Tax Classes By CMA J.S.
Malhotra
Practice Session– 2
Salary Income
Q.1. Mr. Lal is employed in Bharat Textiles Ltd. Mumbai on monthly salary of 20,000. In addition
to this fixed salary, he is entitled to a commission @ 5% on the sales made by him. During
previous year 2023-24, he had received following allowances and amenities from his
employer.
(i) D.A. @ 2,000 p.m. which is granted to him under the terms of employment and
counted for retirement benefits.
(ii) Bonus equal to two month’s Basic Salary.
(iii) HRA @ 5,000 p.m.
(iv) Entertainment allowance @ 250 p.m.
(v) The company paid 1,000 as his income tax penalty.
(vi) In Sept., 2023, during leave he went on a visit to Kashmir with his family. The
expenditure amounting to 16,000 as passage money were paid to him by employer as
Leave travel assistance. Had he travelled by AC first class compartment by train the
expenditure in this regard would have been only 14,000.
(vii) He had been provided with the amenities of gas, electricity and water, the expenses
of which amounting to 12,000 were paid by the company.
(viii) Commission on Sales of 10,00,000 @ 5%.
(ix) He was given free cloth worth 4,000 by his employer.
(x) He and his employer each contributed 12.5% of his salary to RPF. The interest
credited to this fund for the previous year 2023-24 @ 13.5% amounted to 27,000.
Compute the salary income and gross total income of Mr. Lal for the assessment year 2024-25,
keeping in mind that he spent Rs6000p.m. as rent of the house hired by him, assume that Mr. Lal
has opted for the Option Available under Section 115BAC(6).
Q.2 Mr. X is employed with AB Ltd. On a monthly salary of Rs25,000 Per month and on
entertainment allowance and commission of Rs1000 Per month each. The company
provides him with the following benefits:-
1. A company owned accommodation is provided to him in Delhi. Furniture costing Rs2,40,000
was provided on 1.8.2023.
2. A Personal loan of Rs 5,00,000 on 1.7.2023 on which it charges interest @6.75% p.a. The
entire loan is still outstanding. (Assume SBI rate of Interest to be 12.75%p.a.)
3. His son is allowed to use a motor cycle belonging to the company. The Company had
purchased this motor cycle for Rs60,000 on 1.5.2020. The motorcycle was finally sold to
him on 1.8.2023 for Rs30,000.
4. Professional tax paid by Mr. X is Rs2000.
Compute the income from salary of Mr.X for the Assessment year 2024-25.
assume that Mr. X has opted for the Option Available under Section 115BAC(6).
Tax Classes By CMA J.S. Malhotra
Q.3 MR. Subramani is the chief Finance Manager of M/S LHW Ltd. Based at Chennai. He has
given the following details relating to salary :-
1 Basic Salary (Rs60,000 x 12) = Rs7,20,000
2 D.A. (Rs25,000 x 12) = Rs3,00,000 (Forms part of retirement benefits)
3 Bonus – 2months of basic pay
4 Commission – 0.1%of the turnover of Company. The turnover of Company for
the Previous year 2023-24 is Rs20 Crores.
5 Contribution of Employer and Employee to RPF: Rs3,50,000 each
6 Interest Credited to RPF Account at 9.5% : Rs65,000
7 Rent Free Unfurnished Accomodation provided by the Company for which the
company has paid annual Rent of Rs80,000.
8 Entertainment Allowance : Rs 30,000
9 Hostel allowance for three Children : Rs5000 each
Compute the income chargeable under the head “ Salary” in the hands of Mr. Subramani for the
A.Y. 2024-25, assume that Mr. Subramani has not opted for the Option Available under
Section 115BAC(6).
Q.4 Mr. Vasudevan retired on June 30, 2023. He submits the following information:
Basic Salary( Since Jan 2023); 20,000 p.m.
DA : 6,000 p.m. (one third of which is part of retirement benefits)
Employer’s contribution towards PF : 3,000 p.m.
(Vasudevan makes a matching contribution)
Interest credited to PF @ 15% : 7,500
Pension after retirement : 10,000 p.m.
Payment of PF received at the time of retirement : 7,60,000, as per details below:
Employer Contribution: 3,30,000
Interest thereon : 44,000
Employee’s Contribution: 3,40,000
Interest thereon: 46,000
Salary and pension becomes due on the last day of each month.
