR is always taken only for the period it is actually let out.

Gross annual value as per Sec 23(1)(c) shall be 2,00,000


A.439 Gross annual value [Refer Note] 2,16,000

(-) Municipal taxes 2,000Annual value u/s 23(1)(a) 2,14,000(-) Deductions u/s 24Standard deduction (30% of 2,14,000) 64,200

Interest on loan 80,000 (1,44,200)Income u/h house property u/s 22 69,800

Notes:-1. Gross Annual Value:- (i) Municipal Value 2,16,000

(ii) FRV 1,92,000Whichever is higher 2,16,000

(a) Expected Rent 2,16,000(b) Actual Rent (20,000X10) 2,00,000


19/92

CA. Ajay Jain 9310167881 Handout No. 8|19Gross annual value as per Sec 23(1)(a) shall be 2,16,000

Since the house was not vacant but self occupied by owner for few months, house shall be deemedto be let out for full 12 months.

A.440 Building A (Self occupied) Building B (Let out)

Gross Annual Value (Note 1) - 2,16,000(-)Municipal taxes - 2,000Annual value u/s 23(1)(a) NIL 2,14,000(-) Deductions u/s 24

Standard deduction NIL (64,200)Building B(30% of 2,14,000)Interest on loan (30,000) (80,000)Income u/h house property u/s 22 (30,000) 69,800Net Income u/h House Property = (30,000)+69,800 = 39800

Note: (1) Gross Annual Value

Expected Rent

(MV ` 2,16,000 or FRV `1, 92,000 whichever is higher) 2, 16,000

Gross annual value as per Sec 23(1)(a) shall be 2, 16,000Nothing is mentioned about actual rent, so that

(2) As per Sec 23(2), annual value of self occupied house shall be nil.

(3) Interest in case of self occupied building, the interest shall be limited to ` 30,000 as it wastaken for repair. No such restriction shall be applicable for let-out house.

A.441 Floor 1 Floor 2(Let out) (Self occupied)

Gross Annual Value (Note 1) 2,40,000 -(-)Municipal taxes (10,000) -

Annual value u/s 23 2,30,000 Nil(-) Deductions u/s 24

Standard deduction 30% (69,000) NilFloor 1-(30% of 2,30,000)Interest on loan (90,000) (30,000)

Income u/h House Property u/s 22 71,000 (30,000)Net Income u/h House Property = 71,000 + (30,000) = 41,000

Note: (1) Gross Annual Value

Expected Rent 1, 08,000(MV ` 1,08,000 or FRV ` 96,000 whichever is higher)

Actual Rent ( `20,000 x 12) 2,40,000

Gross annual value as per Sec 23 shall be 2,40,000

As per Sec 23(2), annual value of floor 2(self occupied) shall be nil.

A.442 Gross Annual Value [Note1] 2,16,000


20/92

CA. Ajay Jain 9310167881 Handout No. 8|20(-)Municipal taxes (2,000)

Annual value u/s 23(1)(a) 2,14,000(-) Deductions u/s 24

Standard deduction(30% of 2,14,000) 64,200Interest on loan 80,000 (1,44,200)Income u/h House Property u/s 22 69,800

Note:

(1) Gross Annual ValueExpected Rent 2, 16,000(MV ` 2, 16,000 or FRV `1, 92,000 whichever is higher)Actual Rent ( `10,000 x 10) 1,00,000Gross annual value as per Sec 23(1)(a) shall be 2, 16,000

(2) Deductions for expenses like repair ,insurance ,land revenue ,ground rent ,etc are included instandard deduction of 30% and hence no separate deduction shall be allowed for these expenses.


A.444 Floor 1 Floor 2

Self occupied( `) Let Out( `)Gross annual value [Note1] - 1,20,000(-) Municipal taxes - 1,000Annual Value u/s 23(1)(b) Nil 1,19,000(-) Deduction u/s 24

Standard deduction Nil (35,700) Floor 2 (30% of 1,19,000)

Interest on loan (30,000) (40,000)Income u/h house property u/s 22 (30,000) 43,300

Net income from House Property = 43,300 + (30,000) = 13,300

Notes:-(1) Gross Annual Value:- (i) Municipal Value (9,000x12) 1,08,000

(ii) FRV (8,000x12) 96,000Whichever is higher 1,08,000

(a) Expected Rent 1,08,000(b) Actual Rent 1,20,000

Gross annual value as per Sec 23(1)(b) shall be 1, 20,000(2) As per Sec 23(2), annual value of self occupied house shall be nil.

(3) Deductions for expenses like repair ,insurance ,land revenue ,ground rent ,etc are included

in standard deduction of 30% and hence no separate deduction shall be allowed for theseexpenses.

A.445 Computation of income u/h house property for P/Y 12-13 :-Let out Portion ( `)

Gross Annual Value (Note 1) 1, 20,000(-) Municipal taxes paid (1,000)

Annual Value u/s 23(1)(b) 1, 19,000(-)Deductions u/s 24

Standard Deduction (30% of 1,19 ,000) 35,700


21/92

CA. Ajay Jain 9310167881 Handout No. 8|21Interest on loan for repairs (80,000/2) 40,000 (75,700)Income u/h house property u/s 22 43,300

Note :-( 1)Gross Annual Value(a) Expected Rent 1, 08,000

(MV ` 1, 08,000 or FRV `96,000 whichever is higher)Actual Rent ( `10,000 x 12) 1,20,000

Gross annual value as per Sec 23(1)(b) shall be 1,20,000

(2) Self-occupied floor will have no treatment u/h house property but treatmentu/h PGBP.










A.454 Since Yuvi has purchased a house in Delhi and has treated it to be self occupied, the house inChandigarh shall be deemed to be let out as per section23(4).

Gross Annual Value (Note 1) 1,60,000(-)Taxes paid to state government (not allowed deduction) NILAnnual value u/s 23(1)(a) 1,60,000(-) Deductions u/s 24

Standard deduction (30% of 1,60,000) 48,000Interest on loan 70,000 (1,18,000)

Income u/h house property u/s 22 42,000Note:

(1) Gross Annual ValueExpected Rent 1, 60,000(MV ` 1,40,000 or FRV ` 1,60,000 whichever is higher)Actual Rent Nil

Gross annual value as per Sec 23(1)(a) shall be 1,60,000(2) Interest in case of Let out building shall not be limited to ` 30,000/1,50,000.

A.455(i) The house is deemed to be let out and thus entire 40,000 shall be allowed deduction.(ii) 20,000, actual value(20,000) or maximum Limit (30,000) whichever is less


22/92

CA. Ajay Jain 9310167881 Handout No. 8|22This house is covered u/s 23(2) but deduction cannot exceed Actual interest payable.

(iii) ` 1,60,000 since the house is let out and not self occupied.(iv) Restricted to the limit of 30,000 , the house is self occupied and the loan has been

taken for repair and not construction/purchase.(v) House A = ` 30,000 ,since the house is self occupied and the loan has been taken for

repair and not construction/purchase.House B = 1,70,000 - no restriction on interest deduction if the house has been let out.

