UNIT-1 : INCOME FROM SALARY

Section-15 : Chargeability
Conditions
(1) Any income which is arising out of employer and employee relationship
is taxable under the head salary income (master and servant
relationship)
(2) Salary is either taxable on ”Due” Basis
OR
On “Receipt” Basis.
w.e. matures earlier that is,

(a) If salary becomes due on last day of any month, then salary of April to
March is taxable.
(b) If salary becomes due on 1st day of next month then salary of March to
February is taxable.

Graded System of Salary :

Under graded system of salary an employee is in the receipt of a fixed sum
of money as an increment every year. Salary of any previous year is to be
calculated into two parts.

1. Before Increment :
March/April to Month before increment.
2. After increment :
Month of increment to March/February.

If the date of increment is given then considered such date of increment

otherwise consider date of joining as date of increment.

(a) e.g. due on last day rec. on 5th of next month.

Last date  April to March.
Recd w.e. matures
PY Month Due
. earlier
18- 31.3.1 5.4.1
March 19 31.3.19
19 9 9
19- April 19 30.4.1 5.5.1 30.4.19
 20 9 9
19- February 28.2.2 5.3.2
28.2.20
20 20 0 0
19- 31.3.2 5.4.2
March 20 31.3.20
20 0 0

(b) e.g. due on 1st day of next month and received on 5 th of next
month.
First day of next month  March to February
Recd w.e. matures
PY Month Due
. earlier
18- 1.4.1 5.4.1
March 19 1.4.19
19 9 9
19- 1.5.1 5.5.1
April 19 1.5.19
20 9 9
19- February 1.3.2 5.3.2
1.3.20
20 20 0 0
18- 1.4.2 5.4.2
March 20 1.4.20
19 0 0

For Example :
Mr. X joined with ABC Ltd. on 01.01.2011 in a salary scale of 75000-25000-
175000-30000-295000-40000-495000-50000-1095000.
Calculate taxable salary of P.Y. 19-20.
Before increment April to After increment January
December i.e. 9 months to March i.e. 3 months
2010-11 - 75,000
2011-12 75,000 1,00,000
2012-13 1,00,000 1,25,000
2013-14 1,25,000 1,50,000
2014-15 1,50,000 1,75,000
2015-16 1,75,000 2,05,000
2016-17 2,05,000 2,35,000
2017-18 2,35,000 2,65,000
2018-19 2,65,000 2,95,000
2019-20 2,95,000 3,35,000
x 9 months x 3 months
26,55,000 10,05,000
 Rs.36,60,000

Example : Mr. Tushar Kapoor joined with Ekta Ltd. on 1 st February 2011 in a
salary scale of 1000-20-1200-40-1400-50-1800-100-2800, he joined with 2
increments.
On 1st February, 2018, he received 5 additional increment in appreciation of
his ability. Calculate taxable salary for P.Y.2019-20.

Solution :
After increment
Before increment April to
February to March i.e. 2
January i.e. 10 months
months
2010-11 - 1040 (1000+20+20)
2011-12 1040 1060
2012-13 1060 1080
2013-14 1080 1100
2014-15 1100 1120
2015-16 1120 1140
2016-17 1140 1160
2017-18 1160 1360
2018-19 1360 1400
2019-20 1400 1450
x 10 m x2m
14000 2900

Rs.16,900

Working :
1160
+ 20 Regular
1180
+ 20 1st
1200
+ 40 2nd
 1240
+ 40 3rd
1280
+ 40 4th
1320
+ 40 5th
1360
For Example,
Mr. Ronak joined with Reliance Ltd. on 1 st January 2013 with 2
increments in a salary scale of 50,000-5,000-70,000-7,500-1,15,000-10,000-
1,55,000-15,000.
On 1st January 2018, he received 6 additional increments in
appreciation of his special ability. As per terms of employment, salary
becomes due on.
(a) Last date of each month
(b) First date of next month
Calculate taxable salary for P.Y.2019-20 / A.Y.2020-21.

(A) Solution:
Before increment April to After increment January
December i.e. 9 months to March i.e. 3 months
2012-13 - 60,000 (WN.1)
2013-14 60,000 65,000
2014-15 65,000 70,000
2015-16 70,000 77,500
2016-17 77,500 85,000
2017-18 85,000 1,45,000 (WN 2)
2018-19 1,45,000 1,55,000
2019-20 1,55,000 1,70,000
x9 mts x 3 mts
13,95,000 5,10,000

Rs.19,05,000

W.N.1 60,000 = 50,000 + 5,000 + 5,000

W.N.2 85,000 1,15,000
(+) 7,500 Regular (+) 10,000
4 th

92,500 1,25,000
(+) 7,500 1st (+) 10,000
5th
1,00,000 1,35,000
(+) 7,500 2nd (+) 10,000
6th
 1,07,500 1,45,000
(+) 7,500 3rd __________
1,15,000
(B)
After increment January
Before increment March to
to February i.e. 2
December i.e. 10 months
months
1,55,000 1,70,000
x10 x2
1,55,000 3,40,000

Rs.18,90,000

Retirement Benefits :
GRATUITY
Section 10(10)(i) Taxability of Gratuity received by government sector
employee.
Any types of Death cum Retirement Benefits received by Government sector
employee at the time of retirement is Fully Exempt.

Section 10(10)(ii) Taxability of Gratuity received by an employee covered

under the Payment of Gratuity Act, 1972.

Any types of Gratuity received by an employee covered under the Payment

of Gratuity Act shall be exempt to the extent of following.

(a) Actual Gratuity received

(b) Salary last drawn (WN 1) x 15/26 (WN 2) x Completed years
of services (WN 3)
(c) Maximum Rs.20,00,000
w.e. is LESS

Points to be remembered.
(1) Salary last drawn means,
Basic salary 
(+) Dearness Allowance (Full) 

(2) If an employee is retiring from seasonal establishment then instead of
15 days consider 7 days salary i.e. (7/26).
(3) For the purpose of 10(10)(ii), completed years of services means, any
types of fraction of years in excess of 6 months will converted into 1
full year i.e.

29 years and 3 months = 29

29 years and 6 months = 29
29 years and 9 months = 30
29 years, 6 months and 1 day = 30
29 years and 12 months = 30
29 years, 5 months and 29 days = 29
6th month is also not converted.

Section 10(10)(iii) Taxability of Gratuity received by any other

employee.

Any other employee means an employee who is neither covered by

government sector nor covered by the Payment of Gratuity Act. Gratuity
received by any other employee shall be exempt to the extent of following.

(a) Actual Gratuity Received.

