Module 2

30. Ms. Ananya Das, a salaried employee, furnishes the following details for the financial year 2019-20:
Basic salary Rs. 50,000 p.m, DA (not forming part of salary) 65% of basic pay, Bonus Rs. 50,000, Fixed Medical
allowance Rs. 21,000, uniform allowance Rs. 7,000, rent free accommodation is provided by the employer in
Bengaluru. The employer pays a rent of Rs. 20,000 p.m. for the house. The cost of furnishing the house is Rs.
2,00,000, Profession tax paid by Ms. Ananya Das Rs. 3,000, Life insurance premium of Ms. Ananya Das paid by
the employer Rs. 5,000, contribution to RPF by the employer 9% of the basic salary. Ms. Ananya Das contributes
the matching amount. Interest credited to RPF account during the year Rs. 7,000 at 14% p.a. Ms. Ananya Das is
provided with 1.4 litre car for official purposes by the employer. The expenses are borne by the employer.
Required: Compute income from salary of Ms. Ananya Das for your previous year.
Solution:

Computation of Income from Salary of Ms. Ananya Das for the PY 2019-20 [AY 2020-21]

Particulars Rs Rs
Basic Salary 50,000
DA (65% of Basic) 32,500
Bonus (50000/12) 4,167
Fixed Medical Allowance (21000/12) 1,750
Uniform Allowance [Exempt u/s 10(14) 0
Rent Free House:

Least of (a) 15% Salary [15% of 55,917] (50,000+4,167+1,750) 8,388

(b) Lease Rent 20,000

8,388
Add: Furnishing Cost 10% of 2,00,000 1,667 10,055
Motor Car [Only for official use] 0
MONTHLY SALARY 98,472

ANNUAL SALARY 11,81,664

Life Insurance Premium paid by employer [taxable perquisite u/s 17(2)] 5,000
Excess Interest on RPF [7000/14*4.5] 2,250
Gross Salary 11,88,914
Deductions u/s 16:
Standard Deduction u/s 16(ia) 50,000
EA u/s 16(ii) 0
Professional Tax u/s 16(iii) 3,000
Income from Salary 11,35,914
TAX 0
12,500
1,00,000
40,774 1,53,274
ADD: 4% EDUCATION CESS 6,13,
TOTAL TAX 1,59,405
 31. Mr. Shankar Sharma joined State Bank of India as a probationary officer as on 1.1.2016 on a pay scale of
Rs. 25,000 – 2,000 – 29,000 – 3,000 – 44,000. He furnishes the following details for the financial year 2019-20:
DA (enters for retirement benefit) 45% of basic pay, Bonus Rs. 30,000, Fixed Medical allowance Rs. 25,000,
children education allowance Rs. 6,000 for the two children of Mr. Shankar Sharma, HRA Rs. 15,000 p.m. Mr.
Shankar Sharma pays a rent of Rs. 10,000 p.m. for the house. Profession tax paid by Mr. Shankar Sharma Rs.
3,000, entertainment allowance Rs. 2,000 p.m., contribution to RPF by the employer 13% of the basic salary
and DA. Mr. Shankar Sharma contributes the matching amount. Interest credited to RPF account during the
year Rs. 6,500 at 13% p.a. Mr. Shankar Sharma is provided with 1.6 litre car for both the purposes by the
employer. The expenses are borne by the employer including the driver salary. Leave salary received Rs. 5,000.
Required: Compute income from salary of Mr. Shankar Sharma for your previous year.
Solution:
Computation of Income from Salary of Mr. Shankar Sharma for the PY 2019-20 [AY 2020-21]
Working:
1.1.2016 to 31.12.2016 25,000 p.m.
1.1.2017 to 31.12.2017 27,000 p.m.
1.1.2018 to 31.12.2018 29,000 p.m.
1.1.2019 to 31.12.2019 32,000 p.m.
1.1.2020 to 31.12.2020 35,000 p.m.