(vi) ` 1,80,000 no restriction on interest deduction if the house has been let out.(vii) Current Years interest 1,00,000

Add: Pre construction periods interest = 3,00,000/5 = 60,000Total Deduction to be claimed 1,60,000

(viii) Current Years interest 1,00,000Add: Pre construction periods interest = 3,00,000/5 60,000

Total Deduction to be claimed 1,60,000But deduction shall be limited to 1,50,000

All three conditions are satisfied so no restriction of 30,000. Deduction allowed = 1,50,000

A.456

A.457Current year interest 60,000

(+) Pre construction interest (Note 1) 84,000Total Interest deductible in P/Y 12-13 1,44,000

Note:-1. 5,00,000 x 12 x 7/100 = 4,20,000

Pre-construction interest deductible in p/y 12-13 = 4,20,000/5 = 84,0002. From the year 03-04 to 09-10, although interest was payable but no deduction of

interest shall be allowed in those years, since the house was not in existenceduring those years.

Deduction of interest relating to these years shall start from the year 10-11 i.e. the year ofcompletion of the house. Therefore total interest from 03-04 to 09-10 shall be aggregated &shall be divided by 5 & deduction shall start from the year 10-11.

3. As nothing has been specified, it is assumed that the full loan amount is stilloutstanding.

Pre- construction period Current year period

Nil construction completed in the year of takingloan

1 yr `10,000

16 months - `2,667 Nil loan repaid before PY 12-13

Nil 5 yrs have expired Nil loan repaid before PY 12-13

Nil - construction completed in the year of taking

loan

1 yr `10,000

4 yrs - `8,000 1 yr - `10,000

30 months / 2.5 yrs - `5,000 4 months - `3,333

22 months - `3,667 6 months - `5,000

6 months - `1,000 1 yrs - `10,000


23/92


A.458

Current year interest 60,000(+)Pre construction interest (Note 1) 12,000

Total Interest deductible in P/Y 12-13 72,000

Note: -

1. 5,00,000x12/100 = 60,000Pre-construction interest deductible in P/Y 12-13 = 60,000/5 = 12,000During 09-10 although interest was payable for the year , no deduction of interest shallbe allowed since the house was not in existence


A.459Current year interest 60,000(+)Pre construction interest (Note1 ) 48,000

Total Interest deductible in P/Y 12-13 1,08,000

Note :-1. Pre-construction Period = 4 years

Pre construction interest = 5,00,000x12/100 x 4 = 2,40,000Pre-construction interest deductible in p/y 12-13 =2,40,000/5 = 48,000


A.460 Current year interest 60,000(+)Pre construction interest (Note1) 48,000Total Interest deductible in P/Y 12-13 1,08,000

Note :-1. Total Pre-construction interest = 5,00,000x12/100x4 = 2,40,000

Pre-construction interest deductible in p/y 12-13 = 2,40,000/5 = 48,0002. The month of completion is not relevant, only the year of completion is relevant.

Interest of the entire year of completion is allowed deduction in the same year.3. As nothing has been specified, it is assumed that the full loan amount is still

outstanding.

A.461Current year interest for 10 months 50,000

(+) Pre construction interest (note) 51,000Total Interest deduction to be allowed in P/Y 12-13 1,01,000

Note:-Pre-construction Period = 3 months + 4 years = 51 months


24/92

CA. Ajay Jain 9310167881 Handout No. 8|24Interest = 5,00,000x12%x51/12 = 2,55,000

Interest for p/y 12-13 = 2,55,000/5 = 51,000

A.462Current year interest Nil

(+)Pre construction interest 36,000Total Interest deductible in P/Y 12-13 36,000

Note :-1. Pre-construction Period is 3 years i.e., 1-1-08 to 31-12-10

Since the entire loan has been repaid on 31.12.10, i.e. before P/Y 12-13, thereforeentire interest is Pre-construction Period interest & will be allowed deduction in5 equal installments from the year of completion, i.e. from PY 12-13.Interest to be allowed deduction is 5,00,000 x 12%x3 = 1,80,000/5 = 36,000


Add: Pre construction interest NilTotal Interest to be allowed deduction in 12-13 60,000

Note :-Pre construction interest is nil as full amount of interest has been allowed deduction in 5 equalinstallments starting from P/Y 07-08 to P/Y 11-12

A.464Current year interest 60,000Add: Interest of Pre-construction Period Nil

Interest to be allowed deduction in p/y 12-13 60,000

Note: The entire interest from 1-4-2009 shall be allowed deduction in P/Y 09-10 itself, since theconstruction was completed in the same year in which the loan was taken. Therefore, there

will be no pre construction periods interest. A.465

Current year interest 30,000Interest of Pre-construction Period (note-1) 42,000Interest to be allowed deduction in p/y 12-13 72,000

Note :-1. 3,00,000 x 10 x 7/100 = 2,10,000

Pre-construction interest deductible in 12-13 = 2,10,000/5 = 42,0002. From the year 03-04 to 09-10, interest was payable but no deduction of interest

shall be allowed in that year as the house was not in existence.Deduction of interest related to these years shall start from p/y 10-11, when theconstruction is completed. Thus total interest from 03-04 to 09-10 shall be aggregated &divided by 5 and deduction shall start from p/y 10-11.

(i) As nothing has been specified, it is assumed that the full loan amount is stilloutstanding.


(+) Pre construction interest (Note 1) 8,800Total Interest deductible in P/Y 12-13 52,800

Note :-(i) Pre-construction period = 1-4-2009 to 31-3-2010


25/92

CA. Ajay Jain 9310167881 Handout No. 8|254,00,000x11/100 x 1 year= 44,000Pre-construction interest deductible in 12-13 = 44,000/5 = 8,800

(ii) During 09-10, no deduction of interest shall be allowed since the house was notin existence, although, interest was payable for the year 09-10 also.

(iii) As nothing has been specified, it is assumed that the full loan amount is stilloutstanding.

A.467 Current year interest 48,000(+) Pre construction interest (note) 38,400

Interest to be allowed deduction in p/y 12-13 86,400Note :-

(i) Pre-construction period = 1-4-2008 to 31-3-2012 = 4 yearsInterest of Pre-construction Period = 6,00,000 x8 /100x4 = 1,92,000Pre construction interest to be allowed deduction in P/Y 12-13 = 38,400

(ii) As nothing has been specified, it is assumed that the full loan amount is stilloutstanding.


(+) Pre construction interest 39,200Total interest to be allowed deduction in p/y 12-13 88,200

Note :-(i) Pre-construction period = 1-4-2008 to 31-3-2012 = 4 years

Interest relating to Pre-construction Period = 7,00,000x7x4/100 = 1,96,000Pre construction interest to be allowed deduction in P/Y 12-13 = 1,96,000/5 = 39,200(ii) As nothing has been specified, it is assumed that the full loan amount is still

outstanding.

A.469Current year interest for [9,00,000 x6% x 10/12] 45,000(+)Pre construction interest (note) 45,900Total Interest deduction to be allowed in P/Y 12-13 90,900

Note :- Pre-construction Period = 01-10-2008 to 31.03.2012= 3 months + 4 years = 51 months

interest = 9,00,000x6%x51/12 = 2,29,500Interest for p/y 12-13 = 2,29,500/5 = 45,900

A.470Current year interest Nil

(+) Pre construction interest 35,880Total Interest deductible in P/Y 12-13 35,880Note :-

1. Pre-construction Period is 3 years i.e., 1-1-08 to 31-12-10Since entire loan is repaid on 31.12.10, i.e. before PY 12-13, entire interest pertains toPre-construction Period & will be allowed in 5 equal installments from the year ofcompletion of house.Interest to be allowed deduction is 4,60,000x13%x3 = 1,79,400/5 = 35,880


(+) Pre construction interest Nil


26/92

CA. Ajay Jain 9310167881 Handout No. 8|26Total Interest to be allowed deduction in P/Y 12-13 79,800

Note :-Pre construction interest is nil as full amount of interest has been allowed deduction in5 equal installments starting from P/Y 07- 08 to 11-12.Therefore since the period of 5 years has already expired assessee cannot claimdeduction of pre- construction periods interest anymore.