1
(b) Average salary (WN 1,2,.3) x 2 x Completed years of services
(WN 4)
(c) Maximum Rs.20,00,000
w.e. is LESS

Points to be Remembered :
(1) Average salary means salary of last 10 months immediately preceding
the month of retirement that is if an employee is retiring on last date
of any month, then 10 months salary is to be calculated from the
month of retirement otherwise from the previous month of retirement.
(2) Here, salary means,
Basic salary 
(+) D.A. (Forming Part) 
 (+) Comm. on T/O 

(3) When any Dearness Allowance is contributed for retirement benefits
then it is known as forming part of salary.
(4) For the purpose of Sec.10(10)(iii), completed years of services means
any types of fraction of years is totally ignored, i.e.
29 years and 3 m = 29
29 years and 6 m = 29
29 years and 9 m = 29
29 years and 12 m = 30

Common Points for Gratuity :

(1) Any amount of Retirement benefits received during the continuance of
service is fully taxable.
(2) Any amount of Gratuity Fund is contributes by an employer is fully
exempt.
(3) In case of death of an assessee any amount of Gratuity is received by
the legal heirs of a deceased legal heirs is fully taxable or fully exempt
on the basis of due or accrual it means if Gratuity is due then it is fully
taxable in the hands of legal heirs subject to an exemption under
section 10(10)(ii) and 10(10)(iii) and if it is not due, then it is not
taxable.
(4) If an employee is in the receipt of Gratuity from more than one
employer then aggregate amount of Exemption must not exceed the
maximum exemption limit that is Rs.20,00,000.
(5) If any amount of Gratuity was exempted in earlier years then such
amount of exemption claimed in earlier years must be reduced from
maximum. Exemption limit i.e. Rs.20,00,000.

Section 10(10A) Taxability of Pension :

Points to be Remembered :

(1) Any amount of Pension received per month is known as uncommuted

pension.
(2) Any amount of pension received in lumpsum or adhoc then it is known
as commuted pension.
(3) The date on which commuted pension received is known as date of
commutation and therefore from such date uncommuted.

Pension

Uncommuted Pension Commuted Pension

 
Per month Adhoc / Lumpsum

Fully taxable in all cases Received by Govt.Sector
Received by
Non Govt
  sector
Because caln. cannot be Fully Exempt
made Who is in the receipt
Who
is not in the
 of Gratuity receipt
of liab., is not fixed
Gratuity
 
Exempt 1/3 of Exempt
½ of
total commuted total
commuted
value value
Pension must be reduced by percentage of commutation pension.
(4) In case of death of an employee any amount of pension received by
legal heirs of a deceased employee is known as family pension and
such family pension is fully taxable under the head ‘Income from other
sources’ subject to an exemption of Rs.
33.33% of family pension
OR
Maximum Rs.15,000
w.e. is LESS
(5) Any amount of pension received during the continuous of service is
fully taxable in the hands of all employees.

Section 10(10AA) Taxability of Leave Salary :

Section 10(10AA)(i)  Taxability of leave salary by government sector
employee.
Any types of Leave Salary received at the time of retirement from
government sector is fully exempt from tax.
Section 10(10AA) (ii)  Taxability of leave salary by any other
employee.
Any amount of leave salary received by any other employee at the
time of retirement is exempt to the extent of following.

(a) Actual leave salary received.

(b) Cash equivalent of leave (WN 1)
(c) 10 months salary (WN 4)
(d) Maximum Rs.3,00,000
w.e. is LESS

Points to be Remembered :
(1) Cash equivalent of leave means,
Balance of leave as per income tax x Average salary.
(2) Balance of leave as per Income Tax.
(A) When leave available is given leave entitlement as per income tax
Completed years of service x Maximum 30 days  days
Less: leave avail (given in e.g.) (X) days
leave credit / balance of leave as per income tax  days
Income tax ÷ 30 days
 months
(B) When leave avail is not given leave entitlement as per employer
Completed years of services x No. of days leave entitles  days
Less: Leave credit as per employer (X) days
Leave avail  days
Leave Entitlement as per Income Tax
Completed years of services x Maximum 30 days  days
Less : Leave Avail (X) days
Leave credit/balance of leave as  days
 per income tax (in days) ÷ 30 days
 months
(3) As per Income Tax maximum 30 days leave for each completed years
of services shall be granted.
(4) Here, salary means,
Basic Salary
(+) D.A. (Forming part)
(+) Commutation on T/O.
(5) 10 months salary means, salary of last 10 months immediately
preceding the date of retirement.
(6) Any types of fraction of year is totally ignored.
(7) Any amount of leave salary received during the continuance of service
is fully taxable in the hands of all kinds of an employee.
(8) Any amount of leave salary received, by the legal heirs of deceased
employee is fully exempt.
(9) If any amount of leave salary was exempted in earlier year then it
must be reduced from maximum exemption limit i.e. Rs.3,00,000.
(10) If any amount of leave salary received from more than one employer
than the aggregate amount of exemption must not exceeds the
maximum exemption limit i.e. Rs.3,00,000.

Section 10(10C) Taxability of VRS Compensation :

VRS compensation shall be exempt only if it is received after
completing a services of atleast 10 years or 40 years of age.
VRS compensation shall be exempt to the extent of following.
(a) Actual VRS received.
(b) 3 months salary for each completed service.
(c) Salary for remaining part of service.
(d) Maximum Rs.5,00,000
w.e. is LESS

 Salary means, Basic salary + D.A. (Forming part), + Commutation on

T/O.
 Ignore fraction of months.

Section 10(13A) Taxability of House rent Allowance :

 HRA shall be exempt to every employees only if the following
conditions are fulfilled.
(1) The place where an employee is working and the place he resides, at
both place he must not own his own house property.
(2) Rent expenditure must be incurred which is in excess of 10% salary.
If both of the above conditions are fulfilled then HRA shall be exempt
to the extent of following.
(a) Actual HRA received.
(b) Rent paid – 10% of salary (WN 1,2)
(c) 40% of salary (WN 3)
w.e. is LESS.

Points to be Remembered
(1) Here, salary means,
Basic salary
(+) D.A. (Forming part)
(+) Commission on T/O.
(2) If at the time of calculating of exemption, rent paid – 10% of salary
comes into negative, then no exemption with respect to HRA is
available because rent expenditure is not exceeding 10% of salary.
(3) If the place of working is BCDM (Bombay, Calcutta, Delhi and
Madras/Chennai), then instead of 40%, consider 50% of salary.
(4) If there is any change in any of the following four factors then
exemption with respect to HRA is to be calculated on monthly basis.
- Basic salary / salary
- HRA
- Rent paid
- Place

Section 10(14) Taxability of Special Allowances

(A) Fully Taxable Allowances :
(1) Dearness Allowances.
(2) Tiffin / lunch / meal allowances.
(3) Domestic servant allowances.
(4) Project allowances.
(5) Allowances for Gas, Electricity and Water.
(6) Entertainment allowances
(7) Medical allowance
(8) Holiday home allowance
(9) Over time allowance
(10) City compensatory allowance
(11) Telephone Allowance
(12) Pet allowance
(13) Wardenship Allowance
(14) Special Allowance
(15) Gift Allowance

(B) Allowances which are exempt to the extent of Actual

Expenditure incurred (HRCUT).
(1) Helper allowance
(2) Research allowance
(3) Conveyance allowance / petrol allowance
(4) Uniform allowance
(5) Travelling allowance / trip allowance / tour daily allowance
Rs 500 pm per child for each of his three children as education and hostel
allowance(all 3 children are studying of which one is staying in a hostel)
500*12*3=18000
100*12*2=2400
300*12*1=3600

(C) Allowances which are exempt to the extent of Basic Limits

determined by Income Tax.
(1) Children Education Allowance :
This allowance is exempt to the extent of maximum Rs.100 per month
per child for maximum 2 children i.e. RS.2400. (Only with respect to
such child or children who are studying)

(2) Hostel Allowance :

This allowance is exempt to the extent of maximum Rs.300 per month
per child for maximum 2 children. (Only with respect to such child or
children who are staying in a hostel)
(3) Transport Allowance :
This Allowance is now FULLY TAXABLE but it shall be exempt to the
extent of Rs.3200 per month in case of physically and mentally
 disabled person including blind).
(4) Allowances to meet expenses on duty :
This allowance is mainly available to transport sector and it is exempt
to the extent of following.
70% of such allowance
OR
Rs.10,000 p.m.
w.e. is LESS.
(5) Tribal Area Allowances
This allowance is exempt to the extent of Rs.200 per month.

