OUTLINE

L
I
No. Topic Page l
2. Theory Questions 63
2. 1 Descriptive Questions (7 or 8 Marks] 63
2.2 Short Notes (5 Marks] 63
3. Objective Questions 63
3.1 Fill in the Blanks 63
3.2 State Whether True or False 63
3.3 Check Your Answers 63

2. THEO'RY QUESTIONS [15 MARKS]

2.1 DESCRIPTIVE QUESTIONS [7 OR 8 MARKS]

1. Enumerate the different heads of income under which income is classified under the Income-tax Act.
2. Explain the statement - " Section 4 provides the basis of charge on total income; Section 5
defines its scope; Section 14 classifies the total income under different heads and Sections 15
to 59 quantify the amount of total income."
3. Explain the statement - 'The different heads of income are mutually exclusiv!3".
4. Explain - "The heads of income are different, but the income-tax is one tax ."
5. Distinguish between a head of income and a source of income.
6. Describe in brief how total income from all sources is computed under different heads . What is
the importance of heads of income in computation of total income of assessee?

2.2 SHORT NOTES [5 MARKS]

Write a short note on :
1. Heads of Income [Ans. : Para 1.1]
2. Importance o f heads of income [Ans.: Para 1.2]
3. Total Income and Different Heads [Ans.: Para 1.5]

3. OBJECTIVE QUESTIONS

3.1 FILL IN THE BLANKS

1. As per S. 14 of the Income-tax Act, there are _ _ _ _ heads of Income .
2. Income compu ted under eac h head, when added together is called _ _ _ _ (Gross / Net)
total ,ncome.
3. Rent received lrom tenant of a house property is classified as _ __ _
4. Lottery priz e won Is charged to tax under the head _ _ __ (Inco me from Other Sources /
Cap ital Gain s) .

3.2 STATE WHETHER TRUE OR FALSE

1. Perquisites rece ived by employees are taxed as Income from other sou rces .
2. Profit made on sa le of old house 1s taxed eith er as bu siness in come or ca pital gain s.
3. All heads of income as defined under S . 14 are mutu ally exclu sive .
4. Rules for computation of income under all heads are the sam e.
5. Gross Total Income is the sum total of income o f the assessee . du ring th e previous year, from all
sources. classified and computed under different heads.

3.3 CHECK YOUR ANSWERS

3.1 (1 ) 5 (2) Gross (3) Income from House Property (4) Income from Other Sources
3.2 True : 3, 5: False : 1. 2 4
 Ul;SJ;EGTIV-E Q'U ESl:
: . JONS· , ' .

