Sol 1 Computation of Income from Salary

Particulars Amt. (Rs.)

Basic Pay [(16,500 x 4) + (18,000 x 8)] (W.N.1) 210,000
Dearness Allowance (W.N.2) 158,400
Gross Salary 368,400
Less : Standard deduction 50,000
Net Salary 318,400

Working Note 1: Calculation of Basic Salary

Period Basic Salary

01/08/2010 – 31/07/2011 9,000 p.m.
01/08/2011 – 31/07/2012 9,750 p.m.
01/08/2012 – 31/07/2013 10,500 p.m.
01/08/2013 – 31/07/2014 11,250 p.m.
01/08/2014 – 31/07/2015 12,000 p.m.
01/08/2015 – 31/07/2016 13,000 p.m.
01/08/2016 – 31/07/2017 14,000 p.m.
01/08/2017 – 31/07/2018 15,000 p.m.
01/08/2018 – 31/07/2019 16,500 p.m.
01/08/2019 – 31/07/2020 18,000 p.m.

Working Note 2: Dearness Allowance

For Calculating dearness allowance, PY 2018-19 can be divided into following three periods.

Period Basic Salary

From April 2019 to July 2019 ( 4 Months) 39,600
(16,500 x 4) x 60%
From August 2019 to January 2020 ( 6 Months) 86,400
(18,000 x 6) x 80%
From February 2020 to March 2020 ( 2 Months)
(18,000 x 2) x 90% 32,400
Total DA 158,400
Sol 3
A) Income from salary is computed from starting of the year (01/04/2019)

Computation of Income from Salary

Particulars Amt. (Rs.) Amt. (Rs.)
Basic Salary (1,00,000 X 12) 1,200,000
Advance Salary for April 2020 100,000
Bonus received during the year 12,000
Arrears of salary 150,000
Reimbursement of Medical expenses 25,000

Gross Salary 1,487,000

Less: Standard deduction 50,000
Net Salary 1,437,000

Notes
1)    Bonus is taxable only on receipt basis,
therefore bonus for 2018-19 outstanding during the year is not taxable in PY 2019-20.
2)    Reimbursement of car expenses in respect of office use is not taxable.
3)    Advance against salary is in the nature of loan taken from employer therefore,
advance of 40,000/- against salary of May 2020 is not taxable.
4)    Loan from employer is capital receipt & not taxable.

B) Mar - jan 11 months

Basic 1100000
Entertainment allowance 11000
Commutation allowance 22000
Gross Salary 1,133,000
Less: Standard deduction 50,000
Net Salary 1,083,000
Sol.4 Computation of Income from Salary
Particulars Amt. (Rs.Amt. (Rs.)
Basic Salary 900,000
Dearness Allowance 360,000
City compensatory allowance 90,000
Medical allowance 96,000
Children educational allowance 21,600
Less: Exemption 2,400 19,200
Hostel expenditure allowance 21,600
Less: Exemption 7,200 14,400
Transport Allowance 24000

Overtime allowance 30,000

Uniform Allowance 9,600
Less: Exemption = Actual expenditure 2,000 7,600
Gross Salary 1,541,200
Less-Profession Tax was deducted 2,400
Less- Standard Deduction 50,000
Income From Salary 1,488,800
Sol 5 Computation of Income from Salary
Particulars Amt. (Rs.)
Basic Salary (75,000 x 12 ) 900,000
House Rent Allowance ( 25,000 x 12 ) 300,000
Exam fees from own clg NOT INCLUDED
Allowance for looking after the evening shift of the college (1,500 x 12) 18,000
Gross Salary 1,218,000
Less Deduction u/s 16
Profession tax paid 1,600
Standard deduction 50,000
Net salary 1,166,400

Notes:
1)      Exemption from House rent allowance is not available since she is staying in her own house and not paying any rent.
2)      Remuneration received from IMT college for working as visiting faculty will be taxable as income from Business & profession.
3)      Examinership fees received from Shivaji University and Banaras Hindu University will be taxable as income from Business & profession.

