Questions on Income from Salary
Illustration 1: Grade Pay
Mr. Banku joins Skill India Ltd. on 1st August 2010 in the pay scale of 9,000 – 750 – 12,000 –1,000 –
15,000 – 1,500 – 21,000. The company has allowed him dearness allowance @ 60% of the basic pay from
01/04/2019 upto 31/07/2019 and thereafter dearness allowance was allowed @ 80% of the basic pay but
upto 31/01/2020 and after that dearness allowance was allowed @ 90% of the basic pay.
Compute his Income from salary for the Assessment Year 2020-21.
Illustration 2:
Chunky Kumar, an Indian citizen, is deputed by the central government at Maldives during the Previous
Year 2019-20. His emoluments consist of Basic Pay of Rs.1,50,000 per month and overseas allowance of
Rs. 60,000 per month. Besides, he is entitled for the to and fro journey to India and also uses the
Government’s car at Maldives. He has no taxable income except Salary income stated above. Discuss the
taxability of his income.
Illustration 3: Basis of Charge
Mr. Leo Martin, an employee of Indiana Fashions Ltd., submits following details of salary in respect of P.Y.
2019-20.
i) He was entitled to salary of Rs.1,00,000/- p.m. due on the last day of the month, but received on 5th
day of next month.
ii) Salary for April 2020 was received in advance in March 2020 of Rs. 1,00,000/-.
iii) Bonus for the year 2019-20, Rs.15,000 is outstanding but bonus of Rs.12,000 for the year 2018-19
was paid on 1st January 2020.
iv) Arrears of salary Rs.1,50,000/- for 2017-18 received in October 2019. It was not taxed earlier on due
basis.
v) Reimbursement of car expenses in respect of office use Rs.12,000/-
vi) Reimbursement of Medical expenses Rs.25000/- during the year.
vii) Advance of 40,000/- against salary of May 2020, received on 31/3/2020.
viii) Loan taken from employer for marriage of sister Rs.4,50,000/-
Compute his income from salaries for PY 2019-20.
b) Is there any change in answer if salary is due and paid on 1st day of next month (Assume only Basic
Salary same as above, rest ignore). He received entertainment allowance Rs.1000 p.m , Commutation
allowance Rs. 2000 p.m. He retired on 31/01/2020.
Illustration 4:
Compute the gross salary of Mr. Kamal for the assessment year 2020-21 on the basis of the following
information:
1) Basic Salary per month Rs.75,000/-
2) Dearness Allowance per month 40% of basic pay
3) City compensatory allowance 10% of basic pay
4) Medical allowance per month Rs.8,000/-
5) Children educational allowance (per month per child for three children) Rs.600
6) Hostel expenditure allowance (per month per child for two children) Rs.900/-
7) Transport Allowance per month (for commuting between home & office) Rs.2,000/-
(However actual expenditure was only Rs. 8000 )
8) Overtime allowance per month Rs.2,500/-
9) Uniform Allowance per month (However actual expenditure was only Rs. 2000 ) Rs.800/-
10) Profession Tax was deducted Rs.2,400/-
11) Perquisite value of car facility exclusively for official purpose Rs. 5,600/-
Illustration 5: Lecturer in college
Miss Reema is a senior lecturer in Accountancy in MCC College of Commerce. She furnishes you the
following details:
a) Draws basic salary @ Rs.75,000 per month.
b) House Rent Allowance Rs.25,000/- per month. She is staying in her own house and not paying any rent.
c) Allowance for looking after the evening shift of the college Rs.1,500 per month.
d) Rs.20,000 received from IMT college for working as visiting faculty
e) Examinership fees from her college Rs.2,000. Examination fees from Shivaji University and Banaras
Hindu University Rs.5,000/-
f) Royalty for writing book on accountancy Rs.20,000. Expenses incurred for writing manuscripts, proof
reading etc. are Rs.4,000.
g) Expenses incidental to employment were Rs.6,000/- including purchase of books, conveyance etc.
h) Fees for setting T.Y.B.Com. papers from Mumbai University Rs.4,000/-
i) Profession tax due was Rs.2400/- but paid only Rs.1,600 during the year.
You are required to ascertain the taxable income under the head, “Salaries” of Miss Reema for the
assessment year 2020-21.
Illustration 6: Government Employee
Miss Aasin Chakraborty is employed with Sales officer in a Maharashtra Government Department at
Mumbai, since 1989. She retired from service on 15th January 2020. Following information is furnished by
her for the assessment year 2020-21.
a) Basic Salary @ Rs.25,000 per month.
b) Dearness allowance is 120% of basic salary. 75% of dearness allowance forms part of retirement
benefits.
c) Commission on sales Rs.47,000/- is due for PY 2019-20.
d) Gratuity received on 15/2/20 – Rs.6,50,000/-
e) Bonus equal to one month’s salary was declared.
f) Entertainment allowance @ Rs.9,250 per month. She spent Rs.350/- p.m. on entertainment
g) Amount received from statutory provident fund on retirement Rs.35,00,000/- including employers
contribution and interest thereon Rs.12,50,000/-
h) House Rent Allowance for the year Rs.55,000. (Exempt Rs.35,000/-)
i) She was entitled to pension of Rs.15,000 p.m. but she commuted 100% of her pension and received
Rs.24,00,000/- during the year.
j) Profession Tax paid during the year was Rs.1,080/- & outstanding at the end of the year is Rs.720/-
You are required to ascertain the taxable income from salaries.