10.1 MULTIPLE CHOICE QUESTIONS

1. M, a chartered accountant is employed with M Ltd., as an internal auditor and requests th
employer to call the remuneration as internal audit fee. M shall be chargeable to tax for such fe:
under the head.
(a) Income from salaries (b) Profit and gains from Business and Profession
(c) Income from other sources (d) None of these
2. M, who is entitled to a salary of {20,000 p.m. took an advance oft 50,000 against the salary in
the month of March, 2020. The gross salary of M for assessment year 2020-21 shall be:
(a) 2,90,000 . (b) 2,40,000
(c) 50,000 (d) None of these
3 . M, who is entitled to salary of { 12,000 p.m. took advance salary from his employer for the
months of April and May 2020, along with salary of March, 2020 on 31-3-2020. The gross sala~
of M for the assessment year 2020-21 shall be
r
(a) 1,44,000 (b) t 1,68,000
(c) t 24,000 (d) None of these
4. Salary of M becomes due on 1st of next month and it is paid on 7th of that month. For the
assessment year 2020-21 , the salary of M shall be taken from
(a) April 2019 to March 2020 (b) March 2019 to February 2020
(c) April 2020 to March 2021 (d) None of these
s. M. Ltd. announced increase in D.A. on 21-3-201 9 with retrospective effect from 21-3-2014 and
the same were paid on 6-04-2019 . The arrears of D.A. shall be taxable in the previous year.
(a) 2018-19
(b) 2019-20
(c) In respective previous years to which these relate
(d) None of these
6. Un-commuted pension received by a Government em ployee is
(a) Exempt (b) Ta xable
(c) 1/3 is exempt (d) None of these
► '15
sa/oriel· /S. J5- J 7/
th8
7. M cla_imfd th e exemption ot gratuity In the past to the extent off 2,50,000. He was entitled to
gratuity rom t_h e present employer amounting to ~ 2 ,00,000 In the previous year 2019-20. M can
claim exemption to the maximum extent of
(a)'( 2,00,000 (b) NII
(c) '( 1,00,000_ . (d) None of these
a. Employee M ts ne Ith er a government employee nor covered under Payment of Gratuity Act,
1972_. He has comp!eted 16 years and 8 months of service . The number of completed years
considered for gratuity exemption shall be
(a) 17 years (b) 16 years
(c) 16 year~ and 8 ~onths (d) None of these
9. Compensation received on voluntary retirement is exempt under sec. 10(10C) to the maximum
extent of
(a)'( 2,40,000 (b) ~ 3,00,000
(c) '( 5,00,000 (d) None of these
10. Mis entitled to children eduction allowance @ ~ 80 p.m . per child for 3 children amounting~ 240
p.m. It will be exempt to the extent of : ·
(a)'( 200 p.m. (b) '( 160 p.m
(c) '( 240 p.m (d) None of the above
11. Entertainment allowance in case of government employee is
(a) Fully exempt
(b) Fully taxable
(c) Exempt upto certain limits mentioned in sec. 16 (ii)
(d) First included in full in gross salary and thereafter deduction allowed from gross salary under
section 16 (ii)
12. Pension received by an employee of the Central or State Government who has been awarded
"Param Vir Chakra" :j
(a) is taxable as income from salary
(b) is exempt from tax
(c) is taxed after deducting '( 15,000 or 1/3 whichever is lower. I'
(d) is taxable as income from other sources
13. Children education allowance is I,!
(a) exempt upto lower of the amount actually spent or the prescribed limits.
(b) exempt fully to the ex tent actually spent
(c) exempl lo the extent of lower of allo wance received or the lump-sum amount prescribed ,
irrespective of actual expenditure.
(d) fully taxab le
14. Leave travel concession is
I.
(a) exempt upto lowe r of the amount actually spent or the prescribed limits.
(b) exempt full y to lhe extent ac tua lly spent
(c) exempt to th e exten t or lower or allowance received or lhe lump -sum amount prescribed,
II
irrespective of actua l expenditure.
(d) fully taxab le
15. Allowances for expenses on Travelling on tour or transfer are
(a) exempt upto lower o f the amount actua lly spent or the prescribed limits.
(b) exempt fully to the extent actually spent
(c) exempt to th e extent of lower of allowance received or th e lump -sum amount prescribed,
irrespective of actual expenditure.
(d) fully taxable
16. Lumpsum payment from Unrecognised Provident Fund to an employee, on his retirement, over
and above his own contributions
(a) is not taxable
(b) is taxable as income from othe r sources
(c) is taxable in case of only ·specified' employees
(d) is taxable as 'profit in lieu o f salary '
 96 Direct Tax (T. Y.B. Com.: SEM,J!J

17. Compensation for termination of employment·

(a) is.not taxable
(b) is taxable as capital gains
(c) is taxable in case of only 'specified' employees
(d) is taxable as 'profit in lieu of salary' · ·
d to an employee
18. Cost of medical treatment, -in a hospital maintained by the employer, provide
(a) is hot taxable
(b) is a perquisite taxable in case of all employees
(c) is a perquisite taxable in case of only 'specified' employees
(d) is taxable as 'profit in lieu of salary'
19. Gas, electricity or water supply provided free of cost
(a) is exempt from tax
(b) is a perquisite taxable in case of all employees
(c) is a perquisite taxable in case of only 'specified' employees
. . . _
(d) is a perquisite taxable in c~se of only non-government employees
nt fund within th e allowed hrn1ts
20. Sum paid as employer's contribytion to a recognised provide
{a) is not taxable