A.472 Current years interest [8,60,000x12%] 1,03,200Add: Interest of Pre-construction Period [Note] Nil

Total Interest deduction for 12-13 1,03,200Note :- Since construction was completed in the year of taking loan itself and the house came into

existence, pre construction period does not exist.

A.473[

(i) ` 1,60,000 as the house has been deemed to be let out u/s 23(3).

(ii) 30,000 will be deducted as this house is self occupied and the loan has been taken forrepair and not purchase/construction.

(iii) ` 1,70,000 No restriction will be applied as the house is let out and not self occupied.(iv) The house shall be treated as self occupied u/s 23(2). So ,deduction shall be 20,000

because it shall be the lower of actual interest (20,000) and maximum limit (30,000).(v) House A = Self Occupied

Since, the House A is self occupied, therefore the deduction of interest would beallowed subjected to the limit of `30,000.Hence deduction shall be 30,000.House B = Let outTherefore, Deduction will be allowed an actual basis. Hence, deduction of `40,000Since, the house was let out deduction would be allowed on actual basis. Hence

,deduction `40,000(vi) ` 1, 40,000 - No restriction will be applied as the house is let out and not self

occupied.(vii) Current Years interest 20,000

Add: Pre construction periods interest = 1,00,000/5 20,000Total Deduction to be claimed 40,000

(viii) Current Years interest 20,000Add: Pre construction periods interest = 1,00,000/5 20,000

Total Deduction to be claimed 40,000All three conditions are satisfied so maximum limit shall be 1,50,000.


A.475 Floor 1 (Let out)Gross Annual Value (Note 1) - 1,08,000

(-)Municipal taxes 1,500Annual value u/s 23(1)(a) 1,06,500(-) Deductions u/s 24

Standard deduction (30% of 1,06,500) 31,950Interest on loan (1,80,000x50%) 90,000 (1,21,950)Income u/h house property/s 22 (15,450)


27/92

CA. Ajay Jain 9310167881 Handout No. 8|27Note:

(1) Gross Annual Value(a) Expected Rent 1, 08,000

(MV ` 9,000x12 = 1,08,000 or FRV ` 8,000x12 = 96,000 whichever is higher)(b) Actual Rent (5,000x12) 60,000

Gross annual value as per Sec 23(1)(a) shall be 1, 08,000 (2) The floor which has been occupied for own business or profession shall not be treated u/h

House property.(3) Interest in case of Let out building, the interest shall not be limited to ` 30,000/1,50,000.(4) Deduction for expenses like repair ,insurance ,land revenue ,ground rent ,etc are included in

standard deduction of 30% and hence no separate deduction shall be allowed for theseexpenses.




A.479 Gross Annual Value (note1) 2,16,000 (-)Municipal taxes 2,000Annual value u/s 23(1)(a) 2,14,000(-) Deductions u/s 24

Standard deduction (30% of 2,14,000) 64,200Interest on loan 80,000 (1,44,200)

Income u/h House Property u/s 22 69,800

Note :-

(1) Gross Annual Value

MV (18,000 x 12) = 2, 16,000FRV (16,000 x 12) = 1, 92,000Expected Rent 2,16,000Actual Rent (20,000x10) 2, 00,000Whichever is higherGross Annual Value 2, 16,000

Assumption: - Here, it is assumed that :(i) the tenant has vacated the property ,and(ii) he is not in occupation of any other property of the assessee ,and(iii) legal proceeding have been started against him.

(2) Deduction for expenses like repair ,insurance ,land revenue, ground rent ,etc are included instandard deduction of 30% and hence no separate deduction shall be allowed for these expenses.

A.480 Gross Annual Value(note) 2,16,000

(-)Municipal taxes 2,000Annual value u/s 23(1)(a) 2,14,000(-) Deductions u/s 24

Standard deduction(30% of 2,14,000) (64,200)Interest (80,000) 1,44,200

Income u/h House Property u/s 22 69,800


28/92


Note :-(1) Gross Annual Value

MV (18,000x12) = 2, 16,000FRV ( 16,000x 12) = 1, 92,000Expected rent 2,16,000Actual Rent (10,000 x 10 ) 1, 00,000

Gross Annual Value 2,16,000

(2) Deductions for expenses like repair, insurance, land revenue, ground rent ,etc are included instandard deduction of 30% and hence no separate deduction shall be allowed for these expenses.



A.483 Answer already given in question bankA.484 Answer already given in question bank

A.485Gross Annual Value (Note 1) 60,000

Less: Municipal taxes paid (10,000)Annual Value u/s 23(1)(a) 50,000

Less: Deductions u/s 24(i) Standard Deduction(30% of 50,000) (15,000)(ii) Interest on loan 40,000 (55,000)

(Note 2)

Income under head house property u/s 22 ( 5,000)Notes:-1. Gross Annual Value :-(i) Municipal Value 60,000

(ii) FRV 48,000Whichever is higher 60,000

But expected rent cannot exceed standard rent (72,000).Therefore expected rent shall be 60,000(a) Expected Rent 60,000(b) Actual Rent 36,000

Whichever is higherGross Annual Value 60,000

Interest:- No limit of interest is applicable since the house was let out therefore any amount ofinterest on loan whether taken for repair, purchase etc. will be allowed full deduction.

(3) Deductions for expenses like repair ,insurance ,land revenue ,ground rent ,collection expenses ,etcare included in standard deduction of 30% and hence no separate deduction shall be allowed forthese expenses.

A.486 Gross Annual Value 3,00,000(Note 1)

Less: Municipal taxes paid (5,000)Annual Valueu/s 23(1)(b) 2,95,000

Less: Deductions u/s 24(i) Standard Deduction. 88,500


29/92

CA. Ajay Jain 9310167881 Handout No. 8|29(30% of 2,95,000)

(ii) Interest 1,60,000 (2,48,500)(Note 2)

Income under head house property u/s 22 46,500

Notes:-[

1.Gross Annual Value:- (i) Municipal Value 2,40,000

(ii) FRV 2,88,000Whichever is higher 2,88,000

But expected rent cannot exceed standard rent. Therefore expected rent shall be 2,76,000(a) Expected Rent 2,76,000(b) Actual Rent 3,00,000

Whichever is higher is Gross Annual Value 3,00,000

2.Interest:-Since the house has been let out it doesnt make any difference that whether loan was taken

before 1999 or after 1999.A.487 Gross Annual Value (Note 1) 7,000

Less: Municipal taxes paid(Note2) NILAnnual Value u/s 23(1)(c) 7,000

Less: Deductions u/s 24.(i) Standard Deduction (30% of 7,000) 2,100(ii) Interest (5,000+2,000) 7,000 9,100Income under head house property u/s 22 (2,100)

Notes:-1. Gross Annual Value:-

(a) Expected Rent 10,000

ER is always taken for the entire p/y(b) Actual Rent 7,000[1,000x7] AR is always taken only for the period it is actually let out.