(D) Fully Exempted Allowances :

(1) Allowances to judges of High Court.
(2) Allowances paid by UNO.
(3) Compensatory Allowance received by Judge.
(4) Allowances granted to government employees outside India.
(5) Sumptuary allowances granted to Judges of High Court and Supreme
Court.

How to Compute Taxable Salary :

A Statement showing Taxable Salary

P.Y. 2019-20

A.Y.2020-21

------------------------------------------------------------------------------------------------------------
---------
Particulars Amount ` Amount `
------------------------------------------------------------------------------------------------------------
---------
Basic Salary 
D.A. 
Entertainment allowance 
All taxable allowances 
Bonus 
Commission 
Taxable value of perquisites 
 Retirement Benefits
Gratuity 
Pension 
Leave salary 
VRS compensation 
Retrenchment compensation 
Provident Fund  
Gross Salary 

Less: Deductions U/s. 16 :

(i) Standard Deduction Flat 50,000
(ii) Entertainment Allowance 
(iii) Professional Tax  (X)
Taxable salary 

Section-16 : Deductions available from Gross Salary :

Sec.16(1) : Standard Deduction

There is a flat deduction of ` 50,000 irrespective of type of employment.

Sec.16(2) : Entertainment Allowance :

1. First of all actual entertainment allowance received is fully taxable as

Gross Salary.

2. Deduction with respect to entertainment allowance is allowed to

government sector employee only to the extent of following.

(a) Actual entertainment allowance recd

(b) 20%/ 1/5th of Basic Salary

(c) Maximum Rs.5,000

w.e. is LESS

3. Any types of expenditure for the purpose of entertainment is not

relevant.
Section 16(3) : Professional Tax / Tax on Employment :

1. Professional tax is levied as per Article 276 of the Indian constitution.

2. Professional Tax shall be allowed as deduction to every employee on

payment basis (then only deduction).

3. Professional tax is personal obligation of an employee but if it is paid

by an employer, then it is fully taxable as salary and it is also allowed
as deduction u/s. 16(3).

Section 10(10) Taxability of Provident Fund

(During the service)

Statutory
Recognised Unrecognised
Contributions Provident
Provident Fund Provident Fund
Fund
1. Employer’s Exempt upto 12%
Not Taxable Not Taxable
contribution to PF of salary
2. Interest Exempt upto 9.5%
Not Taxable Not Taxable
Credited on PF of Rate of Interest
3. Employee’s Not eligible for
Eligible for deduction U/s. 80C
contribution to PF deduction U/s. 80C.

Here, salary means,

Basic salary

(+) D.A. (Forming part)

(+) Commutation on T/O.

Taxability of Provident Fund on Maturity / Retirement

 Any amount of statutory Provident Fund received on Retirement /

Maturity is fully exempt.

 Any amount of Recognised Provident Fund on Retirement / Maturity is

taxable to the extent of following.

RPF
 When not Taxable When
Taxable

If it is received after If it is received without In all cases,
it is fully
completing the servicescompleting the services taxable
of atleast 5 years of 5 years
↓
If it is received without completing the services of 5 years

Due to discontinue of Due to death or in Due to any other

Employer’s Business capacity of an circumstances beyond
employee the contribution of an
employee

Any amount of unrecognized provident fund received on maturity is

fully taxable as follows.
Contribution Taxable under the
Head
(1) Employer’s contribution to URPF Salary income
(2) Interest credited on employer’s contribution to Salary income
URPF
(3) Employee’s contribution to URPF It is not taxable
(4) Interest credited on Employee’s contribution to IFOS
URPF
Section 17(2) PERQUISITES
Rule 3(1) : Accommodation Facility
(A) Unfurnished Accommodation
1. Government sector employee ® Unfurnished accommodation
provided to government sector employee is taxable to the extent of
Licence Fees determined by government sector.
2. For any other employee ® Taxable value of unfurnished
accommodation provided to any other employee is taxable to the
extent of following.
When accommodation is
Population Owned by an Not owned by an
Employer Employer
When Accommodation is provided
in a city where population is
15% of “Salary”
(a Not Exceeding 10 lacs 7.5% of
OR
) “Salary”
Lease rent paid by
(b Exceeds 10 lacs but not exceeds 25 10% of
an employer
) lacs “Salary”
whichever is less
(c Exceeds 25 lacs 15% of
) “Salary”
(B) Furnished Accommodation :
Taxable value of furnished accommodation is to be calculated as
follows.
Step-1 : Calculate Taxable value as if it is unfurnished.
Step-2 : Add 10% cost of furniture (if furniture own by employer)
Step-3 : Add Rent of Furniture (If furniture is not own by an employer)
Add hire charges for other domestic appliance.

(C) Hotel Accommodation :

Hotel accommodation is not taxable if the following conditions are
fulfilled.
(1) It is provided because of transfer from one place to another place.
(2) The aggregate number of days during the relevant P.Y. must not
exceed 15 days during the relevant P.Y.
 If any of the above conditions are not fulfilled the Hotel
accommodation is taxable to the extent of following.
24% of “Salary”
OR
Hotel Tariff charges
w.e. is LESS

(D) Accommodation provided on Concessional Rent :

If any amount is recovered from an Employee then it must be reduced
from Taxable Value.

Points to be Remembered :
(1) Accommodation facilities is taxable in the hands of specified as well as
Non specified employee.
(2) Accommodation facilities is taxable only for such time period during
which it was provided to an employee.
(3) For the purpose of accommodation facilities, salary includes salary
from past, present and prospective employer.
(4) Salary for the purpose of accommodation facilities is always calculated
on due basis and therefore any types of advance salary is totally
ignored.
(5) Here, salary means, BABC
B = Basic Salary
A = All Taxable Allowances
(D.A. is included only if it is forming part of salary)
B = Bonus
C = Commission
Any other monetary receipts.

Meaning of Specified Employee :

Certain perquisites are taxable only in the hands of specified employee i.e.
car facility, domestic servant facility of Gas, electricity and water facility,
education facility, medical treatment facility, club facility, credit card facility
etc. are taxable only in the hands of specified employee.
The following are employees known as specified employee.
(1) Director of Company :
 For the purpose of specified employee, a person need not to be whole
time Director. If a person is a director for only a single day then also he
will be a specified employee.
(2) Substantially Interested Shareholder :
If an employee is holding 20% or more voting rights then he is known
as specified employee.
(3) Monetary Salary chargeable to tax exceeding Rs.50,000.
If an employee is neither director nor substantially interested
shareholder then he will be a specified employee only if his monetary
salary chargeable if exceeding Rs.50,000. If at the time of calculating
monetary salary, any types of perquisites is not included.