- (b) is a perquisite taxable in case of all employees

(c) is a perquisite taxable in case of only 'specified' employees
(d) is taxable as 'profit in lieu of salary'
21 . Value of rent-free accommodation provided by the employ er

- (a) is exempt from tax

(b) is a perquisite taxable in case of all employees
(c) is a perquisite taxable in case of only 'specified' employees
(d) is a perquisite taxable in case of only government employees
22. Salary received by partner from firm
(a) Salary (b) Income from other sources
(c) Income from business (d) exempt income
23. Salary received by a Member of Parliament
(a) Salary (b) Income from othe r sources
(c) Income from business (d) exempt income
question papers
24 . Payment rece ived by a College lecturer from University for setting
(a) Salary (b) Income from other sources
(c) Income from business (d) exempt income

10.2 FILL IN THE BLANKS

1-- 1 . Salary received by the partner from the firm in which he is a partner is taxab le under the
head

2 . Income under the head salary is taxable only if there is a relationsh ip of

_ _ _ _ and _ __
between the payer and the payee .
).
3. 'Profits in lieu of Salary' is taxab le under the head _ _ _ _ (Sa laries / Profits from business
It Is
4. Compe nsation payable to an empl oyee on te rminatio n of service is a capital receipt.
_ _ _ _ (Taxable I Non-taxable).
5. A Ltd . paid salary of~ 2,00,000 to employee M and undertakes to pay the income -tax amounting
salary of M shall be
to ~ 6,120 during the previous year 20 19-20 on behalf of M. The gross

