Computation of Total Income

COMPUTATION OF TOTAL INCOME

Problem 1

Computation of gross total income of Mr. Mohan for the A.Y. 2011-12

Particulars	Amount	Amount	Amount
Income from house property
House 2: Self occupied [Sec. 23(2(a)] (Note 2)
Net Annual Value (NAV)		Nil
Less : Deduction u/s 24(b) Interest on loan		6000	(-) 6000
Profits and gains of business or profession			64000
Income from other sources
Rent received		28800
Less : Expenditure
Lease rent (Note 1)	12000
Salary of Durban	2400
Interest on loan	2400	16800	12000
Gross Total Income			70000
Notes Since first house is taken on lease for a period less than 12 years, hence not taxable u/s 22. Since second house is transferred to wife without adequate consideration, hence assessee shall be deemed as owner of such house u/s 27.

Problem 2

Computation of total income for the A.Y. 2011-12

Particulars	Details	Amount
Profits and gains of business or profession
Income from letting cycle	40000
Salary received from firm (Note 1)	36000	76000
Capital gains (Note 2)		Nil
Income from other sources
Interest on fixed deposit with company	18000
Dividend received [Exempt u/s 10(34)]	Nil	18000
Gross Total Income		94000
Less : Deduction under chapter VIA (since Fixed deposit has not been made with the scheduled bank hence no deduction u/s 80C)		Nil
Total Income		94000

Notes

Since salary is received as partner from a firm engaged in the business of only manufacturing tea and not in growing and manufacturing tea, hence, such salary is fully taxable and Rule 8 shall not be applicable.
Assume agricultural land is situated in rural area, therefore it is not a capital asset. Hence, capital gain does not arise on sale of such land.

Computation of agricultural income

Particulars	Details	Amount
Lease rent	48000
Share of agricultural produce (being rent received in kind)	30000	78000
Less : Expenditure
Payment of Government tax	6000
Expenses on power, irrigation, cess and farm labour	10000
Purchase of seeds	1000
Tractor hire charges	2500	19500
Agricultural income		58500
Income on sale of agricultural land is not treated as income from agricultural business.

Problem 3

Computation of total income of Mrs. Reena for A.Y. 2011-12

Particulars	Details	Details	Amount	Amount
Income from house property
Gross Annual Value (being rent received)			62000
Less : Municipal tax			2000
Net Annual Value			60000
Less : Deduction u/s
24(a) Standard Deduction (30% of NAV)		18000
24(b) Interest on loan		30000	48000	12000
Profits and gains of business or profession
Net profit as per books of accounts			373700
Add : Expenditure debited but not allowed
Donation to Gujarat Earthquake Relief Fund		15000
Municipal tax paid for house property		2000
Repairs, maintenance etc for car to the extent of personal use		3300
Interest on loan for construction of house property		30000
Depreciation (treated separately)		30500
Salary paid in cash in excess of Rs.20000		30000
Contribution to recognized provident fund (unpaid)		5000
Printing and stationery (being not related to previous year)		3000	118800
			492500
Less : Expenditure allowed but not debited in Profit and Loss Account
Depreciation on (Working) -
- Car	10301
- Computer	45000
- Typewriter	2250
- Furniture	2500	60051
Less : Income not taxable but credited in Profit and Loss Account
Dividend except covered u/s 2(22)(e)		7000
Income from UTI		6500
Less : Income taxable under other head but credited in P/L A/c
Profit on sale of shares		20800
Dividend u/s 2(22)(e)		3500
Rent received from flat		62000
Honorarium received for evaluation work		4600	164451	328049
Capital gains
Short term capital gains on sale of shares ^#				20800
Income from other sources
Dividend u/s 2(22)(e)			3500
Honorarium received from various institution for evaluation of answer papers			4600	8100
Gross Total Income				368949
Less : Deduction u/s
80C: ELSS			80000
80D: As medical insurance premium paid in cash			Nil
80G: Donation -
- CS Benevolent Fund (50% of donation)			500
- Gujarat Earthquake Relief Fund			15000	95500
Total Income (Rounded off u/s 288A)				273450

Working: Calculation of depreciation u/s 32

Particulars	Car	Computer	Typewriter	Furniture
Rate of depreciation	15%	60%	15%	10%
W.D.V. as on 1-4-2010	85840	Nil	15000	25000
Add : Purchased during the year	Nil	150000	Nil	Nil
	85840	150000	15000	25000
Less : Sale during the year	Nil	Nil	Nil	Nil
W.D.V. on 31-3-2011	85840	150000	15000	25000
Depreciation	12876	45000 1	2250	2500
Less : Asset used for personal purpose	2575	-	-	-
Depreciation u/s 32	10301	45000	2250	2500

# Assuming such transfer is subject to securities transaction tax.

1. Depreciation for half year as asset used for less than 180 days.

Computation of tax liability

Particulars	STCG covered u/s 111A	Other income	Total
Taxable income	20800	252650	273450
Tax rate	15%	Slab
Tax liability before edcuation cess	3120	1265	4385
Add : Education cess @ 3%			132
Tax and Cess payable (rounded off)			4520