Rule 3 (2) : Car Facility :

1. When car is own by an employee and its expenses are also borne by
an employee then it is not regarded as perquisites and therefore it is
not taxable.
2. When car is provided by an employer and its expenses are also borne
by an employer or employee then taxable value of such perquisites
shall be taken as NIL subject to it must be used for purpose of official
purpose.
3. In any other cases, car facility is taxable to the extent of following.
Car Exps. Wholly Partly official and partly
personal personal
purpose
1.Employ Employ Actual Actual running and maint. cost ü
ee er Running & Add : *Driver salary ü
main. cost
Add : *Driver ü
Salary
Taxable value Less : Exempt
For Car
upto1.6 litre CC Rs.1800 p.m. (X)
More than 1.6 litre CC
Rs.2400 p.m. (X)
*For Driver
Rs.900 p.m. (X)
 Taxable Value ü
2.Employ Employ Actual wear For car upto 1.6 litre CC Rs.600 p.m.
er ee and tear ü
OR More than 1.6 litre CC Rs.900 p.m. ü
Hire charges *For Driver
paid by Rs.900 p.m. ü
employer
Add : *Driver Taxable value ü
Salary
Taxable value

3.Employ Employ Actual For car upto 1.6 litre CC

er er Running and Rs.1800 p.m. ü
main. exps.
Add : *Driver More than 1.6 litre CC
Salary Rs.2400 p.m. ü
Add : Actual *For Driver
Wear Rs.900 p.m. ü
and tear
OR Taxable Value ü
Hire charges
paid by
employer
Less : Amt
recovered
from an
employee
Taxable Value

*Driver’s salary is taxable only if it is provided by an employer.

(4) Actual wear and tear means 10% cost of car.

(5) When an employees provided more than one car, only one car shall be
taken as partly official and partly personal purpose and other car/cars
shall be taken as only personal purpose. According to choice of an
assessee only one car shall be taken as partly official and partly
 personal purpose and the car having higher value shall be taken as
partly official and partly personal purpose, while other cars shall be
taken as wholly personal purpose.
(6) The above mentioned perquisites is taxable only if the hands of
specified employee but if its expenses are directly made or reimburse
by an employer then it is fully taxable in the hands of specified as well
as non specified employees.
(7) A certificate for official use of car must be obtained from employer and
for that purpose and employer has to maintain certain necessary
documents like journey register, trip register, log book and any other
necessary documents.

Rule 3(3) : Domestic Servant Facility :

 When any types of Domestic Servant is provided by an employer like
sweeper, cook, watchman, gardener etc. then it is taxable only when
an employee is a specified employee.
 When any Domestic Servant engage by an employee but its salary is
directly met or reimburse by an employer then it is fully taxable in the
hands of specified as well as Non specified employee because it is the
personal obligation of an employee which is directly met or reimburse
by an employer and therefore it is fully taxable within the meaning of
Sec.17(2) (iv).
 If any amount of recovered from an employee, then it must be reduce
from taxable value.
 As per circular No.122 dated 19.10.1973 of CBDT, when
accommodation facility is provided which is own by an employer, then
any expenditure with respect to garden and gardener’s salary is not
taxable.
When Accommodation is
Domestic
Servants Owned by an Not Owned by an
employer employer
Cook ü ü
Watchman ü ü
Gardener X ü

Rule 3 (4) : Free Supply of Gas, Electricity, Water etc. facilities :

 If an employer is a manufacturing company of such facility then
taxable value = Cost of manufacturing.
 If an employee is not a manufacturing company of such facility then
taxable value is actual cost to the employer.
 If any amount is recovered from an employee then it must be reduced
from Taxable value.
 If Gas Bill are issued in the personal name of employee then it is fully
taxable in the hands of specified as well as Non specified employee
within the meaning of Sec.17(2)(4).
Rule 3 (5) : Education Facility
(1) Any types of training facility provided to an employee that it is not
taxable.
(2) When any types of education expenses is directly met or reimburse by
an employer then it is fully taxable within the meaning of Sec.17(2)(4).
(3) When any types of Education Allowance is received per month then it
is fully taxable in the hands of specified as well as non specified
employee subject to an exemption of Rs.100 p.m. per child.
(4) Any types of Education Facility is provided in a school, college or
institute which is own or maintain by an employer there is an
arrangement between employer and such institute with respect to
Education facility then it is taxable to the extent of following.
(a)When Education facility provided to children of an employee.
1. Reasonable cost of Education is not exceeding Rs.1,000 p.m. per child
Not Taxable
2. When reasonable cost of education is exceeding Rs.1,000 p.m. per
child.
Reasonable cost of education ü
Less: Exempt Rs.1,000 p.m. per child (X)
ü
Less: Amount recovered from employee (X)
ü
(b) When Education facility is provided to any other relatives of an
employee.
Actual cost of education ü
Less : Amount recovered from employee (X)
Taxable Value ü
(5) The above mentioned perquisites are taxable in the hands of specific
employee only but if expenses employee only but if expenses are
directly met or reimburse by an employee then it is fully taxable in the
hands of specified as well as non specified employee.
(6) There is no limit on number of children for the purpose of exemption of
an education facility.
(THERE IS AN ALTERNATE VIEW WHICH PROVIDES THAT IF COST OF
EDUCATION EXCEELDS 1000 ` PER MONTH PER CHILD THEN IT
IS FULLY TAXABLE ALSO)
Rule 3 (6) : Medical treatment Facility :
(1) A fixed sum of money received per month is known as medical
allowances it is fully taxable.
(2) A medical treatment facility is provided to an employee is taxable in
the hands of specified employee only.
(3) Here Relative means,
-Own, spouse, Children
-Parents, brother and sister of an assessee who are mainly dependent
upon him/her.
(4) When any types of medical treatment facility is provided to an
employee or any of his relative in a Government hospital, then it is
not taxable.
(5) When any types of medical treatment facility is provided to an
employee or any of his relative in a hospital which is own or maintain
by an employer then it is not taxable.
(6) When any types of medical treatment facility is provided to an
employee or any of his relatives in a hospital which is recognised by
Chief Commissioner of Income Tax, then it is not taxable.
(7) When any types of Health Insurance premium of an employee or his
relative is paid by an employer, it is not taxable.
(8) When any types of medical treatment facility is provided to an
employee or any of his relative in a private clinic or private nursing
home or reimbursement of medical expense in a private clinic or
private nursing home, then it is FULLY TAXABLE.

Medical Treatment Facility provided Outside India :

(1) Expenditure with respect to cost of stay and medical treatment is
exempt to the extent of permitted by RBI.
(2) Travelling expenses from India to outside India and vis-a-versa is either
fully taxable or fully exempt based on the level of GTI. It means if GTI
is exceeding Rs.2,00,000 then travelling expense is fully taxable and if
it is not exceeding Rs.2,00,000 then travelling expenses are fully
exempt.

Rule 3 (7) Fringe Benefit Tax (FBI)

Rule 3 (7) (i) : Interest free loan or loan provided at concessional
rate of interest :
When Loan Facility is not taxable :
 In each of the following situation, loan facility is not taxable.
1. When any amount of loan is borrowed for medical treatment of
specified disease.
2. When the aggregate amount of loan during the relevant P.Y. is not
exceeding Rs.20,000.

When Loan facility is Taxable :

If any above mentioned conditions are not fulfilled then loan facility is
taxable on the basis of SBI lending rate which was prevailing as on 1 st day of
P.Y.

When loan borrow for medical treatment of specified disease is

taxable :
When any amount of insurance compensation received then to the
extent of such insurance compensation loan facility is taxable.

Points to be Remembered :
(1) If any amount of rate of interest is recovered then it must be reduce
from taxable value.
(2) Loan facility is taxable in the hands of specified as well as non
specified employee.

