MKG

MAY 21/NOV 21
MOCK TEST SOLUTIONS
UPTO DEDUCTION FROM GROSS TOTAL INCOME
ATTEMPT ALL QUESTIONS
Time allowed: 3 hours
Maximum Marks: 100

MULTIPLE CHOICE QUESTIONS (30 Marks)

Question 1
(i) In respect of a non-resident assessee, who is of the age of 60 years or more but less than 80 years at
any time during the previous year 2020-21, -
(a) Basic exemption of `2,50,000 is available
(b) Basic exemption of `3,00,000 is available
(c) Basic exemption of `5,00,000 is available
(d) No basic exemption limit would be available
Answer: (a)
(ii) Unexhausted basic exemption limit of a non-resident individual can be adjusted against –
(a) only LTCG taxable @20% u/s 112
(b) only STCG taxable @15% u/s 111A
(c) only LTCG taxable @ 10% u/s 112A
(d) casual income taxable @30% u/s 115BB
(e) none of these
Answer: (e)

(iii) Tax Liability of a resident individual having LTCG 3.5 Lakh shall be
(a) `7,800
(b) `72,800
(c) `18,200
(d) `20,800
Answer: (a)

(iv) Mr. Nishant, a resident but not ordinarily resident for the previous year 2019-20 and resident and
ordinarily resident for the previous year 2020-21 has received rent from property in Canada amounting to
`1,00,000 during the P.Y.2019-20. He has deposited the same in a bank in Canada. During the financial year
2020-21, he remitted this amount to India through approved banking channels. Is such rent taxable in India,
and if so, how much and in which year?
(a) Yes; ` 70,000 was taxable in India during the previous year 2019-20.
(b) Yes; ` 1,00,000 was taxable in India during the previous year 2019-20.
(c) Yes; ` 70,000 was taxable in India during the previous year 2020-21.
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(d) No; such rent is not taxable in India either during the previous year 2019-20 or during the previous year
2020-21.
Answer: (d)

(v) Income earned from a contract negotiated by an agent in India in the name of a non-resident and
approved by such non-resident shall:
(a) be taxable in India as such income is deemed to accrue or arise in India
(b) not be taxable in India as there is no business connection in India
(c) be taxable in India only if it is received in India
(d) not taxable in India as such income accrues or arises outside India
Answer: (a)

(vi) In case of inter source adjustment the loss derived from a house property can be set off during the
year against:
(a) the income of any other house property
(b) the capital gain
(c) the income under other sources
(d) (b) and (c) above
Answer: (a)

(vii) Income accruing in London and received there is taxable in India in the case of-
(a) resident and ordinarily resident only
(b) both resident and ordinarily resident and resident but not ordinarily resident
(c) both resident and non-resident
(d) non-resident
Answer: (a)

(viii) The maximum amount of rebate allowable under section 87A for A.Y. 2021-22 is -
(a) `2,000, if the total income does not exceed `5 lakh
(b) `5,000, if the total income does not exceed `5 lakh
(c) `12,500, if the total income does not exceed `5 lakh
(d) `2,500, if the total income does not exceed `5 lakh
Answer: (c)

(ix) The income earned during the previous year is subject to tax under the Act on the basis of residential
status of an assessee. However, the residential status of an assessee ........................ every year.
(a) will not change
(b) will certainly change
(c) may change
(d) None of the above
Answer: (c)
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(x) Mr. Rajiv, born and brought up in India left for employment in Belgium on 15-10-2020. He has
never gone out of India, previously. What is his residential status for the assessment year 2021-22?
(a) Non-resident
(b) Not ordinarily resident
(c) Resident and ordinarily resident in India
(d) Indian citizen
Answer: (c)

(xi) Leena received `30,000 as arrears of rent during the P.Y. 2020-21. The amount taxable under
section 25A would be -
(a) `30,000
(b) `21,000
(c) `20,000
(d) `15,000
Answer: (b)

(xii) Ms. Padmaja let out a property for `20,000 per month during the year 2020-21. The municipal tax
on the let-out property was enhanced retrospectively. Hence, she paid `60,000 as municipal tax which
included arrears of municipal tax of `45,000. Her income from house property is —
(a) `1,80,000
(b) `1,57,500
(c) `1,26,000
(d) `1,36,500
Answer: (c)

(xiii) A borrowed `5,00,000 @ 12% p.a. on 1-4-2015 for construction of house property which was
completed on 15-3-2020. The amount is still unpaid. The deduction of interest for previous year 2020-
21 shall be :
(a) `60,000
(b) `96,000
(c) `1,80,000
(d) `2,40,000
Answer: (b)

(xiv) An assessee has paid life insurance premium of ` 25,000 during the previous year 2020-21 for a
policy of `1,00,000 taken on 1.4.2015. He shall:
(a) not be allowed deduction u/s 80C
(b) be allowed deduction of ` 20,000 u/s 80C
(c) be allowed deduction of ` 25,000 under section 80C
(d) be allowed deduction of ` 10,000 u/s 80C
Answer: (d)
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(xv) Mr. X has income from business ` 505 lakhs and short term capital gain under section 111A ` 30
lakhs and long term capital gains under section 112A ` 41 lakhs, in this case tax liability shall be
(a) 207,92,850
(b) 225,29,650
(c) 209,87,330
(d) 173,69,430
Answer: (a)