Income by way of examinership fees received by a professor from the same university in which he is employed would not be chargeable to tax
under the head income from salary but must be taxed as income from other sources under section 56. This is because of the fact that the
essential condition that the income in question must be received fro services rendered in the ordinary course of emplyment would not be
fulfilled in the case of examinership fees.
4)      No deduction is allowed from income from salary for expenses incurred while performing the duty.
5)      Fees for setting T.Y.B.Com. papers is received from Mumbai University not from her employer therefore not taxable as Income from salaries.
6)      Deduction for Profession Tax is allowed only on payment basis.
Computation of Income from Salary- Govt Employee
Particulars Amt. (Rs.)
Sol 6 Basic Salary (25,000 x 9.5 ) 237,500
Dearness allowance (2,37,500 x 120%) 285,000
Commission on sales 47,000
Gratuity Exempted
Bonus declared Not Taxable
Entertainment allowance (9,250 x 9.5) 87,875
Amount received from statutory provident fund Exempted
House Rent Allowance (55,000 – 35,000) 20,000
Commuted pension Exempted
Gross Salary 677,375
Less- Deduction u/s 16
Entertainment allowance
Less: Exempted least of the following
a)1/5th of basic Salary Rs.47,500
b)Amt. Specified Rs.5000
c)Actual amount received 87,875
Whichever is lower 5000
less: Profession tax paid 1080
less: Standard deduction 50000
Income from salary 621,295
Taxable Income rounded off to the nearest 10 rupee 621,300

Computation of Tax Liability

Tax on Rs. 6,21,300 at slab rate ( Nil + 12,500 + 24,260) 36,760
Add: Health & Education cess @ 4% 1470
Tax Liability 38,230
Rounded off u/s 288B 38,230
Sol 7 Computation of Income from Salary of Mr. Sudarshan for A.Y 2020-21
Particulars Amt. (Rs.) Amt. (Rs.)
Basic Salary
From 01/04/2019 to 31/07/2019 (75,000 X 4) 300000
From 01/08/2020 to 31/03/2020 (90,000 X 8) 720000 1020000
Taxable HRA (W.N. 1) 228000
Gross Salary 1248000

Particulars Amt. (Rs.) Amt. (Rs.) Amt. (Rs.)

I) From 01/04/2019 to 31/07/2019 (4 months)
HRA Received (32,000 x 4) 128,000
Less: Least of the following is exempt:
a) Actual HRA received 128,000
b) Rent Paid – 10% of Salary (1,00,000 – 30,000) 70,000
c) 50 % of Salary (3,00,000 X 50%) 150000 70,000 58,000

II) From 01/08/2019 to 30/11/2019 (4 months)

HRA Received (32,000 x 4) 128,000
Less: Least of the following is exempt:

a) Actual HRA received 128,000

b) Rent Paid – 10% of Salary (1,00,000 – 36,000) 64,000

c) 50 % of Salary (3,60,000 X 50%) 180,000 64,000 64,000

III) From 01/12/2019 to 31/01/2020 (2 Months)

HRA Received (45,000 x 2) 90,000

Less: Least of the following is exempt:

a) Actual HRA received 90,000

b) Rent Paid – 10% of Salary (50,000 – 18,000) 32,000

c) 50 % of Salary (1,80,000 X 50%) 90,000 32,000 58,000

IV) From 01/02/2020 to 31/03/2020 (2 Months)