of employ ee is a _ _ _
6. Medi-claim insurance premium paid by employer on , the behalf
(Tax-free I Taxable) perquisite.
previou s year in excess ol
7 . Employe r's contribution to recognised provident fund during the
_ _ _ _ of basic salary is taxable as salary.
r 8 . Amount notified as exempt gratuity for a non-government employ ee
9. _ _ _ _ of commuted pension received (alongwith gratuity ) by
is _ _ _ _ .
a non-go vernme nt employee
is exempt from tax.
; exempt ).
1o. Leave encash ment received wh ile in service is _ _ _ _ (taxable
~
salaries /S. 15-17) 97
.
Mpays a salary of'{ 2,50,000 to his em 1
11· P oyee V and Undertakes to pay the Income Tax amounting
t 49 980 during the previous y 2019
~ear 2020-21 is '{ - - - - . ear •20 on behalf of V. Gross saJary of V for Asses_sment
Mwas employed on 1-4-2.012 in the
12• Assessment Year 2020-21 is '{ grade of'{ 15,Q00-400-17,000-500-22,000. Gross salary for
Mwas employed on 1-8-2016 in th ·
13·was fixed at'{ 16,200 from the dat! ~;~d~ _oft 15,000-400-17,000-500-22,00 0 and his salary
t ------ · Joining. Gross salary for Assessme nt Year 2020-21 is
M who is entitled to a Salary of '{ 10 00 .
14
·t 20,000 on 1-3-2019 against the sal~r ?p .m. paid on last day of the month, took an advance of
th e month of March 2019. Gross salary for Assessme nt
year 2020-21 is '{ _ _ _ __ Yin
M who is entitled to Salary of'{ 1o 000
15· f April and May 2020 along with S~la p.m. took advance salary from his employer for the month
~ear 2020-21 is '{ - - - -· ry of March 2020 on 31-3-2020. Gross salary for Assessme nt
Mis employed with V ltd., at a salary ft 1
16
· alary of January 2019 to March 201 9 ° o,ooo_ p.m. As V Ltd ., was 1n financial crisis , it paid the
to M only 1n July 2019. Gross salary for Assessme nt Year
~ .21 is ( _ _ ___
020
Salary of M is ( 10,000 p .m M had tak s I . .
17· in March 2019 itself G en a ary in advance for the months of April 2019 to June
20 19 . . · ross salary for Assessme nt Year 2020-21 is? _ _ _ _
M who was working with another . .
18- f ( 10 000 H. company Joined the present employer w.e.f. 1-5-2019 at a
p.m . IS sal_ary becomes due on first of next month. He was also entitled to a
0
Sala~ '
4 is
pension of ( ,ooo p.m. from his former employer. Gross salary for Assessme nt Year 2020-21
t---
19. Daya Marak is a governme nt employee . He draws a monthly salary of ? 5,000 and dearness
allowance @ ( ~OO p.m . He gets< 500 p.m. as entertainment allowance .The amount of deduction
towards entertainm ent allowance is ( _ _ _ _
.
20. X a Governme nt ~mployee receives< 50,000 as salary and< 12,000 as Entertainment Allowance
His actual expenditu re on entertainm ent is only< 3,000. The deduction for entertainm ent allowance
is<----
he got
21. Shobhit is getting a pension of < 3 ,000 p.m. from a company. During the previous year
three-fourth of his pension commuted and received< 2,40,000. Assuming that he also received
gratuity earlier, the exempt amount is < _ __
,
22. C retires from service on 30-11-201 9 . He is in receipt of< 3,000 p.m. as pension upto 31-1-2020
,
payable on the last day of each month. On 1-2-2020, he gets two-third of his pension commuted
for< 1,20,000. He is an ex-employ ee of Central Govt. The amount of pension taxable is'{ _ _ _
of
23. Mr. X is employed in ABC ltd. and the employer has paid him children education allowance
<175 p.m. per child for three children. In this case , taxable amount shall be< _ _ _ _
of
24. Mr. X is employed in ABC ltd. and the employer has paid him children education allowance
<45 p.m. per child for three children . In this case , taxable amount shall be< _ _ _ _
child
25. Mr.Xis employed in ABC Ltd . and is getting children education allowance of< 75 p.m. per
X has incurred < 500 p.m. on the education of each of the child, in this
for three children and Mr.
case taxable amount shall be <- - - -
10.3 MATCH THE FO~L.OW~NG COLUMNS
Column B
1. Column A
I Capital Gains
(a)
1. Salary to partner by fi rm
(b) Profits in lieu of salary
2. Salary of a M.P. / MLA
(c) Business Income
3. Value of rent-free accommo dation
(d) Tax-free perquisites
4. Receipts from Keyman Insurance Policy
(e) Pe rquisites
5. Professio nal Tax
(f) Income from othe r sou rces
(g) Deduction from salary
98 Direct Tax (T. Y.B. Com.: SEM.

2. Column A Column B
1. Notified amount of exempt gratuity (a) t 5,000
2. Notified amount of exempt leave encashme nt (b) t 20,00,000
3. Notified amount of exempt retrenchment (c) t 2,00 ,000
compensa tion (d) ~ 5,00 ,000
4. Notified amount of exempt entertainment (e) ~ 3,00 ,000
allowance to govt. employee s (f) t 15,000
5. Medical reimburse ment not taxable upto (g) t 10,000