As per Section 23(1)(c) GAV shall be 7,0002. Municipal Taxes :- ` 4,000 will not be allowed deduction from Gross Annual Value since

they have been paid by the tenant.[

3. Ground Rent :- ` 6,000 is covered under 30% Standard deduction provided u/s 24.

4. Interest :- Current year interest ` 5,000Add: Pre-construction interest ` 2,000

7,000 A.488 Gross Annual Value 10,000

(Note 1)Less: Municipal taxes paid NIL

(Note 2)Annual Value u/s 23(1)(a) 10,000

Less: Deductions u/s 24(i) Standard Deduction. (30% of 10,000) 3,000(ii) Interest (Note 3) 7,000 (10,000)Income under head house property u/s 22 Nil

Notes:-


30/92

CA. Ajay Jain 9310167881 Handout No. 8|301. Gross Annual Value:-

(a) Expected Rent 10,000ER is always taken for the entire p/y

(b) Actual Rent 10,000[1,000x10] AR is always taken only for the period it is actually let out.As per Section 23(1)(a), GAV shall be 10,000Clause (c) & (b) are not applicable, since AR is not less than ER.[

2. Municipal Taxes :- ` 4,000 are not allowed deduction from GAV ,because they have beenpaid by the tenant.

3. Ground Rent :- ` 6,000 is covered under 30% Standard deduction provided u/s 24.

4. Interest :- Current year interest = ` 5,000Add: Pre-construction period = ` 2,000

7,000

A.489 Gross Annual Value (Note 1) 1,00,000

Less: Municipal taxes paid (Note 2) 5,000

Annual Value u/s 23(1)(c) 95,000Less: Deductions u/s 24

(i) Standard Deduction 28,500(30% of 95,000)

(ii) Interest (Note 3 ) 42,000 (70,500)Income under head house property u/s 22 24,500

Notes:-1. Gross Annual Value:-

(a) Expected Rent 1,20,000[10,000 x 12] ER is always taken for the entire p/y

(b) Actual Rent 1,00,000[1,000x10] AR is always taken only for the period it is actually let out.As per Section 23(1)(a).As per sec 23(1)(c),if AR is less than ER due to such vacancy ,GAV shall be AR .Thus ,GAVshall be 1,00,000

2. Interest :- Even if loan is taken for repairs still deduction is allowed without limit in caseof let out house.

3. Deduction for expenses like repair, insurance ,land revenue ,ground rent ,collection expenses ,etcare included in standard deduction of 30% and hence no separate deduction shall be allowed forthese expenses.

A.490

Gross Annual Value (Note 1) 2,16,000Less: Municipal taxes paid(3,000x12) (36,000)Annual Value u/s 23(1)(a) 1,80,000

Less: Deductions u/s 24.(i) Standard Deduction (30% of 1,80,000) 54,000(ii) Interest on loan 50,000 (1,04,000)

Income under head house property u/s 22 76,000Note :-

In Question ` 90,000 FRV for 5 months is given, whereas FRV is always taken for 12 months.1. Gross Annual Value:-

(a) Expected Rent 2,16,000


31/92

CA. Ajay Jain 9310167881 Handout No. 8|31[18,000 x 12] ER is always taken for the entire p/y

(b) Actual Rent 1,00,000[20,000x5] AR is always taken only for the period it is actually let out.

As per Section 23(1)(a) GAV shall be 2,16,0002. Since the house is let out for part of the year, therefore it is not covered u/s 23(2) .Hence, the

purpose of loan does not matter.

A.491 Gross Annual Value (Note 1) 2,40,000 Less: Municipal taxes paid (30,000)

Annual Value u/s 23(1)(a) 2,10,000Less: Deductions u/s 24.

(i) Standard Deduction 63,000(30% of 2,10,000)

(ii) Interest on Loan 1,80,000 (2,43,000)(Note)

Income under head house property u/s 22 (33,000)

Note :- (1)Since nothing has been mentioned ,it has been assumed that FRV of the house is equal tothe actual rent .Hence ,GAV shall be 2,40,000.

(2)Interest :-For the year 12-13 1,50,000(15,00,000 x 10/100 x 1) +Pre-construction period (from 1-4-2009 to 31-3-2010)(15,00,000 x 10/100 x 1)/5 30,000Total deduction of interest for the previous year 12-13 1,80,000

Deduction of interest of pre-construction period is allowed for 5 years equally starting fromthe previous year 10-11.

A.492Annual Value u/s 23(2) NilLess: Deductions u/s 24

Interest (Note) (1,50,000)Income under head house property u/s 22 (1,50,000)

Note : - Interest :-For the year 12-13 1,50,000(15,00,000 x 10/100 x 1) +Pre-construction period (from 1-4-2009 to 31-3-2010)(15,00,000 x 10/100 x 1)/5 30,000Total deduction of interest for the previous year 12-13 1,80,000But limited to 1,50,000

Deduction of interest of pre-construction period is allowed for 5 years equally starting fromthe previous year 10-11But in one year maximum deduction of interest in case of self occupied house cannot exceed1,50,000

A.493Step I:- (Taxable value if house is treated as let out) Delhi USA

Gross Annual Value 70,000 1,00,000Less: Municipal taxes paid (10,000) (5,000)

Annual Valueu/s 23(1)(a) 60,000 95,000

Less: Deductions u/s 24(i) Standard Deduction @ 30% (18,000) (28,500)


32/92

CA. Ajay Jain 9310167881 Handout No. 8|32(ii) Interest (Note) (1,60,000) (40,000)

Income under head house property (1,18,000) 26,500

Step II:- (Taxable value if house is treated as Self occupied) Delhi USAAnnual Valueu/s 23(2) Nil Nil

Less: Deductions u/s(i) Interest (30,000) (30,000)

(Note )Income under head house property u/s .22 (30,000) (30,000)

Step III:- Delhi USAOption A (3,500) Self-occupied (30,000) + let out 26,500Option B (1,48,000) Let out (1,18,000) + Self-occupied (30,000)Because income is less under option B Therefore Gauti should treat USA. house as self occupied andDelhi. house as let out


A.495 Gross Annual Value (Note ) 30,000Less: Municipal taxes paid (1,000)

Annual Value u/s 23(1) (a) 29,000Less: Deductions u/s 24

(i) Standard Deduction (8,700)(30% of 29,000)

(ii) Interest on loan NIL (8,700)Income under head house property u/s 22 20,300

Note:-

(1) Gross Annual Value:- (a) Expected Rent 2,500x12 = 30,000

(b) Actual Rent 3,000x7 = 21,000Whichever is higher is Gross Annual Value 30,000

(2) The Interest paid outside India without Deduction of TDS is not allowed deduction as per sec 25.

(3) For Allowing Deduction of unrealized rent: - The following conditions must be fulfilled.(a) Tenant has vacated the property.(b) Tenant is not in any other business occupation of any other property assessee.(c) Necessary legal proceedings have been taken against the tenant

In P/Y 15-16Recovery u/s 25AA 6,000[{3,000 x (7+5)} 30,000]Income u/h house property 6,000

As per ICAI ,no standard deduction shall be allowed from subsequent recovery of unrealized rent.

Note: Unrealized rent is taxable only to the extent not taxed earlier. Thus ,30,000 has beendeducted.

It does not matter whether the assessee is the owner of the house property or not at the time ofrecovery.