(xvi) Mr. Rajat Saini, aged 32 years, furnishes the following details of his total income for the A.Y. 2021-22:
Income under the head Salary (computed) 27,88,000
Income under the head House Property 15,80,000
Income under the head Other sources 7,22,000
He has not claimed any deduction under chapter VIA. You are required to compute tax liability of Mr. Rajat
Saini as per the provisions of Income Tax Act, 1961.
(a) 13,93,080
(b) 14,58,600
(c) 15,32,390
(d) 16,02,040
Answer: (b)

(xvii) Incomes which accrue or arise outside India but received directly in India are taxable in case of-
(a) resident and ordinarily resident only
(b) both resident and ordinarily resident and resident but not ordinarily resident
(c) non-resident
(d) All the above
Answer: (d)

(xviii) Fees for technical services paid by the Central Government will be taxable in case of –
(a) resident and ordinarily resident only
(b) both resident and ordinarily resident and resident but not ordinarily resident
(c) non-resident
(d) All the above
Answer: (d)

(xix). Deduction under section 80TTA is allowed

(a) to every person for interest on saving accounts
(b) to an individual for interest on fixed deposit
(c) to an individual and HUF for interest on savings account
(d) to an individual and HUF for interest on any account
Answer: (c)
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(xx). Deduction under section 80TTB is allowed

(a) to all individual upto ` 10,000
(b) to all individual upto ` 50,000
(c) to a senior citizen upto ` 40,000
(d) none of these
Answer: (d)

(xxi). Deduction for investment in Kisan Vikas Patra is allowed under section
(a) 80C
(b) 80CCC
(c) 80CCD
(d) none of these
Answer: (d)

(xxii). Deduction for repayment of principal amount under section 80C is allowed
(a) for any house property
(b) repairs of residential house property
(c) purchase or construction of residential house property
(d) construction of commercial house property
Answer: (c)

(xxiii). Deduction u/s 80DD in case of expenditure in connection with handicapped dependent relative
is allowed to:
(a) Any assessee
(b) an individual
(c) An individual or HUF
(d) An individual or HUF who is resident in India
Answer: (d)

(xxiv). John is a foreign citizen born in USA. His father was born in Delhi in 1960 and his grand-father
was born in Lahore in 1935 but his mother was born in UK in 1963. John came to India for the first
time on 1st June, 2020 and stayed in India for 183 days and then left for USA. His residential status for
the A.Y. 2021-22 shall be :
(a) Resident and ordinarily resident
(b) Resident but not ordinarily resident
(c) Non-resident
(d) Foreign National
Answer: (b)

(xxv). In case of default in payment of advance tax, interest shall be charged

(a) 2% p.m. u/s 234C
(b) 1% p.m. u/s 234B
(c) 1.5% p.m. u/s 234A
(d) 1% p.m. u/s 234C
Answer: (d)

(xxvi). Mr. Shiva made a donation of `50,000 to National Children's Fund and `20,000 to Rajiv Gandhi
Foundation by cheque. He made a cash donation of `10,000 to a public charitable trust. The deduction
allowable to him under section 80G for A.Y.2021-22 is
(a) `80,000 (b) `70,000 (c) `60,000 (d) `35,000
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Answer: (c)

(xxvii). Mr. Shaleen, a businessman, whose adjusted gross total income for A.Y.2021-22 is `4,60,000,
paid house rent at `12,000 p.m. in respect of residential accommodation occupied by him at Chennai.
The deduction allowable to him under section 80GG for A.Y.2021-22 is
(a) `98,000 (b) `1,15,000 (c) `60,000 (d) `24,000
Answer: (c)

(xxviii). Mr. Ramesh pays a rent of `5,000 per month. His adjusted gross total income is `2,80,000. He
is also in receipt of HRA. He would be eligible for a deduction under section 80GG of an amount of -
(a) `60,000 (b) `32,000 (c) `70,000 (d) Nil
Answer: (d)

(xxix). Mr. Anuj, a businessman, whose adjusted gross total income for AY 2021-22 is `5,95,000. He
does not own any house property and is staying in a rented accommodation in Patna for a monthly rent
of `9,000. Deduction allowance under section 80GG for A.Y. 2021-22 is:
(a) `48,500
(b) `1,48,750
(c) `60,000
(d) `1,08,000
Answer: (a)

(xxx) Mr X has LTCG 112A `50,50,000. Compute tax payable:

(a) `5,43,200
(b) `4,88,800
(c) `5,37,680
(d) `5,35,600
Answer: (d)
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SUBJECTIVE TYPE QUESTIONS (70 Marks)

Question 2 (a) (i) (3 marks)
Mr. X has income from business ` 505 lakhs and short term capital gain under section 111A ` 30 lakhs and
long term capital gains under section 112A ` 41 lakhs. Compute Tax Liability if Mr. X for the Assessment
year 2021-22.
Solution:
Income under the head business/profession from business 505,00,000
Income under the head capital gains
Short term capital gains under section 111A 30,00,000
Long term capital gains under section 112A 41,00,000
Gross total income/total income 576,00,000