HRA Received (45,000 x 2) 90,000
Less: Least of the following is exempt:
a) Actual HRA received 90,000
b) Rent Paid – 10% of Salary (60,000 – 18,000) 42000
c) 50 % of Salary (1,80,000 X 50%) 90000 42000 48,000
Total 228,000
Sr. No. Period
Basic Salary –
Rs.75,000 p.m.
House rent
I) From 01/04/2019 to 31/07/2019 (4 months) allowance -
Rs.32,000 p.m.
Rent Paid - 25,000
p.m.
Basic Salary –
Rs.90,000 p.m.
House rent
II) From 01/08/2019 to 30/11/2019 (4 months) allowance -
Rs.32,000 p.m.
Rent Paid - 25,000
p.m.
Basic Salary –
Rs.90,000 p.m.
House rent
III) From 01/12/2019 to 31/01/2020 (2 Months) allowance -
Rs.45,000 p.m.
Rent Paid - 25,000
p.m.
Basic Salary –
Rs.90,000 p.m.
House rent
IV) From 01/02/2020 to 31/03/2020 (2 Months) allowance - Rs.
45,000 p.m.
Rent Paid - 30,000
p.m.
Sol.8 Computation of Income from Salary
Particulars Amt. (Rs.)
Basic Salary (5000x7) 35,000
DA (1000x7) 7,000
Telephone allowance (500x7) 3,500
Gratuity (W.N. 1) 60300
Pension (W.N. 2) 32800
Leave salary (W.N. 3)- fully taxable 30000
Gross salary 168,600
Less: Deductions u/s 16
Standard Deduction 50000
Taxable salary 118,600

W.N. 1 Gratuity
Calculation of Average Salary for Last 10 Months immediately preceding month of retirement.
Period of ten months before Retirement ( From 01/12/2018 to 31/09/2019)
For calculating exemption, Salary includes Basic salary as well as Dearness allowance if forming part of salar
Basic Salary
From 01/12/2018 to 29/02/2019 ( 4,900 X 3) 14,700
From 01/03/2019 to 31/10/2019 ( 5,000 X 7) 35,000 49,700
Dearness allowance ( 1,000 X 10) 10,000
Salary for Last 10 Months 59,700
Average Salary (59,700 /10) 5,970

Gratuity Received 120000

Less: Exempt ( Whichever is Less)
Amount notified 2,000,000
Actual received 120,000
1/2 x 10 months avg salary x No. of completed yrs of 59,700 59700
(Only completed number of years is considered without rounding off)
Taxable gratuity 60300

W.N. 2: Pension
Uncommuted pension upto the date of commutation ( 3,000 X 3) 9000
Uncommuted pension after the date of commutation ( 3,000 X 30% X 2) 1800
Commuted pension 42000
Less: Exempt
Actual 42000
1/3 x (42000*100/70) 20000 20000 22000
Taxable pension 32800
W.N. 3: Leave Salary
Leaves elegible as per 1 month for each completed y 20 months
Leaves availed during the tenure at the company 25 months
Leaves to his credit Nil
Therefore cash equivalent will be nil, hence exemption will be nil. Therefore entire leave salary

Note: Medical insurance paid by employer is exempted perquisite

Sol.9 Computation of Income under the head Salary
Rs.
Salary 184,800
City Compensatory Allowance 8,000
Bonus 10,200
Education Allowance {Sec 10(14) Rule 2BB} 4,000
Leave Travel Concession {Sec 10(5) Rule 2B} 1,000
Perquisites
Income tax penalty paid by employer {Sec 17(2)(iv)} 2,000
Medical Reimbursement {Proviso to Sec 17(2)} 14000
Free Refreshment Nil
Domestic servant 30,000
Free Residential Telephone Nil
Payment of electricity bills by employer 1,060
Reimbursement of gas bills 1,000
Professional tax paid by employer 300 48,360
Gross Salary 256,360
Less Professional Tax u/s 16(iii) 450
Standard Deduction 50000
Income under the head Salary 205,910

Notes:
Domestic servant was employed by the employee
and the salary of such domestic servant was paid/reimbursed by the employer.
It is taxable as perquisite for all categories of employees.
Taxable perquisite value = Rs.2,500 × 12 = Rs. 30,000.
Education allowance given for Children is exempt but not for grand children
Sol.10 Computation of income under the head Salary in CIC Ltd.
Basic Pay (12,000 x 10) 120,000
Dearness Allowance (3,000 x 10) 30,000
Commission 6,000
Rent free accommodation 254,000
Best suggestion award (Gift) (12,000 – 5,000) 7,000
Lunch Facility Nil
Gratuity 118,654
Uncommuted Pension {3,000 x 50% x 2} 3,000
Commuted Pension 75,000
Refund of employer’s contribution (including interest) 350,000 963,654

Computation of income under the head Salary in TIC Ltd.