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CA. Ajay Jain 9310167881 Handout No. 8|33A.496 Answer already given in question bank

A.497 Answer already given in question bank A.498 Answer already given in question bank


A.500 Answer already given in question bank PGBPA.503 Computation of total income of A Ltd. for P/Y 12-13

1. PGBP (Note 1) 14,70,0002. Capital Gain 2,00,0003. Income u/h Other sources interest on Bank FD 4,00,000

20,70,000Note 1: Computation of income u/h PGBP of A Ltd. for P/Y 12-13

Receipts1. Cash sales 1,16,00,0002. Receipts from Debtors 4,00,000 1,20,00,000Payments1. Depreciation 30,0002. Rent of Building (16,00,000 x ) (Note 1) 4,00,0003. Cost of producing goods 94,00,0004. Payment to ROC 1,00,0005. Damages paid to workers 2,00,0006. Expenses on raising debentures 4,00,000 (1,05,30,000)

Total taxable income u/h PGBP 14,70,000Notes

1) Rent shall be deductible for only that portion of building which was occupied for business.

2) Interest received on bank F.D. is taxable u/h other sources.A.504

Allowed Deduction ii , iii, v, vi, vii, ix, xii, xviNot Allowed Deduction i , iv, viii, x, xi, xiii, xiv, xv

A.505 Taxability u/h PGBP

Taxable u/h PGBP iii, vi, vii, viii, ix, xi, xii, xiii, xvTaxable under any other head- ii, xNot Taxable anywhere i, iv, v,xiv, xvi

A.506 Computation of income u/h PGBP of Mr. M for A/Y 2013-14`

Net profit as per profit and loss account 20, 00,000

Debited items:

1. Opening Stock overvalued [ 11,00,000 x 10/(100 + 10) ] + 1,00,0002. Advance income tax [not allowed deduction u/s 40(a)] + 20,0003. Self assessment income tax [not allowed deduction u/s 40(a)] + 5,0004. Penalty for income tax [any kind of penalty not allowed deduction u/s 40(a)] + 1,0005. Interest for late payment of income tax [not allowed deduction u/s 40(a)] + 1,0006. Provision for income tax [any kind of provision is not deductible] + 7,0007. Sales tax [no treatment required, it is allowed deduction] -----


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CA. Ajay Jain 9310167881 Handout No. 8|348. Provision for sales tax [any kind of provision is not deductible] + 5,0009. Interest for late payment of sales tax [no treatment required, it is allowed deduction] -----10. Penalty for sales tax [any kind of penalty not allowed deduction u/s 40(a)] + 20011. Expenses on income tax proceedings [legal expenses allowed deduction in all cases] -----12. Expenses on sales tax proceedings [legal expenses allowed deduction in all cases] -----13. Audit fees [no treatment required, deduction allowed] -----14. Payment for handling income tax matters [salary to staff is allowed deduction] -----

21,39,200Less: Income credited to P& L A/c but are not taxable

1. Gross sales [no treatment required, taxable income] -----2. Income tax refund [not taxable, as deduction was not allowed when paid] - 1,0003. Interest on income tax refund [taxable u/h Other Sources] - 1004. Sales tax refund [no treatment required, Taxable as it was allowed deduction when paid] -----5. Interest on sales tax refund [taxable u/h Other Sources] - 3006. Refund of income tax penalty [not taxable, as deduction was not allowed when paid] - 1007. Refund of sales tax penalty [not taxable, as deduction was not allowed when paid] - 150

Add: Closing stock overvalued [ 4,50,000 x 10/(100 10) ] + 50,000Income taxable u/h PGBP u/s 28 21,87,550

A.507 Allowed Deduction ii, iii, v, vi, vii, ix, xiii, xv, xviNot Allowed Deduction i, iv, viii, x, xi, xii, xiv

A.508 Taxability u/h PGBP

Taxable v, vi, vii, ix, x, xii, xiii, xiv

Taxable under any other head ii, xiNot Taxable I, iii, iv, viii, xv, xvi,



A.511 Amount of deduction1. 30,0002. 40,0003. 60,000

A.512 Deduction1. 15,0002 25,0003. 25,0004. 15% of 25,000 ( Note 1)5. 25,000 (Limit is 35,000 in case of payment made to transporter)6. 25,0007 Nil8. 25,000 (Note)


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CA. Ajay Jain 9310167881 Handout No. 8|359. 25,000

Note 1. Provisions of sec 40A(3) shall not be attracted in case of capital goods, Deduction shall be given

by way of depreciation u/s 32.2. It is assumed that the vegetables were purchased directly from a farmer, therefore expenditure

shall be covered under Rule 6DD. Thus, full deduction shall be allowed in such case.

A.513

(i) Provisions of section 40A(3) are attracted in this case because the aggregate of payment made to Gin a day is in excess of ` 20,000. Hence no deduction is allowed.

(ii) Provisions of section 40A(3) do not apply in this case, because the aggregate of payment made incash does not exceed ` 20,000, i.e. ` 15,000 in this case. Thus, full deduction shall be allowed.

(iii) Provisions of section 40A(3) do not apply in this case, because payment made in cash on a singleday does not exceed ` 20,000. Hence, full deduction shall be allowed.

(iv) Provisions of section 40A(3) do not apply in this case, because the aggregate payment made inexcess of ` 20,000 i.e. ` 11,00,000 is being done for capital assets. This section is not applicable forpurchase of capital assets.

(v) For a real estate dealer, building is a part of stock -in-trade. As it is not a capital asset for him, theprovisions of section 40A(3) apply and since the payment exceeds ` 20,000, hence no deduction is

allowed.

(vi) Provisions of section 40A(3) shall apply in this case where a single payment of ` 30,500 is beingmade by crossed cheque. The provisions shall apply in case payment is made by crossedcheque/cash/bearer cheque.

(vii) Provisions of section 40A(3) apply, because the payment is made in excess of ` 20,000 by crossedcheque.

(viii) Provisions of section 40A(3) apply, because in case of transport operator, if payment of an amount

greater than ` 35,000 is made in cash, then the entire expenditure shall be disallowed.

A.514 It is assumed that the assessee follows accrual system of accounting.Year of Deduction

1. 2012-132. 2013-143. 2012-134. 2015-165. 2012-13


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CA. Ajay Jain 9310167881 Handout No. 8|366. 2014-157. 2014-15




A.518 Section Amt. Head

1. 35(1)(i) Nil PGBP2. 35(1)(i) Nil PGBP3. 35(1)(i) 100% PGBP4. 35(1)(i) 100% PGBP5. 35(1)(iv) 100% PGBP6. 35(1)(iv) 100% PGBP7. 35(1)(iv) 100% PGBP8. 35(1)(iia) 125% PGBP9. 35(2AA) 200% PGBP10. 35(1)(iii) 125% PGBP11. 35AC 100% PGBP12. 35CCA 100% PGBP13. No Deduction u/h PGBP14. No Deduction u/h PGBP15. No Deduction u/h PGBP16. No Deduction u/h PGBP






A.524 Computation of income u/h PGBP of X & CoStep I (Calculate Book Profit) `

Net Profit 20,000Add: Office expenses (VAT reserve) 5,000Less: Rent of building (Taxable u/h House property) (10,000)Add: Interest to Y in excess of 12% [ (16-12)% x 8,000/16% ] 2,000Add: Salary to partners (4,50,000 + 10,000) 4,60,000

Book Profit 4,77,000(income u/h PGBP without any deduction of salary to partners)


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Step II (Calculate maximum deduction of salary to firm) Book profit 4,77,000

1. 90% of 3,00,000 2,70,0002. 60% of 1,77,000 1,06,200

Maximum salary 3,76,200

Step III (Calculate deduction of salary by comparing maximum with actual salary)Maximum or Actual whichever is less = Deduction of salary to firm= lower of ` 3,76,200 and ` 4,50,000 (no deduction is allowed for salary to non-working partner)

= ` 3,76,200

Step IV (Calculate income u/s 28)`

Book Profit 4,77,000

Less: deduction of salary (3,76,200)Income of firm u/h PGBP u/s 28 1,00,800

Step V (Calculate income taxable in the hands of partners)

X: ` 3,76,200 (Salary)

Y: ` 6,000(Interest)Only that amount is taxable in the hands of the partners which is allowed deduction to the firm.