Computation of Tax Liability

Total Income 505,00,000
Tax on `505,00,000 at slab rate 149,62,500
Add: Surcharge @ 37% 55,36,125
Tax before marginal relief 204,98,625
Less: Marginal Relief (14,83,000)
Working Note:
Tax + surcharge @37% on income of `505,00,000 2,04,98,625
Tax + surcharge @25% on income of `500,00,000 (1,85,15,625)
Increase in tax 19,83,000
Increase in income 5,00,000
Marginal Relief (19,83,000 – 5,00,000) 14,83,000
Tax after marginal relief 190,15,625
Tax on short term capital gain under section 111A 30,00,000 X 15% 4,50,000
Add: Surcharge @ 15% 67,500
Tax on long term capital gain under section 112A (41,00,000 – 1,00,000) X 10% 4,00,000
Add: Surcharge @ 15% 60,000
Tax liability before HEC 199,93,125
Add: HEC @ 4% 7,99,725
Tax Liability 207,92,850

Question 2 (a) (ii) (3 marks)

Mr. X has income as given below:
Income under the head Salary 4,00,000
Income under the head House Property 5,00,000
Income under the head Business/Profession 6,30,253
Deductions allowed under section 80C to 80U are `1,10,000.
Compute the income and the tax liability as per section 115BAC for previous year 2020-21.

Solution:
Computation of Total Income of Mr. X
Previous Year 2020-21, Assessment Year 2021-22
`
Income under the head Salary 4,00,000.00
Income under the head House Property 5,00,000.00
Income under the Business/Profession 6,30,253.00
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Gross Total Income 15,30,253.00

Less: Deduction u/s 80C to 80U (Not Allowed) Nil
Total Income 15,30,253.00
Rounded off u/s 288A 15,30,250.00

Computation of Tax Liability as per section 115BAC

On first `2,50,000 Nil
On next `2,50,000 @ 5% 12,500
On next `2,50,000 @ 10% 25,000
On next `2,50,000 @ 15% 37,500
On next `2,50,000 @ 20% 50,000
On next `2,50,000 @ 25% 62,500
On balance `30,250 @ 30% 9,075
Tax before health and education cess 1,96,575
Add: health & education cess @ 4% 7,863
Tax Liability 2,04,438
Rounded off u/s 288B 2,04,440

Question 2 (b). (4 Marks)

Mr. X has income as given below:
Income under the head PGBP `300,00,000
LTCG 112A `51,00,000
STCG 111A `50,00,000
Dividend from domestic company `100,00,000
Compute his tax liability for A.Y. 2021-22 considering all the options
Solution:
Computation of Total Income and Tax Liability of Mr. X `
Income under the head PGBP 300,00,000
LTCG 112A 51,00,000
STCG 111A 50,00,000
Dividend from domestic company 100,00,000
Gross Total Income 501,00,000
Less: Deductions u/s 80C to 80U Nil
Total Income 501,00,000

Option 1: Taking Dividend tax at slab rate for surcharge

Computation of Tax Liability
Tax on LTCG 50,00,000 (51,00,000-1,00,000) @ 10% u/s 112A 5,00,000.00
Tax on STCG 50,00,000 @15% u/s 111A 7,50,000.00
Tax on 4,00,00,000 at slab rate 118,12,500.00
Tax Before Surcharge 1,30,62,500.00
Add: Surcharge @ 15% on 12,50,000 1,87,500.00
Add: Surcharge on Dividend Income (slab basis) (28,12,500) X 15% 4,21,875.00
Add: Surcharge on PGBP Income (3,00,00,000 x 30% = 90,00,000) X 25% 22,50,000.00
Tax Before cess 159,21,875.00
Add: Health and education cess @ 4% 6,36,875.00
Tax Liability 165,58,750.00

Option 2: Taking Dividend tax @ 30% for surcharge and PGBP income on slab rate
Computation of Tax Liability
Tax on LTCG 50,00,000 (51,00,000-1,00,000) @ 10% u/s 112A 5,00,000.00
Tax on STCG 50,00,000 @15% u/s 111A 7,50,000.00
Tax on 4,00,00,000 at slab rate 118,12,500.00
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Tax Before Surcharge 1,30,62,500.00

Add: Surcharge @ 15% on 12,50,000 1,87,500.00
Add: Surcharge on Dividend Income (100,00,000 x 30% = 30,00,000) X 15% 4,50,000.00
Add: Surcharge on PGBP Income at slab (88,12,500) X 25% 22,03,125.00
Tax Before cess 159,03,125.00
Add: Health and education cess @ 4% 6,36,125.00
Tax Liability 165,39,250.00

Option 3: Taking Dividend tax on average basis for surcharge

Computation of Tax Liability
Tax on LTCG 50,00,000 (51,00,000-1,00,000) @ 10% u/s 112A 5,00,000.00
Tax on STCG 50,00,000 @15% u/s 111A 7,50,000.00
Tax on 4,00,00,000 at slab rate 118,12,500.00
Tax Before Surcharge 1,30,62,500.00
Add: Surcharge @ 15% on 12,50,000 1,87,500.00
Add: Surcharge on Dividend Income
(1,18,12,500/4,00,00,000 x 1,00,00,000 = 29,53,125) X 15% 4,42,968.75
Add: Surcharge on PGBP Income
(1,18,12,500/4,00,00,000 x 3,00,00,000 = 88,59,375) X 25% 22,14,843.75
Tax Before cess 159,07,812.50
Add: Health and education cess @ 4% 6,36,312.50
Tax Liability 165,44,125.00
Rounded off u/s 288B 165,44,130.00

Note: Calculation for surcharge on tax on Dividend is not discussed in the act when it includes other
income also. As per our view we have discussed 3 methods above. Student can solve the solution by
taking any of the above methods.

