Computation of Income from Salary : Exercises

1. Shri Deodas is the Principal of a college at Mumbai. e is in the grade of !s. 1"#$$$%&"$%
1'#($$ since 1st )anuary# "$$*. e gets +$, of his basic salary as dearness allo-ance and
1$, of the basic pay as city compensatory allo-ance. e has been pro.ided -ith a
furnished house by the college o-ned by it# of the estimated rental .alue of !s. 1"#$$$ p.m.
/urniture costing !s. "*#$$$ has also been pro.ided by the college. Shri Deodas has been
using his personal car for his official and personal purposes. Expenses of the car amounting
to !s. "*#$$$ for official purposes are borne by the college. e has been pro.ided -ith the
facility of a gardener# a -atchman and a ser.ant -ho are paid salary by the college 0 !s.
&*$ p.m.# !s. &*$ p.m. and !s. ($$ p.m. respecti.ely. In the month of )anuary# "$1$# he
surrendered lea.e and got one month1s basic pay and dearness allo-ance.
e contributes 1*, of his pay and dearness allo-ance to the recogni2ed pro.ident fund
to-ards -hich the college contributes an e3ual amount. Interest amounting to !s. 1"#*$$
at 1".*, has been credited to his pro.ident fund account.
4ssuming that his salary becomes due on the first day of the next month# determine his
taxable income under the head 1Salaries1 for the assessment year "$1$%11.
". Miss Megha is employed -ith Sharma 5td. on a monthly salary of !s. "$#$$$. She also gets
dearness allo-ance 6according to terms of employment7 0 "*, of basic salary. 8he
follo-ing facilities -ere also pro.ided by her employer :
6i7 4 rent free accommodation at Delhi# o-ned by the company.
6ii7 She too9 the housing loan of !s. :#*$#$$$ during "$$'%$;# on this company charges
interest 0 +,. 8he entire loan is still outstanding. Suppose the rate of interest charged
by the State <an9 of India on housing loan is 8% p.a.
6iii7 =n 1.1."$1$ company pro.ided her interest free loan of !s. 1*#$$$ to purchase a
scooter and in addition to it further pro.ided a loan of !s. +$#$$$ on 1."."$1$ for
treatment of disease mentioned in !ule (4. 8his amount is not reimbursed by
insurance company.
6i.7 She -ent to Mumbai on official -or9 for & days but her stay -as extended for " days
to .isit different places in Mumbai. Employer spent !s. +#$$$ for these + days on
con.eyance# tra.el# tour# boarding and lodging.
6.7 8he company got corporate membership of !ambagh Club. During the pre.ious year
she en>oyed this club. If she obtains the similar type of facility at another club then she
is supposed to pay !s. ""#$$$.
6.i7 8he Company o-ns a .ideo camera. 8he camera -as purchased by the company for
!s. :$#$$$ on 1.:."$$*. She purchased this camera from the company on 1.1$."$$; at
!s. (&#$$$.
6.ii7 4 car -as purchased by the company on 1.*."$$+ for !s. (#$$#$$$. 8his car is sold to
Miss. Megha on 1.'."$$; for !s. 1#&$#$$$.
6.iii7 Company pro.ides her free refreshment and food in office. She used this facility for
($$ days during the pre.ious year. 8he cost of food to company is !s. +* per day and
of refreshment !s. 1$ per day.
6ix7 =n her birthday company presented a gift item of !s. &#:$$. In addition to this
company gifted !s. *$$ to each employee on its anni.ersary.
Compute income from salary of Miss Megha for the assessment year "$1$%11.
(. 8he follo-ing particulars relate to the income of Sri !a>ee. Mehta for the pre.ious year
"$$;%1$ :
e is employed in a cotton textile mill at <angalore on a monthly salary of !s. "*#$$$.
e is also entitled to a commission 0 1, of sales effected by him. 8he sale effected by him
during the pre.ious year amounted to !s. &$#$$#$$$.
e recei.ed the follo-ing allo-ances and per3uisites during the pre.ious year :
6i7 Dearness pay 0 !s. +#$$$ per month.
6ii7 <onus 0 t-o months basic salary.
6iii7 Entertainment allo-ance 0 !s. "#$$$ per month.
6i.7 ouse !ent 4llo-ance 0 !s. *#$$$ per month.
6.7 8he employer paid !s. 1$#$$$ to-ards the income%tax liability of Sri !a>ee. Mehta.
6.i7 8he employer pro.ided him 5.8.C. of !s. (*#$$$ for going to Simla.
6.ii7 e has also been pro.ided -ith gas# electricity and -ater facility and employer spent
!s. 1*#$$$ on these.
6.iii7 8he employer ga.e him cotton -orth !s. 1#$$$ free of cost.
6ix7 e and his employer both contributed 1*, of his salary to his recogni2ed pro.ident
fund and interest credited to this fund 0 ;, amounted to !s. ($#$$$ during the
pre.ious year.
6x7 e spent !s. +#$$$ per month as rent of the house occupied by him in <angalore.