10.4 STATE WHETHER TRUE OR FALSE

1. M a chartered accountan t Is employed with M Ltd., as an Manager-T axation a nd requests
th
employer to call the remuneration as tax consultan cy fee. M shall be chargeabl e to tax for sue
fee under the head Income from Salaries.
2 . Salary of M becomes due on 1st of next month and it is paid on 7th of that month. For assessrner
year 2020-21 , the salary of M shall be taken from April 2019 to March 2020.
3. The Govt. of India announced increase in the D.A. on 15-3-2019 with retrospect ive effect
Iron
1-5-2015 and the arrears were paid on 6-4-2019. The arrears of D.A shall be taxable in
th1
previous year 2019-20.
4. Gratuity shall be fully exempt in the case of employees of Central Govt., State Govt. and
Loca
Authorities .
5. An employee is covered under Payment of Gratuity Act, 1972. Salary for the purpose of calculatint
exemption u/s 10 (10) shall be the average Salary of last 10 months.
6 . An employee is covered under Payment of Gratuity Act, 1972. If the employee has completea
service of 16 years 6 months and 5 days, the number of completed years for calculating exemption
u/s 10(10) shall be taken as 16 years.
7. An employee is covered under Payment of Gratuity Act , 1972. For the purpose of computing
15
days' salary for exemption u/s 1o (10), the number of days in a month shall be taken as 30 days,
8. An employee is neither a Government employee no r covered under Payme nt of Gratuity
Act,
1972. Salary for the purpose of calculating half month fo r calculating exemption u/s 10 (10) shall
be taken as average Salary of 10 months preceding the month of retirement.
9. An employee is neither a Government employee nor covered under Payment of Gratuity
Act,
1972. If the employee has completed 16 years and 8 months of service, the number of completed
years for calculating exemption u/s 1G {10) are taken as 17 years.
10. An employee is neither a Government employee nor covered under Payment of Gratuity
Acl,
1972. The maximum notified amount of gratuity exempt u/s 10 {10) shall be < 20,00 ,000.
11 . M who claimed the exemption of gratuity in th e past to the extent of < 2 ,50 ,000 was entitled
to
the gratuity from the present / second employer amounting to .< 2,00 ,000 in the previous year
2019-20. M shall be entitled to exemption to the max imum extent of < 2,00,000.
12. Pension rece ived by a Govt. employee is exempt.
13. Commute d pension received sha ll be fully exempt in case of Governm ent emp loyee
or an
employee of local authority or an employee of statutory corporation .
14. An employee was entitled to gratuity. He also got 60% of his pe nsion commuted and received
a
sum of< 1,20,000 as co mmuted pension. The exemption in his case shall be< 80 ,000 .
15. An employee who was not entitled to gratuity, got 30% of his total pension commuted in the
past
He wishes to commute another 25% of his total pension in the previous ye ar. He shall be allowed
exemption to the extent of 25%.
16. ~alary . for exempti~n of leave encashment shall be taken as average Salary of 1o months
1mmed1ately preceding the month of retirement.
17. The maximum exemption in case of leave encashme nt fo r a non-govt. employee shall
be
< 3,00 ,000.
18. An employee availed th e exemption of leave encashme nt of < 1,00 ,000 in the past. He received
from the second empl_oyer a sum of< 2,50,000 as encashme nt of leave on his retirement. He
will
be entitled to exemption to the extent of< 2,50 ,000.
19. Compensation received on voluntary retirement is exempt under 10(1 0C) to th e ·mum extenl
of< 3,50 .000 . maxi
~

sa/ari,s/S. 15~1 7/ 99 n
20. A Is entitled to_Childre n educat ion allowan ce @ ~ 80 p.m.
per child for 3 childre n amo unting
'( 240 p.m. It will be exemp t to the extent of ' 200 p.m.
1. MIs entitled to Ho~tel e xpendi ture allowan ce of ~ 600 p.m. for
2 his 3 childre n @ ? 200 per child.
The actual expe ndI ture Is t 300 per child per month . The exemp
tion In this case shall be t 4 oo
p.m.
22. Entertainment allowa ~ce ~n case of Govern ment employ ee Is first Included in full in gross salary
and thereafter ~educt ion is allowe d from gross salary under section 16(ii).
3. th
2 ouri~g e_ pr~viou s year, an employ ee was reimbu rsed, 21,000 as medica l expens es incurre d
by him which include s ~ 7 ,000 spent in Govt. hospital. The taxable perquis
ite in this case shall
oe ~ 21 ,000.
24. employer's c_ontrib ution to statutory provident fund shall be exemp t upto 12% of salary.
25. Interest credite d t_o st_atutory provide nt fund shall be fully taxable.
26. EmPl?ye_r's contnb ution to unreco gnized provide nt fund shall
be fully taxable in the year of
contribution.
21. Tea and sna_cks are pr?vide d to employ ees during office hours . The
value of this perquis ite shall
be Nil, only 1f the cost Is upto ~ 50 per head per day.
28. Profe~s!onal tax of t 2,500 payabl e by the employ ee but paid by
the employ er is an exemp t
perqu1sIte .