Question 3. (a) (5 Marks)

Explain Deduction in case of Units established in Special Economic Zone. Section 10AA
Answer:
Units established in Special Economic Zone
1. Deduction shall be allowed to all the assessees, may be individual, firm, company etc. provided the assessee
has its unit in Special Economic Zone and it is engaged in manufacturing or in providing services including
computer software

2. Quantum of deduction:
Deduction shall be allowed to the units in the Special Economic Zone for a continuous period of 15 years in
the manner given below:
For first 5 Assessment Years 100% of export profits
For next 5 Assessment Years 50% of export profits
For next 5 Assessment Years 50% of export profit provided such profits have been credited
to the Special Economic Zone Re-investment Reserve
Account.
Export profits means Profits of Business x Export Turnover
Total Turnover
e.g. ABC Ltd. has one unit in SEZ and total turnover is `1000 lakhs and profits `400 lakhs and export turnover
`800 lakhs, in this case export profits shall be 400 / 1000 x 800 = 320 lakhs
The amount credited to the Special Economic Zone Reinvestment Reserve Account should be utilised for
acquiring a new plant and machinery within a period of 3 years. The period of 3 years shall be determined
from the end of the previous year in which the reserve was created e.g. If amount has been transferred in
 10

reserve account in the previous year 2020-21, amount should be utilized for purchasing plant and machinery
upto 31.03.2024.
3. If the amount credited to the Special Economic Zone Reinvestment Reserve Account is not utilised within
3 years, it will be taxable in the 4th year. Till the acquisition of plant and machinery amount will be utilized
for the purpose of business/profession but it should not be used for distribution as dividends or for
remittance out of India or for creation of asset out of India. After the assessee has purchased plant and
machinery, information should be retained in form no.56FF
If the amount is misutilised within the period of 3 years, it will be taxable in the year in which it was
misutilised.
4. Export turnover means the consideration in respect of export by the undertaking, being the Unit of articles
or things or services received in, or brought into, India by the assessee but does not include freight,
telecommunication charges or insurance attributable to the delivery of the articles or things outside India or
expenses, if any, incurred in foreign exchange in rendering of services (including computer software) outside
India.
5. The assessee should furnish in the prescribed form (56F), before the date specified in section 44AB i.e., one
month prior to the due date for furnishing return of income u/s 139(1), the report of a chartered accountant
certifying that the deduction has been correctly claimed.
Example: An individual, subject to tax audit u/s 44AB, claiming deduction u/s 10AA is required to furnish
return of income on or before 31.10.2021 and the report of a chartered accountant before 30.09.2021,
certifying the deduction claimed u/s 10AA.

Question 3. (b) (5 Marks)

Mr. Thomas, a non-resident and citizen of Japan entered into following transactions during the previous year
ended 31.03.2020. Examine the tax implications in the hands of Mr. Thomas for the Assessment Year 2020-
21 as per Income Tax Act, 1961. (Give brief reasoning)
(l) Interest received from Mr. Marshal, a non-resident outside India (The borrowed fund is used by Mr.
Marshal for investing in Indian company's debt fund for earning interest)
(2) Received `10 lakhs in Japan from a business enterprise in India for granting license for computer software
(not hardware Specific).
(3) He is also engaged in the business of running news agency and earned income of `10 lakhs from collection
of news and views in India for transmission outside India.
(4) He entered into an agreement with SKK & Co., a partnership firm for transfer of technical documents and
design and for providing. services relating thereto, to set up a Denim Jeans manufacturing plant, in Surat
(India). He charged `10 lakhs for these services from SKK & Co.

Answer:
(1) As per section 9, If loan has been taken by a non-resident, interest income shall be accruing / arising in
India only if loan amount has been utilised in India in business/profession but if loan amount is utilised in any
other source in India or it has been used outside India, interest income shall be accruing / arising abroad.
In the given case, loan amount is used for investing in Indian company debt fund for earning interest and not
for business purpose hence interest income shall not be considered to be accruing arising from India and shall
not be taxable in India.

(2) As per section 9, If any income is accruing and arising in India relating to royalty or technical fees etc., it
will be taxable in India even if the person receiving income is non-resident and even if such non-resident do
not have any Territorial Nexus with India i.e. such non-resident do not have a residence or place of business
or business connection in India and also the non-resident has not rendered services in India. In the given case,
income received for granting licence for computer software shall be deemed to be income accruing arising in
India and shall be taxable in India.

(3) As per section 9, If any non-resident has the business of running a news agency or of publishing
newspapers, magazines or journals etc. outside India, no income shall be deemed to accrue or arise in India
 11

to him from activities which are confined to the collection of news and views in India for transmission out of
India but if newspaper etc. is being sold in India, there will be business connection or if there is telecasting or
broadcasting of such news/views etc. in India, there will be business connection and income shall be taxable
to that extent.
In the given case, income is from transmission outside India hence income shall not be deemed to accrue arise
in India and shall not be taxable in India.