Particulars Rs Rs Rs
Basic Salary = 32,000 x 9 + 35,000 x 3 3,93,000
DA (393000*45%) 1,76,850
Bonus 30,000
Fixed Medical Allowance 25,000
Children Education Allowance 6,000
Less: Exempt u/s 10(14) = 100 x 12 x 2 2,400 3,600
House Rent Allowance 1,80,000
Less: Exempt u/s 10(13A) = Least of: 63,015 1,16,985
(i) HRA received 1,80,000
(ii) Rent – 10 % Salary 63,015
(iii) 40% Salary 2,27,940
Entertainment Allowance 24,000
Excess Employer's Contribution to RPF [1% of Basic & DA] 5,699
Excess Interest on RPF [6500/13*3.5] 1,750
Car 1.6 Litre [1,800 x 12 + 900 x 12] 32,400
Leave Salary [fully taxable as received during service] 5,000
Gross Salary 8,14,284
Deductions u/s 16:
Standard Deduction u/s 16(ia) 50,000
EA u/s 16(ii) 0
Professional Tax u/s 16(iii) 3,000
Income from Salary 7,61,284
32. Ms. Aishwarya owns five houses in Tumkur, all of which are let-out. The information for each of these houses
are provided below.
Particulars House 1 House 2 House 3 House 4 House 5
Municipal value (Rs.) 80,000 55,000 65,000 24,000 80,000
Fair rent (Rs.) 90,000 60,000 65,000 25,000 75,000
Standard rent (Rs.) NA 75,000 58,000 NA 78,000
Actual rent received/receivable (Rs.) 72,000 72,000 60,000 30,000 72,000
Required: Compute the GAV of each house.
Solution:
Finding GAV
Particulars House 1 House 2 House 3 House 4 House 5
GAV = Higher of Step 1 & Step 2
Step 1: Higher of FR & MV But Restricted to SR 90,000 60,000 58,000 25,000 78,000
Step 2: Actual Rent 72,000 72,000 60,000 30,000 72,000
Hence, GAV = Higher of Step 1 & Step 2 90,000 72,000 60,000 30,000 78,000

33. Anirudh has a property whose municipal valuation is Rs.1,30,000 p.a. The fair rent is Rs.1,10,000 p.a. and the
standard rent fixed by the Rent Control Act is Rs.1,20,000 p.a. The property was let out for a rent of Rs.
11,000 p.m. throughout the previous year. Unrealised rent was Rs. 11,000 and all conditions prescribed by
Rule 4 are satisfied. He paid municipal taxes @10% of municipal valuation. Interest on borrowed capital
was Rs. 40,000 for the year.
Required: Compute the income from house property of Anirudh for P.Y. 2019-20.
Solution:
Particulars LOP Rs.
Step 1: Higher of FR & MV But Restricted to SR 1,20,000
Step 2: Actual rent received = 11,000 x 12 – 11,000 Rule 4 satisfied 1,21,000
GAV = Higher of Step 1 or Step 2 1,21,000
Less: Municipal Taxes = 10% of 1,30,000 13,000
NAV 1,08,000
Less: Deductions u/s 24 (a) Standard Deduction = 30% of 1,08,000 - 32,400
u/s 24 (b) Interest on Loan -40,000
Income from House Property 35,600

34. Ganesh has a property whose municipal valuation is Rs.2,50,000 p.a. The fair rent is Rs.2,00,000 p.a. and the
standard rent fixed by the Rent Control Act is Rs.2,10,000 p.a. The property was let out for a rent of Rs.
20,000 p.m. However, the tenant vacated the property on 31.1.2020. Unrealised rent was Rs. 20,000 and all
conditions prescribed by Rule 4 are satisfied. He paid municipal taxes @8% of municipal valuation.
Interest on borrowed capital was Rs. 65,000 for the year.
Required: Compute the income from house property of Ganesh for P.Y. 2019-20.
Solution:
Particulars LOP Rs.
Step 1: Higher of FR & MV But Restricted to SR 2,10,000
Step 2: Actual rent received = AR = 20,000 x 10 – 20,000 - Rule 4 satisfied 1,80,000
GAV = Higher of Step 1 or Step 2 BUT take Actual Rent of Rs. 1,80,000 as 1,80,000
there is vacancy. Therefore, Actual Rent is the GAV
Less: Municipal Taxes = 8% of 2,50,000 20,000
NAV 1,60,000
Less: Deductions u/s 24 (a) Standard Deduction = 30% of 1,60,000 - 48,000
u/s 24(b) Interest on Loan -65,000
Income from House Property 47,000
 35. Poorna has one house property at Indira Nagar in Bangalore. She stays with her family in the
house. The rent of similar property in the neighbourhood is Rs. 25,000 p.m. The municipal valuation is Rs.
23,000 p.m. Municipal taxes paid is Rs. 8,000. The house construction began in February 2013 with a loan
of Rs.20,00,000 taken from SBI Housing Finance Limited. The construction was completed on 30.11.2016.
The accumulated interest up to 31.3.2016 is Rs.1,50,000. During the previous year 2019-20, Poorna paid
Rs.2,40,000 which included Rs.1,80,000 as interest. Repairs to the house Rs. 10,000 spent during the
previous year.
Required: Compute Poorna’s income from house property for P.Y. 2019-20.