Rule 3 (7) (ii) ® Use of Movable Assets :

(1) Use of computers and laptop is not taxable.
(2) Any other movable assets is taxable @ 10% Cost of such movable
assets per
annum.
(3) If assets is not own by an employer then lease rent paid by an
employer is taxable.
(4) If any amount is recovered from an employee them it must be reduce
from taxable value.

Rule 3 (7) (iii) ® Transfer of Movable Assets :

When an employer is transferring any movable asset then it is taxable
in the hands of an employee to the extent of excess of written down value
over its sale price.
If any movable asset transferred after continuous use of 10 years then
it is not taxable.
Electric items includes computer, laptop, digital diaries and other data
storage.
Written down value of any movables asset is to be calculated as
follows :
Rate of Method of
Type of Asset
Depreciation Depreciation
Electronic
50% RBM
items
Car 20% RBM
Any other
10% SLM
assets

Common Points for Salary :

(1) Telephone allowance is fully taxable while telephone facility is fully
exempt.
(2) Lunch allowance is fully taxable while lunch facility is exempt up to
Rs.50.
(3) Gift allowance is fully taxable while gift facility is exempt up to
Rs.5000.
(4) Tea, coffee, non alcoholic beverages provides during office hours is
fully exempt.
(5) Any types of compensation received for injuries occurred during office
hours is fully exempt.
(6) Leave travel concession is exempt for every 2 trip in a span of 4 years
and it is exempt to the extent of fare of shortest distance with respect
to own, spouse, maximum 2 children.
Eligible
1 pregnancy – multiple birth
st
ü
2nd single X
1 pregnancy – single
st
ü
2 multiple birth
nd
ü
(7) Health club facility is not taxable while any other club facility and
credit card facility is taxable to the extent of personal purpose.
(8) Any types of personal obligation of an employee is directly met or
reimburse by an employer then it is fully taxable U/s. 17(2)(iv).
 INCOME FROM SALARY

Q.1. X joins a company on June 1, 2020 on monthly salary of Rs. 30,000 (he
was not in employment prior to June 1, 2020). AS per the terms of
employment, salary becomes due on the first day of the next month
and is paid on the seventh day of the next month. Determine the
amount of salary chargeable to tax for the assessment year 202-22.

Q.2. X joins a company on December 1, 2015 in the pay scale of Rs. 10,000
– Rs. 1,000 – Rs. 25,000 (salary at the time of joining is fixed at Rs.
12.000). As per the terms of employment salary becomes “due” on the
first day of the next month, and it is generally paid on the fifth day of
the next month. Find out the salary taxable for the assessment year
2021-22.

Q.3. Up till June 30, 2020. X is in the employment of A Ltd. on the fixed
salary of Rs. 25,000 per month which becomes “due” on the first day
of the next month. On July 1, 2020, X joins B Ltd. (salary being Rs.
30,000 per month which becomes “due” on the last day of each
month). Salary is actually paid on the seventh day of the next month in
both cases. Find out the amount of salary chargeable to tax for the
assessment year 2021-22.

Q.4. X, an employee of the Himachal Pradesh Government, retires on

January 3, 2021 and received Rs. 60,000 as cash equivalent of earned
leave to his credit. Is Rs. 60,000 fully exempte from tax ?

Q.5. X was employed by PQR Ltd. up to March 15, 1988. At the time of
leaving PQR Ltd., he was paid Rs. 3,50,000 as leave salary out of which
Rs. 57,000 was exempt from tax under section 10(10AA)(ii).

Thereafter he joined ABC (P.) Ltd. and received Rs. 4,14,000 as leave
salary at the time of his retirement on December 31, 2020. Determine
the amount of taxable leave salary from the following information :

Salary at the time of retirement (per month) Rs. 23,000

Average salary received during 10 months ending on

December 31, 2020

- From March 1, 2020 to July 31, 2020 ( per month) Rs. 22,600

- From August 1, 2020 to December 31, 2020 (per Rs. 22,900

 month)

Duration of service (a) 14-¾

years

Leave entitlement for every year of service (b) 45 days

Leave availed while in service (c) 90 days

Leave at the credit of employee at the time of retirement

[(14 x 45  90)  30] 18 months

Leave salary paid at the time of retirement at the rate of

Rs. 23,000 per month

(i.e., Rs. 23,000 x 18) Rs.

4,14,000

Q.6 X, an employee of the Central Government, receives Rs. 78,600 as

gratuity at the time of his retirement on September 30, 2020. Is
gratuity fully exempt from tax ?

Q.7. X, an employee of PQ Co Ltd., receives Rs. 78,000 as gratuity. He is

covered by the Payment of Gratuity Act, 1972. He retires on December
12, 2020 after rendering service of 38 years and 8-months. At the time
of retirement his monthly basic salary and dearness allowance was Rs.
2,400 and Rs. 800, respectively. Is the entire amount of gratuity
exempt from tax?

Q.8. X, who is not covered by the Payment of Gratuity Act, 1972, retires on
November 20, 2020 from ABC Ltd. and receives Rs. 1,86,000 as
gratuity after service of 38 years and 10 months. His salary is Rs.
8,000 per month up to July 31, 2020 and Rs. 9,000 per month from
August 1, 2020. Besides, he gets Rs. 500 per month as dearness
allowance (69 per cent of which is part of salary for computing all
retirement benefits). What amount of gratuity will be exempt from tax?

Q.9. Determine the amount of pension taxable for the assessment year
2021-22 in the following cases on the assumption that it becomes due
on the last day of each month
 1. X receives Rs. 18,250 per month as pension from the Central
Government during the previous year 2020-21.
2. X receives Rs. 21,000 per month as pension from the Government
of Punjab during the previous year 2020-21.
3. X receives Rs. 20,000 per month as pension from ABC Ltd., a public
limited company in the private sector, during the previous year
2020-21.
4. X retires from the Central Government service on May 31, 2020. He
gets pension of Rs. 15,000 per month up to November 30, 2020
(i.e., Rs. 15,000 x 6). With effect from December 1, 2020, he gets
one-third of his pension commuted for Rs. 7,18,000.

Q.10. X retires from ABC Co. on June 30, 2020. He gets pension of Rs.
20,000 per month up to January 31, 2021 With effect from February 1,
2021, he gets 60 per cent of pension commuted for Rs. 10,71,000.
Does it make any difference if he also gets gratuity of Rs. 40,000 at the
time of retirement?

Q.11. X, who resides in Madras, gets Rs. 3,00,000 per annum as basic
salary. He receives Rs. 50,000 per annum as house rent allowance.
Rent paid by him is Rs. 40,000 per annum. Find out the amount of
taxable house rent allowance for the assessment year 2021-22.

Q.12. X is employed by A Ltd. up to November 30, 2020 on the

following monthly salary (place of posting : Delhi)

Up to From
May 31, June 1,

2020 2020
Rs. Rs.

Basic salary 4,000 5,000

 Dearness allowance @ 30 per cent of basic 1,200 1,500
salary (60 per cent of all retirement benefits)

Dearness pay (not part of salary for computing 8,000 9,000

retirement benefits)

Commission 30,000 40,000

House rent allowance 2,000 3,500

With effect from December 1, 2020, he joins B Ltd. on monthly salary

of Rs. 10,000 (place of posting: Amritsar). Besides, he gets dearness
allowance @ Rs. 8,000 per month (5 per cent Forming part). Besides,
he gets a fixed commission of Rs. 45,000 per month. HRA 30000 per
month

Rent paid per month by X is as follows ;

Delhi Amritsar
Rs. Rs.