A.525 Computation of income u/h PGBP of X & Co

Step I (Calculate Book Profit) ` Net Profit 60,000Less: Dividend (Taxable u/h other sources) 20,000Add: Interest [ (13-12)% x 26,000/13%] 2,000Add: Reserve (No deduction is allowed) 14,000Add: Salary to partners (2,00,000 + 20,000) 2,20,000

Book Profit 2,76,000(Income u/h PGBP without any deduction of salary to partners)

Step II (Calculate maximum deduction of salary to firm) Book profit 2,76,000

1. 90% of 2,76,000 2,48,400(Since the book profit is less than 3,00,000)

Maximum salary 2,48,400

Step III (Calculate deduction of salary by comparing maximum with actual salary) Maximum or Actual whichever is less = Deduction of salary to firm= ` 2,48,000 or ` 20,000 whichever is less (No deduction for salary to non-working partner)

= ` 20,000

Step IV (Calculate income u/s 28)`

Book Profit 2, 76,000

Less: Salary of working Partner B (20,000)Income of firm u/h PBGP u/s 28 2,56,000


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CA. Ajay Jain 9310167881 Handout No. 8|38Step V (Calculate income taxable in the hands of partners)

A: Interest of ` 24,000

B: Salary of ` 20,000Only that amount is taxable in the hands of partners which is allowed deduction to the firm.

A.526

(A) When Income is computed on Normal Basis

Particulars X YIncome u/h PGBP 1,00,000 24,00,000

(40L - 38L - 1L) (60L - 34L - 2L)Income u/h other Source 5,00,000 5,00,000

Gross total income 6,00,000 29,00,000Less: Deduction u/c VI- A (Donation to political party) (30,000) (30,000)Total Income 5,70,000 28,70,000

(B) When Income is computed on Presumptive BasisParticulars X Y

Income u/h PGBP 3,20,000 4,80,000(8% of 40,00,000) (8% of 60,00,000)

Income u/h other Source 5,00,000 5,00,000Gross Total Income 8,20,000 9,80,000

Less: Deduction u/c VI- A (Donation to political party) (30,000) (30,000)Total Income 7,90,000 9,50,000

Note:- Mr. X should compute his income on normal basis but he will have to get his accounts auditedand maintain books of account. On the other hand, Mr. Y should compute his income onpresumptive basis. Thus, total income of Mr. X is ` 5,70,000 and of Mr. Y is ` 9,50,000.

Their tax liabilities are calculated as under

X`

Y`

Total income 5,70,000 Total income 9,50,000Tax on: Tax on:

First 2 lakhs Nil First 2 lakhs NilNext 3 lakhs @ 10% 30,000 Next 3 lakhs @ 10% 30,000Balance 70,000 @ 20% 14,000 Balance 4,50,000 @20% 90,000

44,000 1,20,000Add: Education cess Add: Education cess

2% x 44,000 880 2% x 1,20,000 2,400Add: SHEC* Add: SHEC*

1% x 44,000 440 1% x 1,20,000 1,200Tax liability 45,320 Tax liability 1,23,600

*SHEC = Secondary and Higher Education CessA.527


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CA. Ajay Jain 9310167881 Handout No. 8|39If Mr. X was not maintaining any books of accounts, then he will have no option except to compute hisincome on presumptive basis. Thus his total income shall be ` 7,90,000.His tax liability shall be calculated as under

Total income 7,90,000

Tax on: First 2 lakhs NilNext 3 lakhs @ 10% 30,000Balance 2,90,000 @ 20% 58,000

88,000Add: Education cess

2% x 88,000 1,760Add: Secondary & higher education cess

1% x 88,000 880

Tax liability ` 90,640

A.528

When income is computed on normal basis`

Income u/h PGBP 19,00,000(50,00,000 30,00,000 - 1,00,000)

Income u/h House property 5,00,000Total Income 24,00,000

When income is computed on presumptive basis

Income u/h PGBP 2,95,500[(5 heavy trucks x 3 months x 5,000 p.m.) + (4 x 12 x 4,500) + (1 x 4,500 x1)]

Income u/h House property 5,00,000Total Income 7,95,500

Since income is less when income is computed on presumptive basis, it is assumed that the assesseefollows this basis for computing his business income.

Statement of tax liability of Ajay Jain (Truck wala) for A/Y 2013-14

` Total income 7,95,500Tax on:

First 2 lakhs NilNext 3 lakhs @ 10% 30,000Balance 2,95,500 @ 20% 59,100

89,100Add: Education cess

2% x 89,100 1,782Add: Secondary & higher education cess


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CA. Ajay Jain 9310167881 Handout No. 8|4190,000

Less: Sale price of assets sold (30,000)WDV 60,000

Depreciation u/s 32 (10% of 60,000) 6,000

A.537 Calculation of Depreciation u/s 32

Block I (Residential Building, rate 5%) ` Opening WDV Nil

Add: Cost of assets purchased 2,00,000WDV 2,00,000

Depreciation u/s 32 5,000(5% of 2,00,000 x 50%) [Note]

Block II (Office building, rate 10%)Opening WDV NilAdd: Cost of assets purchased 5,00,000

WDV 5,00,000Depreciation u/s 32 (10% of 5,00,000) 50,000[

Total depreciation:- `(5,000 + 50,000)= ` 55,000 Note: - As the residential building has been used for less than 180 days, half depreciation is charged.

A.538

Calculation of Depreciation u/s 32

Plant & machinery `

Opening WDV (A, B) 40,000Add: Cost of assets purchased

(C & D = 20,000 + 30,000) 50,00090,000

Less: Sale price of assets sold (A) (10,000)WDV 80,000

Calculation of Depreciation

(a) Plant C (Note) = 20,000 x 15% x 50% = ` 1,500

(b) Plants (B & D) = (80,000 - 20,000) x 15% = 60,000 x 15% = ` 9,000

Total Depreciation 1,500 + 9,000 = ` 10,500

Note: - Since the plant has been used for less than 180 days, half depreciation is charged.

A.539

Calculation of Depreciation u/s 32

Plant & machinery ` Opening WDV (A,B) 40,000Add: Cost of assets purchased

(C & D = 20,000 + 30,000) 50,00090,000

Less: Sale price of assets sold (85,000)


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CA. Ajay Jain 9310167881 Handout No. 8|42WDV 5,000

Calculation of Depreciation5,000 x 15% x 50% 375

Note:- Depreciation for the asset which is used for less than 180 days is given first and thendepreciation is provided for remaining assets used for 180 days or more, if there is any value left.

A.540

Computation of taxable Income of Mr. Dude

`

(i) Business Receipt 5,00,000(ii) Less: Business Expenses

(a) Rent paid (4,000 x 12) 48,000(b) Assistants salary (6,000 x 12 ) 72,000(c) Depreciation (note 1) 30,000 (1,50,000)

Taxable Income 3,50,000Note 1:- Depreciation of Laptop50,000 x 60% = 30,000

Note 2:- Depreciation of building is not charged because he has paid rent for it.Note 3:- For computing his taxable income, the assessee cannot charge depreciation as per his wish,

but according to WDV method and as per the prescribed rates in Income tax rules.