Problem 4

Computation of total income of Mrs. Anita for the A.Y. 2011-12

Particulars	Details	Details	Amount	Amount
Salaries
Basic			16000
Bonus			2000
Salary in lieu of leave			12000
Allowances
House Rent Allowance (As she resides in her own house)		6800
Entertainment allowance		3000	9800
Perquisites
Free gas & electricity		6000
Domestic servant		12800
Free education facility	12000
Less : Exempted up to Rs.1000 p.m. per child	12000	Nil
Free lunch in office		Nil
Cook's salary		12000	30800	70600
Income from house property
House I: Let out [Sec. 23(1)]
Gross Annual Value (Working)		12000
Less : Municipal tax paid		2100
Net Annual Value (NAV)		9900
Less : Deduction u/s
24(a) Standard Deduction (30% of NAV)	2970
24(b) Interest on loan	Nil	2970	6930
House II: Self occupied [Sec. 23(2)(a)]
Net Annual Value		Nil
Less : Deduction u/s 24(b) Interest on loan		Nil	Nil	6930
Income from other sources				26000
Gross Total Income				103530
Less : Deduction u/s 80C				28500
Total Income				75030

Working: Computation of Gross Annual Value

Particulars	Notes	Amount
RER (Fair rent)	Rs.2000 * 9 (property was acquired on 1/7/2010 no matter when it was constructed)	18000
ARR	Rs.2000 * 6	12000
Higher of above		18000
Gross Annual Value	ARR is less than RER due to vacancy period, otherwise ARR would have been Rs.18000 (being Rs.2000 * 9)	12000

Problem 5

Computation of total income of Sushil for the A.Y. 2011-12

Particulars	Workings	Details	Details	Amount
Salaries
Salaries from law college				27000
Income from house property
Gross Annual Value	Rent received		15000
Less : Municipal tax			Nil
Net Annual Value			15000
Less : Deduction u/s 24(a)	30% of NAV		4500	10500
Profits & gains of business or profession
Income
Legal fees		145000
Special commission fee		5500	150500
Less : Expenses allowed
Subscription and membership		4500
Rent of office	of Rs.47500	23750
Car expenses		14000
Office expenses		8500
Electricity charges	of Rs.4000	2000
Depreciation
- on car	15% of Rs.220000	33000
- on books	(Rs.2000 * 100%) + (Rs.5500 * 100% * )	4750	90500	60000
Capital gains
Sale proceeds of residential property			290707
Less : Indexed cost of acquisition	Rs.50000 * 711/125		284400	6307
Income from other sources
Interest on bank deposits			3500
Dividend from co-operative society			1000
Dividend from UTI	Exempt u/s 10(35)		Nil
Examination remuneration			1480	5980
Gross Total Income				109787
Less : Deduction u/s
80C (LIC Premium)			6000
80G (50% of Donation to approved institution)			1000
80GG (Rent paid being minimum of the following)
- Statutory amount 24000
- 25% of Adjusted GTI [Rs.109787 - Rs.6307 (LTCG) Rs.6000 Rs.1000] 24120
- Rent paid for residence 10% of Adj. GTI [Rs.23750 - 9648] 14102			14102	21102
Total Income (Rounded off u/s 288A)				88680

Notes

As per sec. 145, income chargeable under the head "Profits & gains of business or profession" shall be computed only in accordance with the method of accounting regularly followed by the assessee. In this case, assessee follows cash system of accounting. Hence, outstanding legal fees etc. is not considered.
Income tax is disallowed u/s 40(a).
Personal expenses are not deductible.
Purchase of legal books (annual publication) is eligible for depreciation u/s 32 @ 100%.

Assume that the property sold was situated in a place other than the place where assessee is employed.

Problem 6

Computation of total income of Mrs. X for the A.Y. 2011-12

Particulars	Details	Details	Amount	Amount
Salaries
Basic			86000
Bonus			10200
Allowances
Entertainment allowance		8000
Education allowance (no deduction for grand children)		4000	12000
Perquisites
Income tax penalty		2000
Medical expenses reimbursed	2000
Less : Exempted (up to Rs.15000)	2000	Nil
Leave travel concession [Exempt u/s 10(5)]		Nil
Free residential telephone		Nil
Free refreshment		Nil
Payment of electricity bill by employer		1060
Reimbursement of gas bill		1000
Professional tax paid by employer		300	4360
Gross salary			112560
Less : Deduction u/s
16(iii) Professional tax being paid by -
- Employer		300
- Mrs. X		150	450	112110
Income from house property
House I: Let out [Sec. 23(1)]
Gross Annual Value (Working)		43000
Less : Municipal tax paid		4800
Net Annual Value (NAV)		38200
Less : Deduction u/s
24(a) Standard Deduction (30% of NAV)	11460
24(b) Interest on loan	4000	15460	22740
House II: Self occupied [Sec. 23(2)(a)]
Net Annual Value		Nil
Less : Deduction u/s 24(b) Interest on loan		16000	(-) 16000	6740
Income from other sources
Agricultural income [Exempted u/s 10(1)]			Nil
Dividend [Exempted u/s 10(34)]			Nil	Nil
Gross Total Income				118850
Less : Deduction u/s
80C (Investment in PPF and Repayment of loan to LIC)			31000
80G (Donation to PM National Relief Fund)			2000	33000
Total Income				85850
Tax on above				Nil