Basic Pay (8,000 x 2) 16,000
House Rent Allowance 600 16,600
Gross Income from Salary 980,254

Interest of Rs.1,00,000 on employee contribution from unrecognised provident fund is taxable under IFOS
Working note: Gratuity 335,000
Least of the following is exempt:
(a)    Amount actually received 335,000
(b)   Amount Specified 2,000,000
(c)    15 days salary for each completed years of service (15/26 x 15,000 x 25) 216,346
Taxable (3,35,000 - 2,16,346) 118,654

Working note: House rent allowance

Least of the following is exempt:
(a)    Amount actually received 3,000
(b)   Rent Paid – 10% of salary = 4,000 – 1,600 2,400
(c)    50% of salary = 16,000 x 50% 8,000
Taxable (3, 000 - 2,400) 600

Working note: Pension

Commuted 225000
Less : Exempt u/s 10(10A) 1/3*225000/50% 150000
Taxable 75000
Sol 4 For Mr. Chandra Mohan Income from salary is computed from the date of joining (i.e. 01/09/2019) upto the en

COMPUTATION OF INCOME FROM SALARY

Particulars Amt. (Rs.) Amt. (Rs.)
Basic Salary 560,000
Dearness Allowance 315,000
Ex- gratia ( Received in Cash) 105,000
Entertainment Allowance 21,000
Perquisite Value of Car in respect 9,000
Arrears of salary pertaining to PY 28,000
Commission on sales 47,000
Transport Allowance Received 17500
Gross Salary 1,102,500
Less-Profession Tax was deducted a 2,000
Less: Standard deduction 50,000
Taxable Income From Salary 1,050,500
Sol.10 Computation of Income from Salary
Particulars Amt. (Rs.)
Basic Salary ( 30,000 x 7) 210,000
Dearness Allowance (4,000 x 7) 28,000
House rent allowance (W.N.3) 17,800
Transport Allowance ( 4800-3200) x 7 11200
Night duty allowance (1,000 x 7) 7,000
Entertainment allowance (1,000 x 7) 7,000
Uniform Allowance 5,000
Less: Exemption upto the extent spent 5,000 Nil
Leave Encashment 80,000
Commission as a % of turnover (20,00,000 x 4%) 80,000
Uncommuted pension upto 1/1/2018 16,000
Uncommuted pension after 1/1/2018 12,000
Commuted Pension (W.N.1) 50,000
Gratuity (W.N.2) 0
Gross Salary 519,000
Deductions U/S 16
Professional Tax 1,500
Standard Deduction 50,000
Taxable Salary 467,500

(W.N.1) Commuted Pension

Received 150,000 50% pension = 150000
Less: Exempt Full pension= 300000
1/3 of Amount 100,000
Actual Received 150,000 100,000
Taxable 50,000

(W.N.2) Gratuity
Received 120,000
Less: Exempt 411923.1
15/26*Salary*No. of completed years of service 411,923
Amount Notified 2,000,000
Actual Received 120,000 120,000
Taxable Nil

(W.N.3) House rent allowance

Calculation of salary for HRA Exemption
Basic Salary ( 30,000 x 7) 210,000
Dearness Allowance (4,000 x 7) 28,000
Commission as a % of turnover 80,000
Salary for HRA Exemption 318,000

HRA Received 28000

Less: Exempt
50% of Salary (3,18,000 x 50%) 159000
Rent paid - 10% of Salary (42,000 – 31,800) 10200
Actual Received 28000 10200
Taxable HRA 17800
50% pension = 150000
Full pension= 300000