(4) As per section 9, income by way of fees for technical services payable by a person who is a non-resident,
where the fees are payable in respect of services utilised in a business or profession carried on by such person
in India or for the purposes of making or earning any income from any source in India.
In the given case, services utilized in a business in India hence income shall be accruing arising from India
and same shall be taxable in India.

Question 4 (a). (5 Marks)

Discuss the taxability or otherwise of the following in the hands of the recipient under section 56(2)(x) the
Income-tax Act, 1961 -
(i) X HUF received ` 75,000 in cash from niece of Mr. X (i.e., daughter of Mr. X’s sister). Mr. X is the Karta
of the HUF.
(ii) Miss. X, a member of her father’s HUF, transferred a house property to the HUF without consideration.
The stamp duty value of the house property is ` 9,00,000.
(iii) Mr. X received 100 shares of A Ltd. from his friend as a gift on occasion of his 25th marriage anniversary.
The fair market value on that date was ` 100 per share. He also received jewellery worth `45,000 (FMV) from
his nephew on the same day.
(iv) X HUF gifted a car to son of Karta for achieving good marks in XII board examination. The fair market
value of the car is ` 5,25,000.
Solution:
Taxable/ Amount Reason
Non-taxable liable to
tax (`)
(i) Taxable 75,000 Sum of money exceeding `50,000 received without consideration from a
non-relative is taxable under section 56(2)(x). Daughter of Mr. X’s sister
is not a relative of X HUF, since she is not a member of X HUF.
(ii) Non-taxable Nil Immovable property received without consideration by a HUF from its
relative is not taxable under section 56(2)(x). Since Miss. X is a member
of the HUF, she is a relative of the HUF.
(iii) Taxable 55,000 As per provisions of section 56(2)(x), in case the aggregate fair market
value of property, other than immovable property, received without
consideration exceeds `50,000, the whole of the aggregate value shall be
taxable. In this case, the aggregate fair market value of shares (`10,000)
and jewellery (`45,000) exceeds `50,000. Hence, the entire amount of
`55,000 shall be taxable.
(iv) Non-taxable Nil Car is not included in the definition of property for the purpose of section
56(2)(x), therefore, the same shall not be taxable.

Question 4 (b). (5 Marks)

Mrs. X is a citizen of India and is employed in ABC Ltd. in India and is getting salary of `60,000 p.m. and
she was transferred out of India w.e.f 01.09.2020 and for this purpose she left India on 01.09.2020 for the first
time and she visited India from 27.12.2020 to 07.01.2021 and her salary for the month of Dec’ 2020 was
received in India. Employer and employee both have contributed @ 13% (each) of salary to the recognized
provident fund and during the year interest of `50,000 was credited to the recognized provident fund @ 10%
p.a.
Compute her total income and tax liability in India for assessment year 2021-22.
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Solution:
As per section 6(1), in this case, Mrs. X is covered in special category and her stay in India is less than 182
days hence she will be non-resident and her incomes taxable in India shall be
`
Income accruing/arising in India 3,00,000.00
60,000 x 5
Income received in India 60,000.00
60,000 x 1
Income deemed to be received in India
Employer contribution 7,200.00
(60,000 x 12) x 1% (13% - 12%)
Interest in excess of 9.5%
50,000 /10% x 0.5% = 2,500
Interest on employer contribution 1,250.00
2,500 /2
(Interest on employee contribution i.e. `1,250
shall be taxable under the head Other Sources)
Gross Salary 3,68,450.00
Less: Standard Deduction u/s 16(ia) (50,000.00)
Income under the head Salary 3,18,450.00
Income under the head Other Sources 1,250.00
Gross Total Income 3,19,700.00
Less: Deduction u/s 80C (93,600.00)
Contribution to recognized provident fund
(60,000 x 12) x 13%
Total Income 2,26,100.00

Computation of Tax Liability

Tax on `2,26,100 at slab rate Nil
Tax Liability Nil

Question 5 (a). (5 Marks)

Mr. X has paid advance tax as given below:
Upto 15.06.2020 ` 15,000
Upto 15.09.2020 ` 45,000
Upto 15.12.2020 ` 95,000
Upto 15.03.2021 `1,70,000
He had long term capital gains of `3,00,000 on 01.01.2021 and his income under the head business/Profession
is `11,00,000
He has filed return of income on 10.12.2021 and has paid difference of the tax on 10.12.2021.
Last date for filing of return is 31.07.2021.
Compute interest payable under section 234A, 234B and 234C.
Solution:
Computation of Tax Liability `
Normal Income 11,00,000
Long term capital gains 3,00,000
Total Income 14,00,000
Tax on `11,00,000 at slab rate 1,42,500
Tax on `3,00,000 @ 20% 60,000
Add: HEC @ 4% 8,100
Tax Liability 2,10,600
 13

(Tax liability excluding capital gains i.e. `14,00,000 - `3,00,000 = `11,00,000 at slab rate + HEC @ 4%
1,48,200)
Interest u/s 234C
Since capital gains arises on 1st January 2020, installments for 15th June, 15th September and 15th December
shall be checked without including tax on capital gain and shall be as given below:
Amount payable Amount actually paid Shortfall
` ` `
Upto 15.06.2020 (1,48,200 x 15%) 22,230.00 15,000 7,230.00
Rounded off under rule 119A = 7,200
Interest u/s 234C = 7,200 x 1% x 3 = 216

