Topic wise Test Papers of CA Inter - Direct Tax – MAY/SEP-25 Exams

Topic: Income from Salary

Total Marks: 50 Marks

Time Allowed: 70 minute

Answers:

Part-A Multiple Choice Questions

[Total 20 Marks]
1. Answer : A
2. Answer : A
3. Answer : D
4. Answer : C
5. Answer : C
6. Answers : (i) A
(ii) B
(iii) C
(iv) A
7. Answer : B

Part- B Descriptive Questions

[Total 30 Marks]
Solution 1:
Computation of Total Income of Mr. Raghav for the A.Y.2025-26 as per 115BAC
Particulars ` `
Salaries
Basic Salary = 1,70,000 x 8 13,60,000
Dearness Allowance = 80,000 x 8 6,40,000
Commission = 32,000 x 8 2,56,000
Transport Allowance = 5,000 x 8 40,000
Medical reimbursement [Fully taxable] 40,000
Gratuity – Amount received 25,00,000
Less: Least of the following exempt u/s 10(10)
(i) Actual Gratuity received ` 25,00,000

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2 Test Papers of CA Inter - Direct Tax - MAY/SEP-25 Exams — Answers

Particulars ` `
(ii) ½ month’s salary for every year of completed
service [ ½ x 2,50,000 (Basic salary plus DA) + x
10] = ` 12,50,000
(iii) Notified limit of ` 20,00,000
Least of the above is exempt 12,50,000
12,50,000
Gross Salary 35,86,000
Less: Standard deduction u/s 16(ia) [Actual salary or ` 75,000, 75,000
whichever is less]
Net Salary 35,11,000

Solution 2:
Computation of taxable salary of Mr. X for A.Y. 2025-26
Particulars `
Basic pay [(` 20,000×9) + (` 21,000×3)] = ` 1,80,000 + ` 63,000 2,43,000
Dearness allowance [10% of basic pay] 24,300
Bonus 21,000
Employer’s contribution to Recognized Provident Fund in excess
of 12% (15%-12% =3% of ` 2,67,300) [See Note 1 below] 8,019
Taxable allowances
Telephone allowance 6,000
Taxable perquisites
Rent-free accommodation [See Note 1 & 2 below] 29,430
Medical reimbursement 25,000
Reimbursement of salary of housekeeper 12,000
Gift voucher [See Note 5 below] 10,000
Gross Salary 3,78,749
Less: Deduction under section 16(ia) – Standard deduction 50,000
Salary income chargeable to tax 3,28,749
Notes:
1. Since dearness allowance forms part of salary for retirement benefits, the perquisite value of rent-
free accommodation and employer’s contribution to recognized provident fund have been
accordingly worked out.
2. Where the accommodation is taken on lease or rent by the employer, the value of rent-free
accommodation provided to employee would be actual amount of lease rental paid or payable by
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 Test Papers of CA Inter - Direct Tax - MAY/SEP-25 Exams — Answers 3
the employer or 10% of salary, whichever is lower.
For the purposes of valuation of rent free house, salary includes:
(i) Basic salary i.e., ` 2,43,000
(ii) Dearness allowance (assuming that it is included for calculating retirement benefits)
i.e. ` 24,300
(iii) Bonus i.e., ` 21,000
(iv) Telephone allowance i.e., ` 6,000
Therefore, salary works out to
` 2,43,000 + ` 24,300 + ` 21,000 + ` 6,000 = ` 2,94,300.
10% of salary = ` 2,94,300 × 10/100 = ` 29,430
Value of rent-free house = Lower of rent paid by the employer (i.e. ` 1,20,000) or 10% of salary (i.e., `
29,430). Therefore, the perquisite value is ` 29,430.
3. Facility of use of laptop is not a taxable perquisite.
4. Conveyance allowance is exempt since it is based on actual reimbursement for official purposes.
5. The value of any gift or voucher or token in lieu of gift received by the employee or by member of
his household below ` 5,000 in aggregate during the previous year is exempt. In this case, the gift
voucher was received on the occasion of marriage anniversary and the sum exceeds the limit of `
5,000.
Therefore, the entire amount of ` 10,000 is liable to tax as perquisite.
Note - An alternate view possible is that only the sum in excess of ` 5,000 is taxable. In such a
case, the value of perquisite would be ` 5,000.
6. Premium of ` 5,000 paid by the company for personal accident policy is not liable to tax.