From January 1, 2020 to July 31, 500 -

2020

August, 2020 to November 30, 2,900 -

2020

December 2020 & January 2021 - 1,000

February 1, 2021 to June 30, - 6,000

2021

Determine the amount of chargeable house rent allowance for the

assessment year 2021-22.

Q.13. X, a Government employee, gets Rs. 480,000 per annum as

basic pay. In addition, he receives Rs. 8,500 as entertainment
allowance. His actual expenditure on entertainment for official
purposes, however, exceeds Rs. 9,000. Can he claim deduction of
actual amount spent by him on entertainment?

Q.14. X, an officer of the Government of Madhya Pradesh, draws Rs.

25,000 per month as basic pay. The Government has provided him a
rent-free unfurnished flat whose market rent is Rs. 7,800 per month,
though as per the Government rules licence fee of the flat is Rs. 1,250
 per month. Determine the value of the perquisite in respect of rent-
free flat for the assessment year 2021-22.

Q.15. X, a director-employee of a private sector company based at

Indore (population : 24 lakhs), draws Rs. 90,000 per month as basic
salary. Other allowances and benefits attached to his office are :
dearness allowance (forming part of salary for all retirement benefits) :
20% of basic salary , bonus : 30% of basic salary ; commission : Rs.
800 per month, transport allowance : Rs. 300 per month for
commuting between office and residence (actual expenditure : Rs. 170
per month) ; trial area allowance : Rs. 8,400 and rent-free house (lease
rent paid by the employer: Rs. 40,000 per month). Income-tax paid by
the company by behalf of X is Rs. 6,000. During the previous year
2020-21, X draws salary of April and May 2020 (i.e., Rs. 1,80,000)in
advance. Determine the value of the perquisite in respect of rent-free
house for the assessment year 2021-22.

Q.16. X, a regular employee of A Ltd., gets the following emoluments

during the previous year 2020-21.

Basic salary: Rs. 60,000 per month (which has been increased to Rs.
70,000 per month from January 1, 2020); dearness allowance Rs. 4,000
per month (72 per cent of which is part of salary for computing all
retirement benefits) ; education allowance : Rs. 550 per month per
child for 4 children ; Domestic Servant Allowance Rs.50,000 ; medical
allowance Rs. 400 per month ; transport allowance : Rs. 350 per month
(out of which Rs. 100 per month is used for covering the journey
between office and residence and Rs. 250 per month is used for other
purposes). Besides, he gets Rs. 20,000 per month as house rent
allowance up to November 30, 2019 (rent paid at Ghaziabad Rs.
18,000 per month). With effect from December 1, 2019, he has been
provided a furnished flat by the employer at Delhi (rent paid by
employer: Rs. 26,000 per month ; rent of furniture provided : Rs.
12,780; rent recovered from X: Rs. 900 per month). Find out the salary
chargeable to tax for the assessment year 2021–22 on the assumption
that with effect from January 1, 2021, he joins a part-time employment
with B Ltd. (salary Rs. 18,000 per month) with the permission of A Ltd.
(without leaving the job of A Ltd.)

Q.17. Find out the value of the perquisite in respect of gas in the cases
given below 
 1. X is employed by a gas supply company to whom free gas
(manufacturing cost: Rs. 6,000) is supplied by the employer.
2. Y is employed by A Ltd. which supplies free gas to Y. Gas bills are
issued in the name of A Ltd. (total bills of the previous year 2020-21
: Rs. 15,000).
3. Z is employed by B Ltd. which supplies free gas to Z. Gas bills are
issued in the name of Z (total bills of the previous year 2020-21 :
Rs. 25,000).

Assuming that gas is used only for personal use, find out the value of
the perquisite.

Q.18. Find out the taxable value of the perquisite in the following cases
for the assessment year 2021-22 

1. X is given a laptop by the employer-company for using it for office

and private purpose (ownership is not transferred). Cost of the
laptop to the employer is Rs. 96,000.
2. On October 15, 2020, the company gives its music system to Y for
domestic use. Ownership is not transferred. Cost of music system
(in 1999) to the employer is Rs. 15,000.
3. The employer company sells the following assets to the employees
on January 1, 2021 

Name of employee Z A B

Asset sold Car Computer Fridge

Cost of the asset to Rs. Rs. Rs. 40,000

employer 6,96,000 1,17,000

Date of purchase

(put to use on the same May 15, May 15, May 15,
day) 2018 2018 2018

Sale price Rs.2,10,000 Rs. 24,270 Rs. 1,000

Before sale on January 1, 2021, these assets were used for business
purpose by the employer.

Q.19. X is employed by A Ltd. (basic salary being Rs. 50,000 per

month). Besides, he gets Rs. 3,000 per month as entertainment
allowance. He pays professional tax of Rs. 1,000. Find out the salary
 chargeable to tax for the assessment year 2021-22. Does it make any
difference if the professional tax is paid by A Ltd.

Q. 20. For the previous year 2020-21. X submits the following

information – Basic salary: Rs. 1,20,000; dearness allowance: Rs.
40,000 (46 per cent of which is part of salary for retirement benefits) ;
commission : Rs. 6,000 (i.e., 1 per cent of Rs. 6,00,000, being turnover
achieved by X) and children education allowance for his 2 children : Rs.
7,200 and Domestic Servant Allowance Rs.50,000. The employer
contributes Rs. 20,000 towards provident fund to which a matching
contribution is made by X. Interest credited in the provident fund
account on June 30, 2019 @ 12 per cent comes to Rs. 93,500. Income
of X from other sources is Rs. 86,000. Find out the net income of X for
the assessment year 2021-22 if the provident fund is (a) statutory
provident fund, (b) recognised provident fund, (c) unrecognized
provident fund.

Q.21. X retires on June 30, 2020. He submits the following information 

Basic salary (since January 2011) : Rs. 20,000 per month, dearness
allowance : Rs. 6,000 per month (1/3 of which is part of salary for
retirement benefits), employer’s contribution towards provident fund :
Rs. 3,000 per month (X makes a matching contribution) ; Domestic
Servant Allowance Rs.50,000; interest credited at the rate of 15 per
cent on April 30, 2020 : Rs. 7,500; pension after retirement: Rs. 10,000
per month ; and payment of provident fund at the time of retirement :
Rs. 7,60,000 (out of which employer’s contribution Rs. 3,30,000,
interest thereon Rs. 44,000, X’s a contributions: Rs. 3,40,000, interest
thereon: Rs. 46,000). Salary and pension become due on the last day
of each month. X has deposited the entire provident fund payment
with a company (rate of interest : 9 per cent per annum).

Find out the income of X for the assessment year 2021-22 on the
assumption that the provident fund is (a) statutory provident fund, (b)
recognised provident fund, or (c) unrecognized provident fund.
Q.22. X (Age : 42 years) receive the following incomes from A Ltd.
during the year ending March 31, 2021 :

Rs.