Upto 15.09.2020 (1,48,200 x 45%) 66,690.00 45,000 21,690.00

Interest u/s 234C = 21,600 x 1% x 3 = 648

Upto 15.12.2020 (1,48,200 x 75%) 1,11,150.00 95,000 16,150.00

Rounded off under rule 119A = 16,100
Interest u/s 234C = 16,100 x 1% x 3 = 483

Installment for 15th March shall be including tax on capital gains and is as given below:
Upto 15.03.2021 (2,10,600 x 100%) 2,10,600 1,70,000 40,600
Interest u/s 234C = 40,600 x 1% x 1 = 406
Total Interest u/s 234C `1,756
Interest u/s 234B (01-04-2021 to 10-12-2021)
40,600 x 1% x 9 `3,654

Interest u/s 234A (01-08-2021 to 10-12-2021)

40,600 x 1% x 5 `2,030

Question 5 (b). (5 Marks)

Mrs. X has received the following gifts during previous year 2020-21.
(i) On the occasion of her marriage on 14.08.2020, she has received `90,000 as gift out of which `70,000 are
from relatives and balance from friends.
(ii) On 12.09.2020, she has received gift of `18,000 from cousin of her mother.
(iii) A cell phone of `71,000 is gifted by her employer on 15.08.2020.
(iv) She gets a gift of `25,000 from the elder brother of her husband's grandfather on 25.10.2020.
(v) She has received a gift of `2,000 from her friend on 14.04.2020.
(vi) She has won `4 lakh from a game show on electronic media.
Compute her tax liability for assessment year 2021-22.
Answer:
Computation of taxable income of Mrs. X from gifts for A.Y. 2021-22
Particulars Taxable amount Reason for taxability or
` otherwise of each gift
• Relatives and friends Nil Gifts received on the occasion of
marriage are not taxable.
• Cousin of Mrs. X’s mother 18,000 Cousin of Mrs. X’s mother is
not a relative. Hence, the gift is taxable.
• Elder brother of husband’s grandfather 25,000 Brother of husband’s grandfather is
not a relative. Hence, the gift is taxable.
• Friend 2,000 Gift from friend is taxable.
Aggregate value of gifts 45,000
Since the aggregate value of gifts received by Mrs. X during the previous year 2020-21 does not exceed
`50,000, the same is not chargeable to tax under section 56(2)(x) of the Income-Tax Act, 1961.
 14

Gift received from the employer in kind upto `5,000 is exempt from income tax but excess over it is taxable
hence in this case taxable amount of gift shall be `66,000 (71,000 – 5,000) and it will be taxable under the
head Salary.
Gross Salary 66,000
Less: Standard deduction u/s 16(ia) (50,000)
Income under the head Salary 16,000

Income under the head Other Sources 4,00,000

Gross Total Income 4,16,000
Less: Deduction u/s 80C to 80U Nil
Total Income 4,16,000
Computation of Tax Liability
Tax on `16,000 at slab rate Nil
Tax on `4,00,000 @ 30% 1,20,000
Less: Rebate u/s 87A (12,500)
Tax before HEC 1,07,500
Add: HEC @ 4% 4,300
Tax Liability 1,11,800

Question 6 (a). (5 Marks)

Mr. X an American citizen has come to India for the first time on 01.07.2017 as an executive of a multinational
company. His employer has allowed him to visit USA every year and for this purpose he will be leaving India
every year on 1st November and shall come back on 31st December, besides that he has visited Hong Kong on
several occasions in connection with the official work, because he is looking after the employer’s operations
in Hong Kong also, with details asunder:
Date of leaving India Date of arriving in India
10.09.2017 30.09.2017
07.02.2018 08.05.2018
11.07.2018 21.10.2018
10.02.2019 23.07.2019
11.02.2020 12.06.2020
01.02.2021 10.04.2021
Determine his residential status for the previous years 2017-18 to 2020-21.
Solution:
Previous Year 2017-18
{July – 31, August – 31, September – 11, October – 31, November – 1, December – 1, January – 31, February
– 7}
Days of stay in India are 144
As per section 6(1), Stay in India is less than 182 days but more than 60 days during the relevant previous
year but Stay in India is less than 365 days during 4 years preceding the relevant previous year, hence he is
not complying even a single condition of section 6(1) hence he is Non – resident.
Previous Year 2018-19
{May – 24, June – 30, July – 11, October – 11, November – 1, December – 1, January – 31, February – 10}
Days of stay in India are 119.
As per section 6(1), Stay in India is less than 182 days but more than 60 days during the relevant previous
year but Stay in India is less than 365 days during 4 years preceding the relevant previous year, hence he is
not complying even a single condition of section 6(1) hence he is Non – resident.
Previous Year 2019-20
{July – 9, August – 31, September – 30, October – 31, November – 1, December – 1, January – 31, February
– 11}
Days of stay in India are 145
As per section 6(1), Stay in India is less than 182 days but more than 60 days during the relevant previous
year but Stay in India is less than 365 days during 4 years preceding the relevant previous year, hence he is
 15

not complying even a single condition of section 6(1) hence he is Non – resident.
Previous Year 2020-21
{June – 19, July – 31, August – 31, September – 30, October – 31, November – 1, December – 1, January –
31, February – 1}
Days of stay in India are 176. During the preceding 4 years, his stay is for 365 days or more so he is resident.
His stay during 7 years is 729 days or less, hence he is resident but not ordinarily resident.