Solution:
Particulars SOP Rs.
Annual Value of SOP being NAV NIL
Less: Ded: u/s 24(b) Interest on Loan [1,80,000 + 1/5 x 1,50,000] but limited to Rs. 2,00,000 - 2,00,000
Income from House Property - 2,00,000
Note: Repair expenses are not allowed as deduction.

36. Ganesh has three houses, all of which are self-occupied. The particulars of the houses for the
P.Y. 2019-20 are as under:
House I House II House III
Particulars
Rs. Rs. Rs.
Municipal valuation p.a. 3,00,000 3,60,000 3,30,000
Fair rent p.a. 3,75,000 2,75,000 3,80,000
Standard rent p.a. 3,50,000 3,70,000 3,75,000
Date of completion/purchase 31.3.1999 31.3.2001 01.4.2014
Municipal taxes paid during the year 12% 8% 6%
Interest on money borrowed for repair of property during the Nil 55,000 Nil
PY
Interest for current year on money borrowed in July 2013 for
1,75,000
purchase of property
Required:
Suggest which house should be opted by Ganesh to be assessed as self-occupied so that his tax liability is
minimum and then find Income from House Property

Solution:
First calculate the Income from each House Property assuming that they are DLOP.
Computation of Income from House Property of Ganesh for the A.Y. 2020-21 [PY 2019-20]
Particulars House I Rs. House II Rs. House III Rs.
Higher of MV or FR but not > SR [Only Step 1 and do not apply
3,50,000 3,60,000 3,75,000
Step 2 as there is no actual rent for DLOP]
Less: Municipal Taxes 36,000 28,800 19,800
NAV 3,14,000 3,31,200 3,55,200
Less: (i) Standard Deduction u/s 24(a) = 30 of NAV 94,200 99,360 1,06,560
(ii) Interest on Loan u/s 24(b) 0 55,000 1,75,000
Income from HP 2,19,800 1,76,840 73,640
Second calculate the Income from each House Property as SOP
Particulars House I Rs. House II Rs. House III Rs.
GAV NIL NIL NIL
Less: Municipal Taxes NIL NIL NIL
NAV NIL NIL NIL
Less: Interest on Loan u/s 24(b) NIL 30,000 1,75,000
Income from HP NIL - 30,000 - 1,75,000
Ganesh can opt to treat any two of the above house properties as self-•‐occupied.
OPTION 1 (House I & II = SOP and House III – Deemed to be let out), then income from house property:
Particulars Rs.
House I [SOP] 0
House II [SOP] [Interest limit as loan for repairs] ‐ 30,000
 House III [Deemed to be LOP] 73,640
Income from HP 43,640
OPTION 2 (House I & III = SOP and House II – Deemed to be let out), then income from house property:
Particulars Rs.
House I [SOP] 0
House II [Deemed to be LOP] 1,76,840
House III [SOP] -•‐1,75,000
Income from HP 1,840
OPTION 3 (House II & III = SOP and House I – Deemed to be let out), then income from house property:
Particulars Rs.
House I [Deemed to be LOP] 2,19,800
House II [SOP] [Interest limit as loan for repairs] - 30,000
House III [SOP] -•‐1,75,000
Income from HP 19,800
Since Option 2 is most beneficial, Ganesh should opt to treat House I and III as self-•‐o ccupied and House II as
deemed to be let out. His income from house property would be Rs. 1,840 for the A.Y. 2020-•‐21.

37.
(i) Mr. Anil purchased gold in 1968 for Rs. 10,000. In the P.Y. 2019-20, he gifted it to his daughter at the time of
marriage. Fair market value (FMV) of the gold on the day the gift was made was Rs. 2,10,000.
(ii) A house property is purchased by a Hindu undivided family in 1937 for Rs. 15,000. It is given to one of the
family members in the P.Y. 2019-20 at the time of partition of the family. FMV on the day of partition was Rs.
22,00,000.
(iii) Mr. Bimal purchased 100 convertible debentures for Rs. 30,000 in 1986 which are converted in to 500 shares
worth Rs. 1,20,000 in December 2019 by the company.
(iv) Mr Abhijith Sold Zero Coupon bonds after holding them for 13 months.
Required: Discuss the capital gains taxability of the above transactions.