Salary (@ Rs. 52,500 per month for 12 months) 6,30,00

0

Leave travel concession for proceeding on leave

(actual expenditure on rail fare : Rs. 14,100) 13,800

Tiffin allowance (actual expenditure : Rs. 2,700) 4,000

Reimbursement of ordinary medical expenses for treatment 16,300

of X and his family members in a private clinic

Besides, X enjoys the following perks

Rent-free unfurnished house at Noida (population: 16 lakh). House is

owned by the employer. Expenditure of Rs. 40,000 includes salary of
Rs. 24,000 paid by the employer to the gardener. The employer
provides two watchmen (salary : Rs. 700 per month per person).
Domestic Servant Facility Rs.50,000

Free use of Maruti 800 for official purposes. Car can also be used for
journey between office and residence and back and for other domestic
purposes (log-book is not maintained by the employer).

Free meal (at the place of work) : Rs. 14,700 (i.e., Rs. 70 per day for
210 days, amount is directly paid to canteen by the employer).

Interest-free loan for purchasing, home appliances (amount: Rs.

1,20,000; date of taking loan : March 1, 2017. Amount outstanding
between April 1, 2020 and November 30, 2020: Rs. 76,000 and after
November 30, 2020 : Rs. 50,000). The SBI lending rate for similar loan
on April 1, 2019 is 16 per cent. Though the salary falls due on last day
of each month, salary of March 2021 is received on April 15, 2021.
Q.23. X is the Marketing Manager of A Ltd. He retires on November 29,
2020 after service of 22 years and 10 months. At the time of
retirement he has been paid Rs. 2,80,000 as gratuity, although A Ltd.
is not covered by the Payment of Gratuity Act, 1.972. Find out the
salary chargeable to tax for the assessment year 2021-22.

The following additional information is available 

1. Salary and allowances

Basic salary at the time of Rs. 8,000 per month

retirement

Month from which increment is From the salary payable

allowed

For the month of July

Amount of last increment Rs. 1,000

Dearness allowance (fixed since Rs. 2,000 per month

2008 and only 15 per cent is
considered for all retirement
benefits)

Commission (fixed on per month Rs. 500

basis since 2009)

2. Besides, he gets 0.5 per cent commission on turnover achieved by

him. Turnover for different months is as follows 

Rs.

January 2020 70,000

February 2020 80,000

March 2020 85,000

April 2020 to June 2,70,00

2020 0

July 2020 to October 3,70,00

2020 0

November 2020 95,000

 3. As per service rules, salary, allowances and commission become
due on first day of the next month and paid on the same day.

Q.24. X received during the previous year ending March 31, 2021,
emoluments consisting of basic pay: Rs. 1,62,000; special allowance :
Rs. 17,000 and reimbursement of medical expenditure: Rs. 3,800. His
employer has also provided a rent-free furnished flat in Bombay. Lease
rent of the unfurnished flat is Rs. 50,000. Some of the household
appliances provided to X (with effect from June 1, 2020) are owned by
the employer (cost price of which is Rs. 36,000, date of purchase is
April 1, 1960 and written down value, as on April 1, 2020 is Rs. 620).
Employer pays Rs. 10,000 annually as hire charges for three air-
conditioners installed throughout the previous year in rent-free flat.
Compute the value of the perquisite if : (a) X is a Secretary in the
Ministry of Law and Rs. 4,000 is the licence fee of unfurnished flat as
per the Central Government rules: (b) X is the Managing Director of
ABC (P) Ltd. Does it make any difference, if X has been provided a
hotel accommodation throughout the year (tariff being Rs. 1,20,000
per annum) ?

Q.25. Find out the taxable value of the perquisite for the assessment
year 2021-22 in the following cases –

1. X is an employee in the Accounts Department of A Ltd. On

November 27, 2020, he attends a seminar on “Perquisite
Valuation”. Seminar fees of Rs. 7,500 is paid by A Ltd.
2. Y’s son is a student of ninth class of DPS, Noida. Rs. 17,800 being
tuition fees of Y’s son is paid / reimbursed by B Ltd. where Y is
employed. There is no arrangement between B Ltd. and DPS, Noida.
3. Star Public School, Ajmer, is owned and maintained by C Ltd., a
manufacturing company, Books of account of the school and C Ltd.
 are maintained separately. Z is an employee of C Ltd. The following
family members of Z are students in Star Public School 

Cost of education in Amount charged

a similar institution from Z

A. daughter of Z Rs. 5,500 per month Rs. 800 per month.

B. dependent brother Rs. 6,000 per month Rs. 1,600 per month
of Z

4. Suppose in (3) (supra) Star Public School is not owned / maintained

by C Ltd. AS per arrangement of C Ltd with the school, family
members of employees of C Ltd. can have educational facility in the
school. 100 seats are reserved for this purpose forwhich the
company annually pays Rs. 10 lakh to the school (no separate
billing by the school to the employees of C Ltd.). Family members of
Z are students of the school. Cost of education in a similar institute
and amount charged from Z by C Ltd. are given in the table in (3)
(supra).

Q.26. Determine the taxable value of the perquisite in the following

cases.

1. Xis employed by A Ltd. On June 1, 2020, the company gives an

interest-free housing loan of Rs. 14,00,000, Loan is repayable within
5 years. SBI 8%
2. V is employed by B Ltd. On April 1, 2020, he takes a personal loan
of Rs. 12,50,000 from B Ltd. B Ltd. recovers interest @ 7 per cent
per annum from V. SBI 16%
3. C Ltd. gives the following interest-free loan to Z, an employee of the
company  Rs. 15,000 for child’s education and Rs. 5,000 for
purchasing a refrigerator. No other loan is given by C Ltd.. SBI 16%
4. A purchases a Honda City 1.6 Lxi on March 1, 2020 from a loan of
Rs. 8,00,000 taken at concessional rate of 7 per cent per annum
from his employer XYZ Ltd. As per the agreed terms of repayment.
A is supposed to repay in monthly instalments of Rs. 25,000 starting
from January 1, 2020. Compute the taxable valued perquisite in
respect of concessional loan for the previous year 2021-22. SBI 8%
5. B takes an interest-free loan of Rs. 7,00,000 from his employer PQR
Ltd., on June 16, 2020 for medical treatment of his wife who is
suffering from a disease specified in rule 3A. Mrs. B is also covered
 under a mediclaim insurance cover. Insurance company reimburses
here of the hospitalization charges of Rs. 2,50,000 on January 1,
2020. According to terms of repayment of loan, B has to pay Rs.
12,000 per month on the seventh day of each month starting
November 2020. Ascertain the taxable value of perquisite in respect
of interest free loan for the previous year 2020-21. The amount paid
by the insurance company is retained by B. SBI 16%

Q.27. Find out the taxable value of the perquisite in respect of medical
facility in the following cases 

1. X gets a fixed medical allowance of Rs. 600 per month from his
employer.
2. Y, a director in the employer company, gets medical treatment in
dispensary maintained by his employer.
The expenditure on medical treatment provided to Y and his family
members during the previous year 2020-21 is as follows:

Rs.

Y, Mrs. Y and minor child of Y 9,100

Major son of Y (not dependent 2,700

upon Y)

Parents of Y (dependent upon Y) 3,000

Parents of Mrs. Y (dependent 12,00

upon Y) 0

Brother of Y (dependent on Y) 6,000

Sister of Y (not dependent on Y) 17,00

0.

Besides, he gets reimbursement of ordinary medical expenses paid to a

private medical practitioner.