Question 6 (b). (5 Marks)

The particulars of income of Mrs. X. aged 55 years for the financial year 2020-21 are given below: `
(1) Income under the head salary received from M/s ABC Ltd. for the year 4,00,000
(2) Rental income received from a commercial complex 12,000 p.m.
(3) Arrears of rent received from the complex, which were not charged to
tax in any earlier years 30,000
(4) Interest paid on loan taken for the purchase of a house from a scheduled
bank for use as own residence 1,20,000
(5) Repayment of instalments of loan taken from the bank for the purchase
of the above property 60,000
(6) Deposits in public provident fund account
(i) Towards loan taken from public provident account 20,000
(ii) Out of current year’s income 40,000
(7) Investment made in units of a mutual fund approved by the board under
section 80C of the Income-Tax Act. 40,000
Compute the total income of Mrs. X and the tax payable thereon in respect of assessment year 2021-22.
Answer: ` `
Computation of total income and tax liability Mrs. X
Income from under the head salary
Income under the head Salary 4,00,000.00

Income from house property

Let out commercial complex
Gross Annual Value (12,000 x 12) 1,44,000.00
Less: Municipal taxes Nil
Net Annual Value 1,44,000.00
Less: 30% of NAV u/s 24(a) (43,200.00)
Less: Interest on capital borrowed u/s 24(b) Nil
Income from let out property 1,00,800.00
Property self- occupied for residence
Net Annual Value Nil
Less: Interest on capital borrowed u/s 24(b) (30,000.00)
Loss from self–occupied property (30,000.00)

Arrears of rent Section 25A 30,000

Less: (30% of `30,000) (9,000) 21,000.00
Income under the head House Property 91,800.00
Gross Total Income 4,91,800.00
Less: Deduction u/s 80C (1,40,000.00)
Repayment of loan taken to purchase residential house property 60,000
Deposit in public provident fund out of current income 40,000
Investment made in units of mutual fund for infrastructure facility 40,000
Total Income 3,51,800.00
Computation of Tax Liability
Tax on `3,51,800 at slab rate 5,090.00
Less: Rebate u/s 87A (5,090.00)
Add: HEC @ 4% Nil
 16

Tax Liability Nil

Question 7 (a). (5 Marks)

Mr. Arjun (52 years old) furnishes the following particulars in respect of the following payments:
S. No. Particulars Amount (`)
1. Premium paid for insuring the health of –
• Self 10,000
• Spouse 8,000
• Dependant son 4,000
• Mother 18,000
2. Paid for Preventive Health Check-up of
• himself 2,000
• spouse 1,500
• mother 4,000
3. Incurred medical expenditure of ` 25,000 and `15,000 for his mother, aged 80
years and father, aged 85 years. Both mother and father are resident in India.

Compute the deduction available to Mr. Arjun under section 80D for the A.Y. 2021-22.
Solution:
Computation of deduction under section 80D for the A.Y. 2021-22
S. No. Particulars Amount (`)
1. I. In respect of premium paid for insuring the health of -
• Self 10,000
• Spouse 8,000
• Dependant son 4,000
22,000
II. In respect of expenditure on preventive health check-up of -
• Self 2,000
• Spouse 1,500
3,500
Restricted to [`25,000 – ` 22,000, since maximum deduction is `25,000] 3,000
Aggregate of deduction (I+II) under (1) restricted to 25,000
2. I. In respect of payment towards health insurance premium for his mother 18,000
II. In respect of preventive health check-up of his mother [`4,000,
restricted to `2,000, (`5,000 – `3,000), since maximum deduction for 2,000
preventive health check-up under section 80D is `5,000]
III. Medical expenditure for father would only be eligible for deduction
[See Note below] 15,000
35,000
Amount of deduction under (2) 35,000
Total deduction under section 80D [(1) + (2)] 60,000
Note: Irrespective of the fact that the mother of Arjun is a very senior citizen the deduction under section 80D
would not available to him in respect of the medical expenditure incurred for his mother, since Mr. Arjun has
taken a health insurance policy for his mother.

Question 7 (b). (5 Marks)

The following are the particulars relating to Mr. A, Mr. B, Mr. C and Mr. D, salaried individuals for A.Y.
2021-22 –
Particulars Mr. A Mr. B Mr. C Mr. D
Amount of loan taken ` 43 lakhs ` 45 lakhs ` 20 lakhs ` 15 lakhs
 17