Vasudevan has deposited the entire PF Payment with a company (Rate of interest 9%
p.a.).
Find out the total income of Vasudevan for the assessment year 2024-25 on the
assumption that the PF is
(a) Statutory Provident fund
(b) Recognised provident fund
Tax Classes By CMA J.S. Malhotra
(c) Unrecognised Provident fund
Assume that Mr. Vasudevan has opted for the Option Available under Section 115BAC(6).
Q.5 Mr. Mohit is employed with XY Ltd. On a basic salary of 10,000 p.m. He is also entitled to
D.A @ 100% of basic salary, 50% of which is included in salary as per the terms of employment.
The company gives him house rent allowance of 6,000 p.m. which was increased to 7000 p.m.
with effect from 1-1-2024. He also got an increment of 1,000 p.m. in his basic salary with effect
from 1-02-2024. Rent paid by him during the previous year 2023-24 is as under:-
April and May 2023 - Nil, as he stayed with his parents
June to October 2023 - 6,000 p.m. for an accommodation in Ghaziabad
Nov2023 to Mar 2024 - 8,000 p.m. for an accommodation in Delhi
Compute his gross salary for the assessment year 2024-25. Assume that Mr. Mohit has opted
for the Option Available under Section 115BAC(6).
Q.6 Mr. X, employed as Production Manager in B Ltd., furnishes you the following information for
the year ended 31.03.2024 :
(i) Basic salary upto 31.10.2023 50,000 p.m.
Basic salary from 01.11.2023 60,000 p.m.
Note : Salary is due and paid on the last day of every month.
(ii) Dearness allowance @ 40% of basic salary.
(iii) Bonus equal to one month salary. Paid in October, 2023 on basic salary plus dearness
allowance applicable for that month.
(iv) Contribution of employer to recognized provident fund account of the employee @ 16% of
basic salary.
(v) Professional tax paid 3,000 of which 2,000 was paid by the employer.
(vi) Facility of laptop and computer was provided to Mr. X for both official and personal use. Cost
of laptop 45,000 and computer 35,000 were acquired by the company on 01.12.2022.
(vii) Motor car owned by the employer (cubic capacity of engine exceeds 1.60 litres) provided to
the employee from 01.11.2023 meant for both official and personal use. Repair and running
expenses of 45,000 from 01.11.2023 to 31.03.2024 were fully met by the employer. The
motor car was self-driven by the employee.
(viii) Leave travel concession given to employee, his wife and three children (one daughter aged
7 and twin sons – aged 3). Cost of air tickets (economy class) reimbursed by the employer
30,000 for adults and 45,000 for three children. Mr. X is eligible for availing exemption this
year to the extent it is permissible in law.
Compute the salary income and also tax liability of Mr. X for the assessment year 2024 – 25.
assume that Mr. X has Not opted for the Option Available under Section 115BAC(6).
Q.7 Mr. Kashyap retired from the services of M/s ABC Ltd. on 31.01.2024, after completing
Tax Classes By CMA J.S. Malhotra
service of 30 years and one month. He had joined the company on 1.1.1988 at the age of 30
years and received the following on his retirement:
(i) Gratuity ` 5,50,000. He was covered under the Payment of Gratuity Act, 1972.
(ii) Leave encashment of ` 3,30,000 for 330 days leave balance in his account. He
was credited 30 days leave for each completed year of service.
(iii) As per the scheme of the company, he was offered a car on 31.01.2024 which
was purchased on 01.03.2021 by the company for ` 5,00,000. Company has
recovered` 2,00,000 from him for the car. Company depreciates the vehicles
at the rate of 15% on Straight Line Method.
(iv) An amount of ` 3,00,000 as commutation of pension for 2/3 of his pension
commutation.
(v) Company presented him a gift voucher worth ` 8,000 on his
retirement. Following are the other particulars:
(i) He has drawn a basic salary of ` 20,000 and dearness allowance @50% of basic
salary for the period from 01.04.2023 to 31.01.2024. Dearness allowance does not
form part of pay for retirement benefits.
(ii) Received pension of ` 7,000 per month for the period 01.02.2024 to
31.03.2024 after commutation of pension.
Compute his income taxable under the head “Salaries” for Assessment Year 2024-25. assume
that Mr. Lal has opted for the Option Available under Section 115BAC(6).