Solution:
(i) As per the provisions of section 47(iii), transfer of a capital asset under a gift is not regarded as transfer for the
purpose of capital gains. Therefore, capital gains tax liability does not arise in the given situation.
(ii) As per the provisions of section 47(i), transfer of a capital asset (being in kind) on the total or partial partition of
Hindu undivided family is not regarded as transfer for the purpose of capital gains. Therefore, capital gains tax
liability does not arise in the given situation.
(iii) As per the provisions of section 47(x), transfer by way of conversion of bonds or debentures, debenture stock
or deposit certificates in any form of a company into shares or debentures of that company is not regarded as transfer
for the purpose of capital gains. Therefore, capital gains tax liability does not arise in the given situation.
(iv) It is a LTCA as holding period is > 12 months & gain on the sale is long term capital and is taxable.
38. Mr. Roy, aged 55 years owned a Residential House in Ghaziabad. It was acquired by [Link] on 10-10-2006
for Rs. 24,00,000. He sold it for Rs. 65,00,000 on 4-11-2019. The stamp valuation authority of the State
fixed value of the property at Rs. 72,00,000. The assessee paid 2% of the sale consideration as brokerage
on the sale of the said property.
Mr. Roy acquired a residential house property at Kolkata on 10-12-2019 for Rs. 7,00,000 and deposited Rs.
3,00,000 on 9-4-2020 and Rs. 5,00,000 on 11-6-2020 in the capital gains bonds of Rural Electrification
Corporation Limited. He deposited Rs. 4,00,000 on 6-7-2020 and Rs. 9,00,000 on 1-11-2020 in the capital gain
deposit scheme in a Nationalized Bank for construction of an additional floor on the residential house property
in Kolkata.
Cost Inflation Index:
FY CII
2006-07 122
2019-20 289
Required: Compute the Capital Gain chargeable to tax for the Previous Year 2019-20.

Solution:
Computation of Capital Gains chargeable to tax in the hands of Mr. Roy for the P.Y. 2019-20
Particulars Rs.
Gross Sale Consideration on transfer of residential house
[u/s 50C, in case the actual sale consideration is lower than the stamp duty value fixed by
72,00,000
the stamp valuation authority, the stamp duty value shall be deemed as the full value of
consideration]
Less: Brokerage @ 2% of actual sale consideration of Rs. 65,00,000 - 1,30,000
Net Sale Consideration 70,70,000
Less: Indexed cost of acquisition [Rs. 24,00,000 x 289/122] - 56,85,246
Long-term capital gain 13,84,754
Less: Exemption under section 54
Acquisition of residential house property at Kolkata -7,00,000
Amount deposited in Capital Gains Accounts Scheme [Rs. 9,00,000 not eligible] -4,00,000
Less: Exemption under section 54EC
Amount deposited in capital gains bonds of RECL < 6 months from the date of transfer -3,00,000
Taxable LTCG After exemption, Taxable Capital Gain can not be negative and Hence
Nil
take zero or Nil as the Taxable Capital Gain
39. Mr. Piyush has sold the following assets during 2019-20.
Residential House Rural Machinery Goodwill Shares of
Agricultural TCS
Land
Acquired in June 2006 July 1985 Aug 2015 Self Oct 2019
generated
Sale consideration Rs. 1,60,00,000 Rs. 40,00,000 Rs. 50,000 Rs. 90,000 Rs. 3,15,000
Date of sale 07.10.2019 05.10.2019 12.12.2019 13.01.2020 15.1.2020
WDV on 1.4.2019 NA NA Rs. 55,000 NA NA
Expenses of transfer Rs. 1,00,000 Rs. 40,000 Rs. 1,000 Nil Rs. 500
Cost of acquisition Rs. 11,00,000 Rs. 10,000 Rs. 98,000 NA Rs. 2,89,000
Mr. Piyush spent Rs. 2,00,000 for the renovation of the above residential house during 2011-12. On 5th April
2020 he bought another house for Rs. 20,00,000 & deposited Rs. 4,00,000 in Capital Gains Accounts Scheme on
9th May [Link] last date for filling returns of income is 31st July 2020.
Note:
FY CII
2006-07 122
2011-12 184
2015-16 254
2019-20 289
Required: Compute Income from Capital Gains for your previous year.
Solution:
Rural Agricultural Land is not a capital asset and hence exempt from capital gains.
Computation of CG
Particulars LTCA STCA
Res House Goodwill Shares of TCS Machinery
Sale Consideration (Rs.) 1,60,00,000 90,000 3,15,000 50,000
Less: Cost of transfer 1,00,000 0 500 1,000
Net Sale Consideration 1,59,00,000 90,000 3,14,500 49,000
Less: ICA or CA 26,05,738 0 2,89,000 55,000
ICI or CI 3,14,130 0 0 0
LTCG 1,29,80,132 90,000 25,500 -6,000
Less: Exemption u/s 54 24,00,000 0 0 0
[House + CG Deposit ]
Taxable LTCG 1,05,80,132 90,000 25,500 -6,000
40. Mr. Ghosh has sold the following assets during 2018-19:
(a) Residential House: It was built during 1956-57 by his father at the cost of Rs. 39,000. The fair market
value as on 1.4.2001 was Rs. 35,00,000. Mr. Ghosh inherited this property in 1999. Mr. Ghosh invested Rs.
3,00,000 for the renovation of the house during 2011-12. He spent 2 % brokerage on the sale. He sold this
house on 1.1.2020 for Rs. 2,85,00,000. He bought two houses on 31.1.2020 for Rs. 20,00,000 and Rs.
45,00,000.
(b) Shares of Infosys: Mr. Ghosh bought 200 shares of Infosys at Rs. 800 per share in September 2018. He
got bonus shares at 1:1 ratio in December 2018. He sold all the shares at Rs. 1,100 on 14th Jan 2020. The
brokerage was 0.5%.
(c) Shares in Havells: Mr. Ghosh bought 300 shares of Havells at Rs. 700 per share in February 2017. He got
right entitlement at 1:3 ratio in January 2018 at a price of Rs. 350 per share and he fully subscribed for the
right shares. He sold all the shares at Rs. 1,100 on 14th Jan 2020.
(d) Furniture: It was acquired at a cost of Rs. 3,00,000 during 2010-11. He sold the furniture for Rs. 1,20,000
in June 2018. The WDV of the furniture as on 1.4.2018 was Rs. 86,000.
Note on cost inflation index:
FY CII
2001-02 100
2011-12 184
2019-20 289
Required: Compute income from capital gains for your previous year.
Solution:

Particulars LTCA STCA

Res House Shares of Infy Shares of Havells Furniture
Sale Consideration (Rs.) 2,85,00,000 4,40,000 4,40,000 1,20,000
Less: Cost of transfer 5,70,000 2,200 0 0
Net Sale Consideration 2,79,30,000 4,37,800 4,40,000 1,20,000
Less: ICA or CA 1,01,15,000 1,60,000 2,45,000 86,000
ICI or CI 4,71,196 0 0 0
LTCG 1,73,43,804 2,77,800 1,95,000 34,000
Less: Exemption u/s 54 65,00,000 0 0 0
[on both houses]
Taxable LTCG 1,08,43,804 2,77,800 1,95,000 34,000
41. Mr. Jain purchased 100 equity shares of TCS on 01-02-2018 at rate of Rs. 1,000 per share by paying securities
transaction tax at 0.02%.
The Company allotted bonus shares in the ratio of 1:1 on 01.12.2019. He has also received dividend of Rs. 10
per share on 01.05.2018.
He has sold all the shares on 01.03.2020 at the rate of Rs. 4,000 per share through a recognized stock exchange
and paid brokerage of 1% and securities transaction tax of 0.02%.
Required: Compute his taxable income from capital gains for the PY 2019-20.

Solution:
Computation of Taxable Capital Gains for the PY 2019-20 [AY 2020-21]
Particulars Originally Acquired Shares (Rs.) [LTCA] Bonus Shares (Rs.) [STCA]
Sale Consideration 100 x 4,000 = 4,00,000 100 x 4,000 = 4,00,000
Less: Cost of transfer = 1% (-) 4,000 (-) 4,000
Net Sale Consideration 3,96,000 3,96,000
Less: Cost of Acquisition 100 x 1,000 = (-) 1,00,000 Nil
Capital Gain LTCG = 2,96,000 STCG = 3,96,000
Note 1: Do not apply index on sale of equity shares & is taxed at 10% [Sec 112A: No Indexation benefit] Note 2:
Securities transaction tax is not deductible.
Note 3: Period from date of getting Bonus shares to sale of bonus shares is not > 12 months, hence it is STCA.