Loan taken from HFC Deposit taking Deposit taking Public sector bank
NBFC NBFC
Date of sanction of loan 01.04.2020 01.04.2020 01.04.2020 31.03.2019
Date of disbursement of 01.05.2020 01.05.2020 01.05.2020 01.05.2019
loan
Purpose of loan Acquisition of Acquisition of Purchase of Purchase of
residential house residential electric vehicle electric vehicle
property for self- house property for personal use for personal use
occupation for self-
occupation
Stamp duty value of house ` 45 lakhs ` 48 lakhs – –
property
Cost of electric vehicle – – ` 22 lakhs ` 18 lakhs
Rate of interest 9% p.a. 9% p.a. 10% p.a. 10% p.a.
Compute the amount of deduction, if any, allowable under the provisions of the Income-tax Act, 1961 for
A.Y.2021-22 in the hands of Mr. A, Mr. B, Mr. C and Mr. D. Assume that there has been no principal
repayment during the P.Y.2020-21.
Solution:
Particulars `
Mr. A
Interest deduction for A.Y.2021-22
(i) Deduction allowable while computing income under the head “Income from house
property”
Deduction u/s 24(b) ` 3,54,750
[` 43,00,000 X 9% X 11/12]
Restricted to 2,00,000
(ii) Deduction under Chapter VI-A from Gross Total Income
Deduction u/s 80EEA ` 1,54,750
(` 3,54,750 – ` 2,00,000)
Restricted to 1,50,000
Mr. B
Interest deduction for A.Y.2021-22
(i) Deduction allowable while computing income under the head “Income from house
property”
Deduction u/s 24(b) ` 3,71,250
[` 45,00,000 X 9% X 11/12]
Restricted to 2,00,000
(ii) Deduction under Chapter VI-A
Deduction u/s 80EEA is not permissible since:
(i) Loan is taken from NBFC
(ii) Stamp duty value exceeds ` 45 lakh. Nil
Deduction under section 80EEA would not be permissible due to either violation listed above.
Mr. C
Deduction under Chapter VI-A
Deduction u/s 80EEB for interest payable on loan taken for purchase of electric vehicle [` 20 1,50,000
lakhs X 10% X 11/12 = ` 1,83,333, restricted to ` 1,50,000, being the maximum permissible
deduction]
 18

Mr. D
Deduction under Chapter VI-A
Deduction u/s 80EEB is not permissible since loan was sanctioned before 01.04.2019 Nil

Question 8 (a). (5 Marks)

Mr. X has income from business/profession `6,00,000 and long term capital gain `4,00,000 and short term
capital gain u/s 111A `2,00,000 and casual income `1,00,000.
He has paid premium of a mediclaim policy amounting to `20,000 taken in the name of his dependant grand
father who is senior citizen and payment was made by a cheque on 09.01.2021.
He has given premium of Jeevan Suraksha policy `7,000, has donated `12,000 to the National Defence Fund,
`4,000 to Rajiv Gandhi Foundation and `3,00,000 to a charitable institution and `1,00,000 to a social
organization and `4,00,000 to religious organization and all such organization are notified under section 80G.
(all the donations was made by cheque)
Compute his total income and tax liability for A.Y. 2021-22.
Solution: `
Income under the head Business/Profession 6,00,000.00
Income under the head Capital Gain (LTCG) 4,00,000.00
Income under the head Capital Gain (STCG u/s 111A) 2,00,000.00
Income under the head Other Sources (casual income) 1,00,000.00
Gross Total Income 13,00,000.00
Less: Deduction u/s 80CCC (7,000.00)
Less: Deduction u/s 80G
(i) National Defence Fund (12,000.00)
(ii) Rajiv Gandhi Foundation (2,000.00)
(iii) Charitable Institution/ Social organization/ Religious organization (34,650.00)
Working Note:
Charitable Institution 3,00,000
Social organization 1,00,000
Religious organization 4,00,000
8,00,000

AGTI = GTI – LTCG – STCG u/s 111A – Deduction u/s 80C to 80U (except 80G)
= 13,00,000 – 4,00,000 – 2,00,000 – 7,000
= 6,93,000
Qualifying amount = 10% of AGTI or donation whichever is less
= 69,300 or 8,00,000 whichever is less
= 69,300
50% of the qualifying amount = 34,650
Total Income 12,44,350.00

Computation of Tax Liability

Tax on casual income `1,00,000 @ 30% u/s 115BB 30,000.00
Tax on STCG `2,00,000 @ 15% u/s 111A 30,000.00
Tax on LTCG `4,00,000 @ 20% u/s 112 80,000.00
Tax on normal income `5,44,350 at slab rate 21,370.00
Tax before health & education cess 1,61,370.00
Add: HEC @ 4% 6,454.80
Tax Liability 1,67,824.80
Rounded off u/s 288B 1,67,820.00
 19

Question 8 (b). (5 Marks)

Write a note on deduction in case of royalty income from certain books.
Answer: Deduction in respect of royalty income, etc., of authors of certain books other than text books
Section 80QQB
1. Deduction is allowed only to a resident individual who is an author.
2. He should have income through his copyright in a book which is a work of literary, artistic or scientific
nature but such should not be text-books for schools/colleges etc. and also it should not be any help
book or guide etc. or any newspaper or magazine etc.
3. Deduction allowed shall be equal to the amount of royalty income or `3,00,000 whichever is less.
4. Royalty received by the author in excess of 15% of the value of such books sold during the previous
year shall be ignored.
e.g. Mr. X is an author of a book of literary nature and print price is `200 and total copies sold are 3000
and he claims that he is getting royalty @ 50% of print price, in this case deduction allowed shall be
200 x 15% x 3000 = 90,000
5. In respect of any income earned from any source outside India, so much of the income shall be taken into
account for the purpose of this section as is brought into India by the assessee in convertible foreign exchange
within a period of six months from the end of the previous year in which such income is earned or within such
further period as the competent authority may allow in this behalf.