Solution 3:
Computation of income under the head “Salaries” of Mr. Raja for the A.Y.2025-26 as per 115BAC.

Particulars ` `
Basic Salary = ` 25,000 x 9 months 2,25,000
House Rent Allowance = ` 6,000 x 9 months 54,000
Less: Least of the following exempt u/s 10(13A) [Not available in N/A 54,000
115BAC]
Gratuity
Less: Least of the following exempt under section 10(10)(ii) 3,50,000
(i) Actual Gratuity received ` 3,50,000
(ii) 15 days salary for every year of completed service [15/26 x` 25,000 x
26] = ` 3,75,000
(iii) Notified limit = ` 20,00,000 3,50,000 Nil
Leave encashment 3,15,000
Less: Least of the following exempt under section 10(10AA) 2,50,000 65,000
(i) ` 25,00,000
(ii) Leave salary actually received ` 3,15,000

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4 Test Papers of CA Inter - Direct Tax - MAY/SEP-25 Exams — Answers

Particulars ` `
(iii) ` 2,50,000, being 10 months’ salary x ` 25,000
(iv) Cash equivalent of leave standing at the credit of the employee based
on the average salary of last 10 months’ (max. 30 days per year of
service) for every year of actual service rendered for the employer
from whose service he has retired
375/30 x ` 25,000 = ` 3,12,500
[Leave Due = Leave allowed – Leave taken]
= 750 (30 days per year × 25 years) – 375 days (15 days x 25)
= 375 days]
Uncommuted Pension received [` 5,000 x 1) + (` 5,000 x 2 x 40%) 9,000
Commuted Pension received 3,00,000
Less: Exempt under section 10(10A)
1/3 x ` 3,00,000/60% x 100%) 1,66,667 1,33,333
Gift Voucher [As per Rule 3(7)(iv), the value of any gift or voucher or Exempt
token in lieu of gift received by the employee or by member of his
household not exceeding ` 5,000 in aggregate during the previous year is
exempt]
Mobile Phone received as gift from colleagues (Neither taxable under the Nil
head “Salaries” nor “Income from other sources”, since taxability
provisions under section 56(2)(x) are not attracted in respect of mobile
phone received from colleagues, as mobile phone is not included in the
definition of “property” thereunder)
Gross Salary 4,86,333
Less: Standard deduction u/s 16 [Actual salary or ` 75,000, whichever is 75,000
less]
Net Salary 4,11,333

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 Test Papers of CA Inter - Direct Tax - MAY/SEP-25 Exams — Answers 5
Solution 4:

Computation of tax liability of Kashyap under both the options

Particulars Option I – Option II –

HRA (`) RFA(`)

Basic Salary (` 45,000 x 12 Months) 5,40,000 5,40,000

Perquisite value of rent-free accommodation (10% of ` 5,40,000) N.A. 54,000

House rent Allowance (` 8,000 x 12 Months) ` 96,000

Less: Exempt u/s 10(13A) – least of the following -

- 50% of Basic Salary ` 2,70,000

- Actual HRA received ` 96,000

- Rent paid less 10% of salary `24,000 ` 24,000 72,000

Gross Salary 6,12,000 5,94,000

Less: Standard deduction u/s 16(ia) 50,000 50,000

Net Salary 5,62,000 5,44,000

Less: Deduction under Chapter VI-A - -

Total Income 5,62,000 5,44,000

Tax on total income 24,900 21,300

24,900 21,300

Add: Health and Education cess@4% 996 852

Total tax payable 25,896 22,152

Tax Payable (Rounded off) 25,900 22,150

Cash Flow Statement

Particulars Option I – Option II

HRA – RFA

Inflow: Salary 6,36,000 5,40,000

Less: Outflow: Rent paid (78,000) -

Tax on total income (25,900) (22,150)

Net Inflow 5,32,100 5,17,580

Since the net cash inflow under Option I (HRA) is higher than in Option II (RFA), it is beneficial for Mr. Kashyap
to avail Option I, i.e., House Rent Allowance

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