Compute his taxable income under the head 1Salaries1 for the assessment year "$1$%11.
&. Mr. !ang !a>an -as appointed in a company of Chennai on the grade !s. *#*$$%1$$%:#*$$
since 1st )an.# "$$+.
e recei.es *$, dearness allo-ance. <esides this he is getting !s. :#*$$ per month
entertainment allo-ance. In terms of ser.ice he is re3uired to entertain the clients of
the company. e receives also house rent allo-ance !s. '$$ per month. e has ta9en a
flat at the rent !s. "#$$$ per month. 8he company pro.ided him a s-eeper# coo9 and
gardener and paid them !s. "$$ per month each.
e has been pro.ided t-o motor%cars# one of these is large and another small. 8he cars
are used in personal use also. 8he company bears the expenses for only official use. 8he
cost of large car is !s. +#$$#$$$ and of small !s. (#$$#$$$. 8he expenses relating to cars
are !s. '$#$$$ and !s. +$#$$$ respecti.ely.
8he employer and employee each contributed '.((, of salary and dearness allo-ance to
recogni2ed pro.ident fund.
Compute Income from salaries for the assessment year "$1$%11 assuming that salary is
due at the end of the month. 8he company has entered into an agreement -ith him to
pay tax free salary. So the company has paid !s. (#&$$ Income tax payable by him.
*. Sri !a>ee. furnished the follo-ing particulars of his income for the financial year "$$;%1$:
!s.
6a7 Salary 1*#$$$ p.m.
6b7 Dearness 4llo-ance 1#"*$ p.m
6c7 Entertainment 4llo-ance 1#$$$ p.m
6d7 Employer?s and employee?s contribution to a recogni2ed
pro.ident fund !s. "&#$$$ each.
6e7 Interest from pro.ident fund 0 ;.*, p.a. 1;#$$$
6f7 City Compensatory 4llo-ance "$$ p.m.
6g7 Medical 4llo-ance 1$#$$$
"
6h7 e has been pro.ided -ith the facility of an unfurnished house by the employer in a
to-n 6population less than 1$ la9h7 for -hich the employer charges !s. *$$ p.m. 8he
fair rent of the house is !s. ($#$$$ per annum. 8he house is o-ned by the employer.
6i7 8he employer has employed for his a s-eeper 0 !s. "$$ p.m.# and a ser.ant 0 !s. :*$
p.m.
Compute the taxable income under the head salary for the assessment year "$1$%11.

+. Smt. !a.i is the manager of the Delhi Cloth Mill# Delhi. She recei.es e.ery month !s.
($#$$$ as basic pay# !s. *$$ as entertainment allo-ance and !s. :#$$$ as dearness
allo-ance.
6a7 She o-ns a house# but the company has pro.ided her the follo-ing amenities :
i. 4 gardener# a s-eeper and a ser.ant -ho are each paid !s. ($$ per month.
ii. /ree use of the refrigerator costing !s. *#$$$.
6b7 8he follo-ing obligations of her -ere paid by the company :
i. @as# electricity and -ater bills amounting to !s. "#$$$.
ii. 4nnual membership fee of !otary Club !s. "#&$$.
6c7 8he company has pro.ided the facility of a small car. 8he car is used for pri.ate
purposes also besides official purposes and all the expenses including the dri.er1s salary
are borne by the company.
6d7 er son is studying in a school run by the company. 8he annual expenses incurred by
the company per student is !s. (#+$$ but he had been sent for education to a similar
schools sum of !s. 1#"$$ -ould ha.e been payable during the year.
6e7 She proceeded on one month1s lea.e to Shimla by car# -here she stayed in the oliday
ome maintained by the company. 8he .alue of such facility is !s. +#$$$.
6f7 8he company proposed to allot her 1$$ shares at !s. 1$$ each. 8he fair mar9et .alue
share on the date on -hich the option -as exercised by the employee -as !s. (*$.
Compute her taxable income from salary for the 4ssessment Aear "$1$%11.
:. Mr. 4sho9 -ho ser.ed BAC 5td for "* years 1$ months and 11 days retired from ser.ice on
(1 Dec "$$;. 8he follo-ing -ere his salary particulars for the P.A. "$$;%1$.
<asic salary !s. 1+#$$$ per month 6Dpto (1 Mar "$$; it -as !s 1*#$$$ per month7
Dearness 4llo-ance E !s. 1#$$$ per month 6+$, enters into pay for retirement benefits7
!4 E !s. *#$$$ per month 6!ent paid !s. +#*$$ at <angalore7
Con.eyance 4llo-ance !s. '$$ per month 6Completely used for official purposes7
CC4 !s. ($$ per month
Payment of his 5IC premium !s. '#$$$ and education expense of his son !s. 1$#$$$ by the
company.