A.541

Calculation of Depreciation of Various Assets u/s 32

`

(i)

Fans and Tube light (10% of 50,000) 5,000(ii) Office Building (10% of 40,00,000) 4,00,000(iii) AC (15% of 20,000) 3,000(iv) Car (15 % of 3,00,000) 45,000

Total Depreciation u/s 32 4,53,000

A.542

Calculation of Depreciation of Kitab Mahal

(i) Copyright of book (25% of 5,00,000) 1,25,000(ii) Building (Residential) (5% of 20,00,000) 1,00,000(iii) Aero plane (40% x 40,000 x 50%) (note) 8,000(iv) Building (Non Residential) (10 % of 30 ,00,000 x 50%) 1,50,000


Note: - Half depreciation is charged because asset is used for less than 180 days.[


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CA. Ajay Jain 9310167881 Handout No. 8|43A.543 No, it is not possible for CA Ajay Jain to disregard depreciation because it is mandatory to claim

depreciation. Moreover, the unabsorbed depreciation can be carried forward to next years for set off(adjustment).

Calculation of Depreciation for CA Ajay Jain for A/Y 2013-14

` (a) ITR & Excus (20,00,000 x 100%) 20,00,000(b) AC (15,00,000 x 15% x 50%) 1,12,500(c) Other books:

On opening balance of 30,00,000 : (30,00,000 x 60%) 18,00,000On new purchases of 50,00,000 (Note 1) : (50,00,000 x 60% x 50%) 15,00,000

(d) Printer (Note 1) (30,000 x 60% x 50%) 9,000(e) Laptop (Note 2) (40,00,000 x 60% x 50%) 12,00,000


Notes:-1. Since the books purchased are used for less than 180 days, half depreciation shall be allowed for

them.2. On computer printers, as per ICAI depreciation is charged @ 15% but as per the judgement of

various courts, it is charged @ 60%, as it is a part of computer.Printer has been used for less than 180 days, so half depreciation is charged.

3. Since laptops are used for less than 180 days, half depreciation shall be given on them.

A.544 Calculation of depreciation for Mr. Factory Ram `

(i) Second hand machine (15% of 1,00,000) (Note 1) 15,000(ii) AC (15% of 50,000) (Note 1) 7,500(iii) Car (15 % of 5,00,000) (Note 1) 75,000(iv) Plant [ 4,00,000 x (15+20)% ] 1,40,000

Total depreciation u/s 32 2,37,500

Note 1:- No Additional depreciation is allowed for second hand machinery, new machine used inoffice and for road transport vehicles.

Note 2:- Deduction of 100% of capital expenditure incurred on research related to business isallowed u/h PGBP u/s 35. Thus, deduction shall be 100% of 3,00,000 = ` 3,00,000.

A.545

If the Plant was purchased on 5.10.2012, the depreciation is calculated as follows:-

` (i) Second hand Machinery (Note 1) (1,00,000 x 15%) 15,000


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CA. Ajay Jain 9310167881 Handout No. 8|44(ii) AC (50,000 x 15%) (Note 1) 7,500(iii) Car (5,00,000 x15%) (Note 1) 75,000(iv) Plant [ 4,00,000 x (15 + 20)% x 50%] (used for less than 180 days) 70,000

Total depreciation u/s 32 1,67,500

Note: -1. No additional depreciation is allowed for second hand machinery, new machinery used inoffice and for road transport vehicle.

Note: - 2 . Deduction of 100% of capital expenditure incurred for scientific research related to business isallowed u/s 35. Thus deduction allowed = 100% x 3,00,000 = ` 3,00,000.

A.546


` Opening WDV 1,00,000Add: Cost of assets purchased 50,000

1,50,000Less: Sale price of assets sold

(30,000)WDV 1,20,000

Depreciation u/s 32 (15% of 1,20,000) 18,000

Note: - The WDV and FMV of the sold asset are irrelevant.

A.547

If the Plant was purchased on 5.10.2012, the depreciation is calculated as follows:-`

Opening WDV 1 00,000Add: Cost of assets purchased 50,000

1,50,000Less: Sale price of assets sold (30,000)

WDV 1,20,000Depreciation of new plant (note) = 50% of 15% of 50,000 = ` 3,750

Depreciation of remaining plant = (1,20,000 - 50,000) x 15% = ` 10,500

Total Depreciation (3,750 + 10,500) = ` 14,250

Note:- Half depreciation is charged as the machinery is used for less than 180 days.

A.548


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CA. Ajay Jain 9310167881 Handout No. 8|45Calculation of Depreciation

` Opening WDV 2 00,000Add: Cost of assets purchased 50,000

2,50,000

Less: Sale price of assets sold (1,20,000)WDV 1,30,000

Depreciation u/s 32New Plant (note) = 50,000 x 15% x 50% = ` 3,750 (notes 1, 2)

Remaining Plant = (1,30,000 - 50,000) x 15% = ` 12,000

Total Depreciation = 3,750 + 12,000 = ` 15,750

Note 1:- The asset has been used for less than 180 days so half depreciation is charged.

Note 2:- Firstly Depreciation is charged for the asset which is used for less than 180 days and then

for the remaining value of asset.

Note 3:- The FMV and WDV of asset sold are irrelevant.



A.551

Calculation of Total Depreciation for Mr. XBlock of Assets Op. WDV Additions Sale Cl. WDV Depreciation

` ` ` Furniture 10% 20,000 - (3,000) 17,000 1,700Office Building 10% 5,00,000 - (4,00,000) 1,00,000 10,000Machinery 15% 6,00,000 1,10,000 + 10,000 - 7,20,000 99,000Residential Building 5% 8,00,000 - 8,00,000 20,000

1,30,7000

Note 1:- Depreciation on machinery has been calculated as follows:-Opening Balance = 6,00,000 x 15% = 90,000

Additions during the year (used for less than 180 days) = 1,20,000 x 15%x 50% = 9,000Total Depreciation on Machinery = 90,000 + 9,000 = ` 99,000.

Note 2:- The residential building was put to use for less than 180 days. Hence, half depreciation shallonly be allowed.

A.552 Since the assessee is engaged in manufacturing, additional depreciation can be claimed on newmachineries purchased u/s 32.


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CA. Ajay Jain 9310167881 Handout No. 8|46Block of Assets Depreciation (

`

) 1. Furniture (20,000 3,000) x 10% 1,7002. Office building (5,00,000 4,00,000) x 10% 10,0003. Machinery

(i) 6,00,000 x 15% 90,000(ii) 1,20,000 x (15+20) % x 50% 21,000 1,11,000

4. Residential building 8,00,000 x 5% x 50% 20,0001,42,700

Note: - It has been assumed that AC was installed in the manufacturing area.

A.553 Calculation of Depreciation of A ltd. & B Ltd. Step 1:- Calculation of Depreciation as if no conversion took place

Machinery `

Opening WDV 5, 00,000

Add:- Purchase at actual cost -Less: Sale at sale price -

WDV 5,00,000Depreciation (15% of 5,00,000) 75,000

Step 2 :- Proportionate depreciation of A Ltd. & B Ltd.

Period for which A Ltd. Used the machinery = 365 - 31 (March) 1 (28th Feb) = 333 days

Period for which B Ltd. Used the machinery = 31 (March) + 1 (28 th Feb) = 32 days

A Ltd. B ltd.75,000 x 333/365 75,000 - 68,425

= ` 68,425 = ` 6,575

Total Depreciation of A Ltd. = ` 68,425

Note:- The Depreciation for furniture shall be charged by B Ltd only because it has been put to use afterconversion and half depreciation shall be charged as it has been put to use for less than 180 days.