10.s CHECK YOUR ANSWERS

10.1
- 1. (a) 5. (b) 9. (c) 13. (c) 17. (d) 21. (b)
2. (b) 6. (b) 10. (b) 14. (a) 18. (a) 22. (c)
3. (b) 7. (a) 11 . (d) 15. (b) 19. (c) 23. (b)
4. (b) 8. (b) 12. (b) 16. (d) 20. 24 . (b)
(a)

10.2 (1) Busine ss income (2) Employer; Employee (3) Salaries

(4) Taxable (5) 2,06, 120 (6) Tax-
free (7) 12% (8) < 10,00,0 00 (9) 1/3 (10) taxable (11) 2,99,98
0 (12) 2,10,00 0 (13) 2,08,0 00
(14) 1,20 ,000 (15) 1,40,00 0 (1 6) 1,20,00 0 (17) 90,000 (18)
1,48,00 0 (19) 5,000 (20) 5,000
(2 1) 1,06 ,667 (22) 8 ,000 (23) 3,900 (24) 540 (25) 900
Hints:
21. 2,40,00 0 X 4/3 X 1/3 = ~ 1,06,667
22 . 8,000 = (3,000 X ) + (1,000 X 2)
23 . [(175
X 3) · (100 X 2)] X 12 = 3,900
24 .[(45 X 3) · (45 X 2)] X 12 = 540
t
25 . [75 X 12 = 900]
10.3 (i) : 1 - (c). 2 - (f), 3 - (e) , 4 - (b), 5 - (g) II
(2) : 1 - (b), 2 - (e). 3 - (d), 4 - (a) , 5 - (f)
10.4 True : 1, 3, 4 , 8, 10 , 11, 13 . 17, 21, 22
False : 2 . 5, 6, 7, 9, 12, 14, 15, 16 , 18, 19, 20 , 23, 24, 25 , 26, 27,
28
2. False ; March 20 19 to Februa ry 2020
5. False ; last drawn sala ry
6. False ; 17 years
7. False ; 26 days
9. False; 16 years
11. True;< 2.00 ,000 (M ax im um < 2 0,00,00 0 · Alrea dy claime
d ~· 2 ,50,000)
12. False; taxable
14. False;~ 66.667 [ 1/3 x (1 ,20 ,000 x 100 ~· 60)]
15. False; 20°~ (Total exemp tion 50%, · Alread y claime d 30%)
16. False; Averag e Salary of 1O months immed iately preced ing
the date of retirem ent.
18. False; < 2 ,00 ,000 (Maxim um< 3,00,00 0 · Alread y claime
d < 1,00,00 0)
19. False;< 5,00,00 0
20 . False; < 160 p.m. (80 p.m. x Max. 2 children)
21. True; (200 p.m . x 2 childre n)
23. False; NIL . spent n Govt. hospita l fully exempt + oth er Medica
1 l expens es upto ~ 15,000 .
 100 Direct Tax (T. Y.B.Com.- : SE1

~ 24. False;-fuHy exempt

25. False; fully exempt
26. False; taxable in the year of transfer/ withdrawal.
--------- 27. False; NIL in all cases · . ; ◄ 6 (...)
. ' . ..
28. False; included in gross salary as perqu1sIte; but allowe d as deduction u s 1 111
------ : :·• ..,._ . ···, -.·· ·t·,r, .,. · · ' l \' ., .. ; .;._i;·_ ·,,,.· .• , ,.;,~_;11~1 ,,'1·.. ;
---- i . 1-1... ·. ,~•·A>GJ.1.I C~t j~qn:etEMS
1 ._.