Working: Computation of Gross Annual Value

Particulars	Notes	Amount
Municipal Value		43000
Standard Rent		50000
RER		43000
ARR Unrealised rent	Rs.46000 Rs.20000	26000
Gross Annual Value	Higher of above	43000
Contribution to unrecognised provident fund is not eligible for deduction.

Problem 7

Computation of total income of Sanjeb for A.Y. 2011-12

Particulars	Details	Details	Amount	Amount	Amount
Salaries
Basic (Note 1)				54450
Profit in lieu of salary
Amount received from Keyman insurance policy				6000
Allowances
Leave Travel Allowance (assume fixed in nature)			3600
House Rent Allowance		4500
Less : Exempted u/s 10(13A) being lower of -
- Actual allowance	4500
- 40% of salary (40% of Rs.54450)	21780
- Rent paid over 10% of salary [Rs(4500 5445)]	Nil	Nil	4500	8100
Employer's contribution to provident fund		4950
Less : Exempted (12% of Rs.54450)		6534	Nil
Interest on PF (Exempted as below 9.5%)			Nil	Nil	68550
*Capital gains*
Short term capital gain on 2 nd Bonus share (Note 2)					2200000
Income from other sources
Dividend [Exempted u/s 10(34)]					Nil
Gross Total Income					2268550
Less : Deduction u/s
80C: Contribution to PPF and PF				8950
80GGA: Contribution to National Laboratory				5000	13950
Total Income					2254600

Notes

1.Calculation of basic salary

Net basic received	Rs.48000
Add : Own contribution towards provident fund	Rs.4950
Add : Tax deducted at source	Rs.1500
Basic salary	Rs.54450

2. It is assumed that transfer of shares has been charged to securities transaction tax. Hence, long term capital gain on transfer of original and 1st bonus shares are exempted u/s 10(38), while short term capital gain on transfer of 2nd bonus shares is subject to tax @ 15% u/s 111A.

Computation of tax liability

Particulars	STCG covered u/s 111A	Other income	Total
Income	2200000	54600	2254600
Less : Maximum exemption limit	105400	54600	100000
Balance income	2094600	Nil	2154600
Tax rate	15%	Slab
Tax liability before cess	314190	Nil	314190
Add : Education cess @ 3%			9426
Tax liability (Rounded off u/s 288B)			323620

Problem 8

Computation of taxable salary of Mrs. Laila for the A.Y.2011-12

Particulars	Working	Details	Amount	Amount
Basic	50000 * 12			600000
Commission	150000000 * 0.1%			150000
Bonus	50000 * 2			100000
Allowances
Dearness allowance	20000 * 12		240000
Entertainment allowances			30000
Children education allowances		15000
Less : Exempted (Note 1)	(100 + 300) * 2 * 12	9600	5400	275400
Perquisites u/s 17(2)
Rent free accommodation (Note 2)	Lower of 15% of salary or 70000			70000
Employer's contribution to RPF		300000
Less : Exempted (Note 2)	12% of salary	118800	181200
Interest on RPF	Being not in excess of 9.5%		Nil	181200
Gross Salary				1376600
Less : Deduction u/s
16(ii) Entertainment allowances	As a non-Govt. employee			Nil
Taxable Salary/Gross Total Income				1376600
Less : Deductions
U/s 80C	RPF contribution & LIC premium	315000
U/s 80CCC (LIC Pension Fund)		10000
	* Maximum limit	325000	100000 *
U/s 80D (Mediclaim)			10000
U/s 80G (Donation)	Note 3		63330	173330
Total Income				1203270
Tax on above including education cess (being senior citizen)				213190

Notes

1. Assume that Children education allowance to meet the hostel expenditure is available to meet both education and hostel expenditure of the children of the employee.

2. Salary for the purpose of -

Particulars	RFA	RPF
Basic salary	600000	600000
Dearness allowance	240000	240000
Commission	150000	150000
Bonus	100000
Entertainment allowance	30000
Children education allowances	5400
Total	1125400	990000

3. Calculation of deduction u/s 80G

Limit of donation	=	10% of adjusted GTI
	=	10% of (Rs.1376600 Rs.100000 Rs.10000) = Rs.126660
Eligible donation	=	Rs.126660
Deduction u/s 80G	=	50% of above (i.e. Rs.63330)