= 30,000 x 10% x 50% = 1,500

Total Depreciation of B Ltd. = 6,575 + 1,500 = ` 8,075

A.554 Calculation of Depreciation u/s 32

Block I (Plant & Machinery) ` Block II (Intangible assets) ` Opening WDV 30,000 Opening WDV 50,000

Add: Cost of assets purchased Nil Add: Cost of assets purchased 10,000Less: Sale price of assets sold (5,000) Less: Sale price of assets sold Nil

WDV 25,000 WDV 60,000Depreciation u/s 32 3,750 Depreciation u/s 32 15,000 (25,000 x 15 %) (60,000 x 25 %)


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Block III (Furniture) ` Block IV (building) ` Opening WDV 40,000 Opening WDV Nil

Add: Cost of assets purchased Nil Add: Cost of assets purchased 30,000Less: Sale price of assets sold (8,000) Less: Sale price of asset sold Nil

WDV 32,000 WDV 30,000 Depreciation u/s 32 3,200 Depreciation u/s 32 1,500

(10% x 32,000) (30,000 x 10 % x 50%)

Block V (Car) ` Block VI (Computer) ` Opening WDV Nil Opening WDV Nil

Add: Cost of assets purchased 2,00,000 Add: Cost of assets purchased 25,000Less: Sale price of assets sold Nil Less: Sale price of assets sold Nil

WDV 2,00,000 WDV 25,000Depreciation u/s 32 30,000 Depreciation u/s 32 15,000

(2,00,000 x15 %) (25,000 x 60%)

Total Depreciation u/s 32 = 3,750 + 15,000 + 3,200 + 1,500 + 30,000 + 15,000 = ` 68,450 Note:- Students can also include car in Block I, as depreciation in both the blocks is charged @ 15%. In

such case, depreciation of Block I will be ` 33,750 and no separate block of car shall be created.

A.555 Calculation of Depreciation [

Particulars WDV as on Additions Assets sold WDV as on Depreciation 1-4-2012 during the year during the year 31-3-2013

` ` Block 1 Building 10% (A,B,C,F) 21,95,000 5,40,000 Nil 27,35,000 2,73,500

Block 2 Building 5% (D,E) 5,70,000 Nil ( 4,00,000) 1,70,000 8,500

Block 3 Machinery 15%(A,B,F,G,H) 2,42,000 1,78,000 Nil 4,20,000 63,000

Block 4 Machinery 30% (C,D,E,I) 2,19,000 16,000 (1,90,000) 45,000 13,500

Block 5 Furniture 10% (A,B) 1,18,000 Nil Nil 1,18,000 11,800

Block 6 Intangible assets 25% Nil 1, 00,000 Nil 1,00,000 25,000Total Depreciation u/s 32 3,95,300

Notes:

1. For block 1:- WDV as on 1-4-2012 = 10,20,000 + 5,40,000 + 6,35,000 = 21,95,000

2. For block 2:- WDV as on 1-4-2012 = 2,60,000 + 3,10,000 = 5,70,000

3. For block 3:- (i) WDV as on 1-4-2012 = 60,000 + 1,82,000 = 2,42,000

(ii) Additions = 1,12,000 + 4,000 + 62,000 = 1,78,000


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CA. Ajay Jain 9310167881 Handout No. 8|484. For block 4:- (i) WDV as on 1-4-2012 = 1,65,000 + 4,000 + 50,000 = 2,19,000

(ii) Sales = 1,10,000 + 80,000 = 1,90,000

5. For block 5:- WDV as on 1-4-2012 = 1,10,000 + 8,000 = 1,18,000

6. For block 6:- Additions = 40,000 + 60,000 = 1,00,000

A.556

Calculation of Depreciation of Ajay Jain and Ajay Jain Pvt. Ltd.

Step I: Calculate depreciation as if no conversion took place

Opening WDV 15,00,000Add:- Purchased a new machine on 20-10-2012 2,00,000

WDV 17,00,000

Computation of depreciation (i) Used for less than 180 days :- 2,00,000 x 15% x 50% 15,000

(ii) Remaining machinery : - 15% x (17,00,000 2,00,000) 2,25,000Total 2,40,000

Step II: Calculate proportionate depreciation for both the assesses

Ajay Jain Ajay Jain Pvt. Ltd. Period Period

New machine 20-10-2012 to 30-12-2012 31-12-2012 to 31-3-2013 91 days= 72 days (for both machines)

Old machine 1-4-2012 to 30-12-2012

= 274 daysDepreciation ` Depreciation

(i) 15,000 x 72/(72 + 91) 6,626 (i) 15,000 x 91/(72 + 91) 8,374(i) 2,25,000 x 274/365 1,68,904 (ii) 2,25,000 x 91/365 56,096

1,75,530 (iii) 3,00,000 x 15% x 50% (Note) 22,50086,970

Note:- New machinery has been purchased after the conversion took place. So, only Ajay Jain Pvt.Ltd. is eligible to charge depreciation.

This machinery has been put to use for less than 180 days, so half depreciation is charged.

A.557 Calculation of Depreciation u/h PGBP

12-13`

13-14`

14-15`

O/WDV - O/WDV 90,000 O/WDV 81,000

(1-4-2012) (1-4-2013) (1-4-2014)Add: 1,00,000 Add: Add:

(actual cost of assets acquired) (actual cost of assets acquired) (actual cost of assets acquired)


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CA. Ajay Jain 9310167881 Handout No. 8|49Less: - Less: - Less: (1,50,0000)

(sale price of assets sold) (sale price of assets sold) (sale price of assets sold)

WDV 1,00,000 WDV 90,000 WDV* Nil*(because block has finished)

Depreciation Depreciation Depreciation Nil( 10% of 1,00,000) 10,000 (10% of 90,000) 9,000

A.558

Calculation of Depreciationu/h PGBP

12-13`

13-14`

14-15`

O/WDV - O/WDV 2,70,000 O/WDV 2,43,000(1-4-2012) (1-4-2013) (1-4-2014)Add: (note) 3,00,000 Add: - Add: -(actual cost of assets acquired) (actual cost of assets acquired) (actual cost of assets acquired)Less: - Less: - Less: -

(sale price of assets sold) (sale price of assets sold) (sale price of assets sold)WDV 3,00,000 WDV 2,70,000 WDV 2,43,000Depreciation Depreciation Depreciation

(10% of 3,00,000) 30,000 (10% of 2,70,000) 27,000 (10% of 2,43,000) 24,300

15-16`

O/WDV 2,18,700(1-4-2015)

Add: -(Actual cost of assets acquired)Less: 1,80,000

(sale price of assets sold)WDV* Nil

*(because block has come to an end)

Note : - The depreciation shall be nil as the block has ceased to exist.

Any subsidy or grant or reimbursement given directly or indirectly, by central govt. or state govt. orany authority or by any other person, for the purchase of an asset is not included in the cost of suchasset. Thus, actual cost of the building is 3,05,000 5,000 = 3,00,000.

A.559 Depreciation shall be nil in this case because the actual cost of any capital asset on which deductionhas been allowed or is allowable to the assessee u/s 35 or 35AD shall be nil.

Note that in P/Y 15-16, if deduction has been claimed u/s 35AD, the sale proceeds of the asset shallbe taxable u/h PGBP u/s 28.

A.560



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201355120900Income Tax - Ans. (Illustrations Questions) .

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