Illustration 7: House Rent Allowance
Mr. Sudarshan is employed in TAJA Chemicals Ltd. getting basic pay 75,000 p.m. but it was increased to
90,000 p.m. w.e.f. 01/08/2019. He was also getting house rent allowance from his employer 32,000 p.m. but
it was increased to 45,000 p.m. w.e.f. 01/12/2019.
Mr. Sudarshan was paying rent 25,000 p.m. for house located in Mumbai but he has to shift to bigger house
in Delhi from February 2020. From 01/02/2020, he was paying rent of Rs.30,000 p.m.
Compute his Income from Salary for the Assessment Year 2020-21.
Illustration 8: (Gratuity + Pension)
Mr. Bahubali retires on 31/10/2019 from Kattapaa Ltd. He furnishes the following particulars:
a) Basic Salary at the time of retirement is Rs.5000/- per month, However, up to 28/02/2019 his basic
salary was Rs.4,900/- per month.
b) Pension Rs. 3,000 /- per month
c) Dearness allowance Rs.1,000 pm forming part of salary for the purpose of retirement benefits,
d) Gratuity received Rs.1,20,000 not covered under Payment of Gratuity Act. He has retired after 20
years and 8 months of service.
e) He commuted 70% of his pension and received Rs. 42,000 on 31/01/2020.
f) Leave salary received at the time of retirement Rs. 30,000.
g) Leaves availed while in service is 25 months.
h) He was given telephone allowance of Rs. 500 pm.
i) The company paid medical insurance premium of his family of Rs. 10,000.
Compute his taxable salary income for AY 2020-21.
Illustration 9: Taxable Perquisite
Mrs. Radha, an employee of Radhe-Shyam Ltd., submits the following information for the Assessment Year
2020-21:
1) Basic Salary: Rs.15,400/- per month;
2) City compensatory allowance: Rs.8,000;
3) Bonus declared during the year Rs.15000/-but received only Rs.10,200;
4) Education allowance: Rs.4,000 (for her grand children); Entire amount was spent by her for
educational purpose.
5) Income tax penalty paid by the employer: Rs.2,000:
6) Domestic servant was provided at the residence of Mrs. Radha. Salary of domestic servant is
Rs.2,500 per month. The servant was engaged by him and the salary is reimbursed by the company
(employer).
7) Medical expenses reimbursed by the employer: Rs.14,000;
8) Medical facility given to his family in a hospital maintained by the company. The estimated value of
benefit because of such facility is Rs.40,000.
9) Leave travel concession: Rs.1,000 (expenditure incurred by the employee is Nil)
10) Free residential telephone: Rs.4,000;
11) Free refreshment during office hours Rs.4,000;
12) Reimbursement of electricity bill by the employer: Rs. 1,060;
13) Reimbursement of gas bills: Rs.1,000;
14) Professional tax paid by the employer: Rs.300 on behalf of Mrs. Radha;
15) Professional tax paid by Mrs. Radha: Rs.150.
Determine the Total Income of Mrs. Radha for the Assessment Year 2020-21.
Illustration 10: Receipt from URPF
Mr. Sundar Lamba, a resident individual, retires from CIC Ltd. Delhi w.e.f. 1st February, 2020 after 25 years
of service. He joined TIC Ltd. on the same day i.e. 1st February, 2020.
The following information is provided by him about his incomes during the Previous Year 2019-20:
(a) Salary/allowances/perquisites/other payment from 01.04.2019 to 31.01.2020 from CIC Ltd.
(i) Basic salary 12,000 p.m.
(ii) Dearness allowance (50% includible for superannuation benefits) 3,000 p.m.
(iii) Commission, 5% on turnover achieved by him 6,000
(iv) House accommodation, rent paid by company. Perquisite value of which is
Rs.2,54,000 p.a.
(v) Best suggestion award for total quality management scheme (in kind) 12,000
(vi) Lunch Facility (Cost per meal is upto Rs.50) 500 p.m.
(vii) Gratuity under Payment of Gratuity Act, 1972 3,35,000
(viii) Pension 3,000 p.m.
(ix) Commuted value of one-half pension w.e.f. 01.02.2018 2,25,000
(x) Refund of employer contribution from unrecognised provident fund (Including 3,50,000
interest of Rs.1,50,000)
(xi) Refund of employee contribution from unrecognised provident fund (Including 2,50,000
interest of Rs.1,00,000)
(b) Salary/allowances/perquisites etc. from 01.02.2020 to 31.03.2020 from TIC Ltd.
(i) Salary 8,000 p.m.
(ii) House rent allowance 1,500 p.m.
(iii) Rent paid by assesse 2,000 p.m
You are required to compute his income under the head Salary and Tax Liability for the Assessment Year
2020-21.