Treatment of Y, Mrs. Y and their 2,00

children 0

Treatment of father of Y 3,70

 0

Treatment of father of Mrs. Y 3,00

0

3. Z (salary : Rs. 2,40,000) pays “ mediclaim” health insurance

premium

(which is later on reimbursement by his employer) as

follows :

On Z’s life 800

On Mrs. Z’s life 600

On the life of Z’s father (not dependent upon Z) 1,00

0

On the life of malor son of Z (not dependent upon Z) 2,70

0

On the life of brother of Z (dependent upon Z) 400

On the life of father of Mrs. Z (dependent upon Z) 500

On the life of grandfather of Z (dependent upon Z) 1,00

0

4. A (salary : Rs. 3,60,000) gets the following reimbursement from his

employer during the previous year 2020-21 :

Reimbursement of expenses incurred for caesarean operation of

Mrs. A in a hospital approved by the Chief Commissioner
28,600
Reimbursement expenses of eye’s treatment (including surgical
operation)
in a hospital approved by the Chief Commissioner
2,700
 Reimbursement of ordinary medical expenses paid to private
nursing home 16,200

Q.28. Find out the taxable value of the perquisite in respect of car in
the following different situation for the assessment year 2020–21

1. X is employed by a company. He has been provided a car (1200cc)

owned by the employer, cost of the car is Rs. 4,26,000. The
expenditure incurred by the company on maintenance of the car are
– petrol : Rs. 46,000, driver: Rs. 36,000 and maintenance: Rs.
10,000. The car can be used by X partly for official purposes partly
for private purposes. A sum of Rs. 12,000 is recovered from X.
2. Assume in Situation 1 that the car is used only for private purposes.
3. A car (1800cc) is owned by the employer (cost of the car being Rs.
4,80,000). X, an employee, can use it partly for official purposes and
partly for private purposes. Expenses for private purposes are,
however incurred by X. During the previous year 2020-21, the total
expenditure incurred by X is Rs. 50,000 on car and Rs. 20,000 on
driver.
4. Assume in Situation 3 that the car can be used only for private
purposes.
5. X owns a car (1400cc). He uses it partly for official purposes and
partly for private purposes. During the previous year 2020-21, he
incurs a sum of Rs. 40,000 on running and maintenance of car.
Besides, he has engaged a driver (salary Rs. 24,000). The
employer reimburses the entire expenditure of Rs. 64,000.
Logbook of the car is not maintained.
6. Assume that in Situation 5 that the logbook of the car is maintained
and 70 per cent of the expenditure is attributable towards the
official use of the car. The employer to this effect gives a certificate.
7. A car (1700cc) is owned by the employer. All expenses (Rs. 56,000)
are incurred by the employer. The employer maintains logbook of
the car. X, an employee, trees the car only for official purposes. The
employer gives a certificate that the car is used only for official
purposes.

Q.29. X gives the undernoted particulars of his income received from C

Ltd. for the year ending March 31, 2021:
 Rs.

Salary [after deduction of tax at source and own 2,48,900

contribution @ 15 per cent to recognised provident fund)

Tax deducted at source 9,500

Employer’s contribution to provident fund 45,600

Interest credited on May 10, 2020 to the provident fund at 30,000

the rate of 16.5 per cent

Allowance for holiday trip 11,800

Academic research allowance for training of X [expenditure 80,000

incurred : Rs. 40,000]

House rent allowance (rent paid for a house in Ajmer by X : 47,000

Rs. 56,200)

X pays life insurance premium of Rs. 9,000 on own life

insurance policy (sum assured : Rs. 1,00,000)

On March 10, 2021, X gets a wrist watch (cost: Rs. 8,610)

from the employer as gift. On March 17, 2021, X is
transferred from Ajmer to Udaipur.

While his family remains in Ajmer, he joins his duties at

Udaipur on March 18, 2021. An accommodation is
provided by the employer in Royal Star Hotel. Udaipur
from March 18, 2021 to March 31, 2021 (tariff being Rs.
1,200 per day is paid by employer).

Domestic Servant Facility

Rs.50,00
0

Determine the taxable income and tax liability (before deducting TDS)
of X for the assessment year 2021-22 assuming that income from
other sources is Rs. 86,720, X annually contributes Rs. 13,000 towards
the Unit-linked Insurance Plan and on March 10, 2020, he has received
a sum of Rs. 2,600 from the Income-tax Department (Rs. 2,400 being
income-tax refund and Rs. 200 being interest thereon).
Q.30. X (63 years), a sales executive in A Ltd. in Delhi, gets the
following emoluments during the previous year ending March 31, 2021:

Basic salary : Rs. 54,000 per month : Dearness allowance (part of

salary for superannuation) Rs. 2,000 per month; entertainment
allowance: Rs. 24,500 per month ; special allowance: Rs. 50,000 per
month; house rent allowance: Rs. 9,000 per month ; rent paid by her:
Rs. 16,000 per month and helper allowance for domestic use: Rs. 5,000
per month. The employer-company provides a Maruti Alto car for
personal use of Mrs. X (employer’s expenditure: Rs. 1,37,800,
depreciation of the car @ 10 per cent : Rs. 12,600). Domestic Servant
Allowance Rs.50,000. The employer also provides free club facility for
personal use of Mrs. X (expenditure of the employer: Rs. 52,100) and
free lunch (cost bring Rs. 55 per day for 100 days).

While her employer contributes Rs. 7,000 per month towards

recognised provident fund, she contributes Rs. 8,000 per month. Her
income from other sources is Rs. 1,67,900. Interest credited on August
10, 2020 @ 12 percent in the provident fund account is Rs. 30,000.
During the year, Mrs. X pays insurance premium of Rs. 10,000 on
insurance policy on the life of her mother and Rs. 3,000 on her own life
insurance policy (sum assured: Rs. 50,000). Premium of Rs. 9,000 on
insurance policy on the life of her husband falls due on March 23, 2020
, though she pays the same on April 3, 2021. Determine the total
income and tax liability of Mrs. X for the assessment year 2021-22.

Q.31. X (age : 50 years), a production manager of ABC (P.) Ltd., which

is engaged in manufacturing computers, gives the following particulars
of his income relevant for the assessment year 2021-22 :

Rs.

Basic salary 60,000 per

month

Bonus 20,000 per

annum

Commission 70,000 per

annum
Entertainment 30,000 per
allowance annum

A rent-free unfurnished house has been provided in Madras ; lease rent

of the house : Rs. 2,50,000 per annum. Domestic Servant Facility
Rs.50,000.

Employer has provided free use of an Opel Corsa 1398cc car for official
as well as personal purposes; expenses of the employer: Rs. 50,000
(out of which 30 per cent is attributable towards personal purposes).
Car can also be used by the family member of X. A sum of Rs. 6,000 is
recovered from X for using the car for private purpose. The employer
pays a sum of Rs. 400 on account of profession tax on behalf of X. On
June 10, 2020, ABC (P) Ltd. gifts a computer, manufactured by it, on its
founder’s day to X (cost of the computer to employer being Rs.
24,900). Employer’s contribution towards recognised provident fund :
Rs. 90,000 per annum. Contribution of X towards provident fund : Rs.
39,000. Payment of insurance premium by X on his wife’s insurance
policy : Rs. 5,000. Payment of insurance premium by Mrs. X on X’s
insurance policy: Rs. 4,000. Investment in shares of a company
engaged in operating an approved infrastructure facility; Rs. 60,000.
Interest received on company deposit : Rs. 1,89,000.

Determine the taxable income and tax liability for the assessment year
2021-22.