Ser.ices of s-eeper 6Salary !s. "*$ per month7
=n the date of retirement# he recei.ed a gratuity of !s. 1#;$#$$$ and a lea.e salary of
!s. "#$*#$$$. During the ser.ice period he had a.ailed lea.e of 1+ months.
e -as also entitled to a pension of !s. 1$#$$$ per month. 8hree fourth of -hich he got
commuted at the end of /ebruary for !s. "#:$#$$$.
Compute 8axable salary for 4A "$1$%11. (BBM BU Oct 96 Adapted)
(
'. Mr. Fair is -or9ing in Ed-ard )ute Mills# Gol9ata. e gets basic pay 0 !s. :#$$$ p.m.
dearness allo-ance @ !s. "#*$$ p.m.# entertainment allo-ance 0!s. 1#*$$ p.m.# and
education allo-ance !s. (*$ p. m. for a child. e has been pro.ided -ith a rent%free house
by the Mills# the fair rent of -hich is !s. +$#$$$ p.a. e has been also pro.ided by the Mill
-ith the facility of free use of furniture costing !s. &$#$$$ and refrigerator costing !s.
'#$$$.
8he Mill has pro.ided him t-o small cars# the expenses relating to the cars are borne by
the Mill. 8he cars are used partly for pri.ate purposes also. 8he salary of the dri.ers is paid
by the Mill. =ther information relating to cars are: cost of each car !s. (#$$#$$$H salary to
each dri.er !s. *#$$$ p.m. Expenses I car !s. :$#$$$ and II car !s. *$#$$$. !s. 1*#$$$ on
the treatment of Mr. Fair and his family members in a pri.ate hospital 6not o-ned by
the employer7 -ere reimbursed by the Mill. 8he company has pro.ided the amenity of
free lunch and free refreshment in office# the cost of -hich is !s. +$ and !s. "$ respecti.ely
for "*$ days.
e as -ell as the company contributes 1&, of full basic pay and half of the dearness
allo-ances to-ards !ecogni2ed Pro.ident /und.
Compute Mr. Fair1s salary income for the 4ssessment Aear "$1$%11.
;. Shri Grishna Mohan is lecturer in a college. /ollo-ing are the details of his income for
pre.ious year "$$;%1$ :
<asic salary 0 1*#$$$ p.m.# Dearness allo-ance 0 !s. "#$$$ p.m.# CC4 !s. "#&$$# ouse
rent allo-ance !s. (#$$$ p.m.# !emuneration as examiner !s. 1#$$$.
e is a member of statutory pro.ident fund to -hich he contributes ', of his salary#
the college the contributing an e3ual amount. During the pre.ious year he spent !s.
"#$$$ on boo9s purchased for teaching purpose and used his o-n scooter for personal as
-ell as college -or9. e li.es in a rented house the rent payable being !s. *#$$$ p.m. e
-as sent by the college to attend re%orientation seminar. 8he college spent !s. "#$$$
for the purpose including his first class fare to and from# seminar fees. Etc.
Compute Shri Grishna Mohan1s taxable salary income for the assessment year "$1$%11.
1$. Mr. B# -ho is a retired employee of the Fepal @o.ernment# started ser.ice in a pri.ate firm
at Meerut. e furnished the follo-ing particulars of his income for the financial year "$$;%
1$:
!s.
6i7 Salary
6 e recei.ed one month?s salary in Fepal -hile on lea.e7
1*#$$$ p.m
6ii7 Planning 4llo-ance 1#$$$ p.m.
6iii7 Medical 4llo-ance 1#$$$ p.m.
6i.7 Entertainment 4llo-ance *$$ p.m.
6.7 8ra.elling 4llo-ance for tour :$$ p.m.
6.i7 Pension from Fepal @o.ernment
6e recei.ed the pension in Fepal and deposited in a ban9 there.7
:#$$$ p.m.
6.ii7 e has been pro.ided -ith a furnished house for -hich the employer pays !s. *#$$$
p.m.# but deducts only !s. 1$$$ per month from his salary. 8he furniture pro.ided to
him costs !s. &$#$$$
6.iii7 is o-n contribution to Dnrecogni2ed Pro.ident /und is !s. 1#*$$ p.m. and the
employer also contributes an e3ual amount.
Compute the salary income of Mr. B for the 4ssessment Aear "$1$%11. e -as not
ordinary resident during the pre.ious year.
&

11. =n the basis of the follo-ing information compute the taxable income of B under the head
1Salaries1 for the assessment year "$1$%11 :
!s.
<asic salary &#"$$ p.m.
Dearness allo-ance +$$ p.m.
Entertainment allo-ance ($$ p.m.
ill area compensatory allo-ance &*$ p.m.
8ribal area allo-ance (*$ p.m.
is o-n contribution to-ards statutory pro.ident fund *$$ p.m.
Employer1s contribution *$$ p.m.
ouse rent allo-ance '$$ p.m.
Interest credited to pro.ident fund +#*$$
B is an officer of the forest department of the @o.ernment of D.P. e is employed at a
place at a height of 1#1$$ metre abo.e the sea le.el. e is paying !s. 1#"$$ p.m. as
house rent.
*