,', ' .·· · .t ,_.. . , , ,. .. - . (. , · '. ,,, .:, ,.:,, ... - -•· .r
• ,

--- ,..l,:, •,r! ~; 1~'

• . •• } \ :• ~ ,( .,...,. .." !)! t1 ( ,, I • · •

11.1 COMPUTATION OF EXEMPTIONS

-------
-- •
Q •1 (Gratu1ty) .
: Shn Hrithik was employed since 1st January, 1987 in. KNPH Ltd. During
.
previous year 2019-20, his salary was : t 15,200 p.m. between Apnl and June an
d<
the cu
15,600
thereafter. He got 15% of his salary as dearness allowance which is treated as salary for comput
of retirement benefits. He retired from seNice on 1st February, 2020. He received < 3 .40,0C
watuity from his employer. Calculate the exempt amount of gratuity for the assessment year 202
~- If -

- (i) Payment of Gratuity Act, 1972 applies; (ii) Payment of Gratuity Act, 1972 does no~_apply. _
[Ans. : (i) ( 3,31,200; (1i) f 2,84,

- ,,
0.2 (Gratuity): Ashok, an employee of KBC Ltd., receives < 2,05,000 a_s gratuity under the Pay1
of Gratuity Act, 1972. He retires on September 1o, 2019 after rendering seN1ce for 35 years
seven months. The last drawn salary was< 2,700 p.m. Calculate the amount of gratuity charge
~
to tax. · -
[Ans.: r 1,48,923; Exempt= f56,
0.3 (Commutation of Pension, w/o gratuity) : A is entitled to get a pension of < 800 per m
rom a private company. He gets two fifth of the pension commuted and receives< 40,000. Com
taxable portion of the commuted value, if he does not receives any gratuity.
[Ans.: Nil; exempt 40, r r
mutation of Pension, with Gratuity) : A joined a company on 1-7-2003 and resit
ervice on 15-9-2019. His salary was< 16,500 per month on since 1-7-2019. He rec~
nt of~ 500 per month w.e.f 1-7-2019. He was also entitled to dearness allowanc
forms part of salary for retirement benefits. On retirement, he received a gratui
ayment of Gratuity Act is not applicable). He was entitled to a pen sion of< 8,00(
• • I • . He got 75% of his pension commuted
w.e.f 1-1-2020 and received a su
pension. Compute his Gross Salary for Assessment Year 2020-21.
[Ans.: r 5,46, 133; Gratuity Exempt - r 1,99,
Commuted Pension Exempt - r 2,66,
ent) : A an employ~e of AB~ Ltd. retired from service w.e .f. 1-1-2020
ears a~?
7 months. At the time of retirement he received a sum of< 50,000 as 1,
t for. unava1led leave of 300 days. He was entitled to 40 d
. ays Ieave 1or each ye
ed service. He was getting a salary of< 5 000 per month t th - f -
. f "' 1
ed increment o , 500 w.e.f. 1-7-2019. Compute the amou at feI Ime o the re tiremenI
'
ta x. n eave encashment ex, °
.6 (Leave encashment): Determine the amount of taxabl [Ans .: ' 22•
20-21 from the following information in respect of an em i8
eave salary for the assessment
1

n 31-12-2019. P oyee who retired from a private se

1 . Salary at the time of retirement : ~ 25,000 p.m.
Average salary received from 1-3-2019 to 30-9-20 . <
. df 19 24
Average salary receive rom 1-10-2019 to 31-12-20 · : < ,000 p·m·
19 25 00
4 . Duration of service : 26 years ' 0 p.m.
5. Leave entitlement for each year of seNice : 1½ months
6. Leave availed while in seNice : 8 months. ·
7. Leave at the credit of employee at the time of retirement .
· f 1· 3
8. Leave salary paid at the time o re irement: t 7,75 ,000 _ · 1 months ·
{Ans.: Exempt LS= 2 43 .
. ' ' 000, Taxable L
0.7 : Mr. Shah an Accou~ts Manager has retired from JK Ltd. on _ _ eave Salary= r 5,32,
for 30 years 7 months. His salary is< 25,000 p.m. upto 30. . 15 1 2020, after rendering ser.
9 2019
and ~ 27.nnn tho,,-,.-,o,.._, ~"