INCOME TAX-II 2 MARKS 1

1. What is Profession?
“Profession” may be defined as a vacation, or a job requiring some thought, skill an d special
knowledge like that of C.A., Lawyer, Doctor, Engineer, Architect etc. So, profession refers t o
those activities where the livelihood is earned by the persons through their intellectual or
manual skill.
2. Mention any four admissible expenses while calculating income from business.
• Audit fees
• Bad debts
• Allowed depreciation
• Printing and stationery
3. What is Long term capital gain?
Any profit or gain arising from the sale or transfer of long-term capital asset (Fin ancial asset
more than one year & other assets more than three years) is known as capital asset.
4. State the provisions US 80GGA.
Section 80GGA allows deductions for donations made towards scientific research or rural
development. This deduction is allowed to all assesses. except those wh o h ave an in come (or
loss) from a business and/or a profession.
Mode of payment: Donations can be made in the form of a ch equ e or by a draf t or in cash ;
however, cash donations in excess of Rs 10,000 are not allowed as dedu ctions. 100% of t h e
amount that is donated or contributed is considered eligible for deductions.
5. What is Tax Free Government securities?
Tax free government securities are those securities which are exempted from tax under sect ion
10(15)
6. Mention any two-no limit 100% deductible donations U/S 80G.
• National Children Fund
• National Defence Fund
7. If Net Income from horse race is 210000, find the gross amount.
Gross winnings = Net winnings X 100/100 - Tax rate
210000X100/70= 3,00,000

Mr. CHIRANJEEVI, [Link]. N.S.A.M FGC

INCOME TAX-II 2 MARKS 2

8. Define Business.
Section 2(13) Income Tax: Business means As per Section 2(13) of the Income Tax Act, 1961,
the term ‘business’ includes any trade, commerce or manufacture or any adventure or con cern
in the nature of trade, commerce or manufacture.
9. Mention any four disallowed expenses, in calculation of profit from business.
• Interest on capital
• Speculation losses
• Deference in trial balance
• Fines and penalties
10. What is short term capital asset?
STCA means a capital asset held by an assesses for less than 36 months, (12 months in the case
of specified assets), immediately preceding the date of its transfer.
[Link] do you mean by less tax securities?
Less tax securities can be issued either by government of non-government institutions. They are
taxable securities but no tax is deducted at source and interest on these will n ot be grossed. If
the interest payable during the financial year exceeds 10,000 tax will be deducted at source.
[Link] the provisions U/S 80U.
The Income Tax Act, 1961 provides deduction u/s. 80U in pursuance of wh ich an in dividual
(Indian citizen and foreign national) who is resident of India, and who suffers from not less than
40 per cent of any disability is eligible for deduction to the extent of Rs. 75,000/- and in case of
severe disability to the extent of Rs. 125,000/-
[Link] any two 50% deductible donations U/S 80G.
• Jawaharlal Nehru Memorial Fund
• Indera Gandhi Memorial Trust
[Link] do you set off the long term capital loss?
It is set off against long term capital gain only and any unabsorbed loss can be carry forward for
8 years and such carry forwarded loss can be set off against long term capital loss only.
[Link] is Vocation?
Vocation means activities which are performed in order to earn livelihood. It com es out from
practice and as gods gift. Example: Dancing and singing etc. for tax purpose profession
includes vocation.

Mr. CHIRANJEEVI, [Link]. N.S.A.M FGC

INCOME TAX-II 2 MARKS 3

16. What is Casual Income?

Casual income is a non-recurring income that is not likely t o occur again in a ye ar. It is an
income which is earned by chance. Such income is neither anticipated nor provided for in an y
agreement. Such incomes are received at uncertain times. Income received from winning
lotteries, crosswords, puzzles, card games, horse race, gambling, betting or any oth er gam es is
known as casual income.
[Link] the Provisions of section 80 D.
Individual and HUF (Hindu Undivided Family) can claim deduction from taxable income under
section 80D. A person can claim deduction for health insurance premium & expen se in curred
towards preventive health check-up for self, spouse, dependent children and parents
[Link] is carry forward and set off of losses?
Set off of losses means adjusting the losses against the profit of a particu lar fin ancial year. If
the profits are insufficient to set off the losses, they can be carried forward to the next
assessment year.
[Link] is meant by cost of improvement?
Cost of improvement means expenditure of capital nature in making any additions or alterations
to the capital asset. Cost of improvement incurred by the assessee before 1.4.2001 shall be fully
ignored.
[Link] any four transactions incurred under the term transfer.
The term transfer includes

• Sale
• Exchange
• Relinquishment
• Extinguishment
• Compulsory acquisition
[Link] is meant by cash system of accounting?
Cash system of accounting where income received or expenditure paid during the previous year
is taxable whether it relates to the previous year of a year preceding or followin g t he previous
year.

Mr. CHIRANJEEVI, [Link]. N.S.A.M FGC

INCOME TAX-II 2 MARKS 4

[Link] do you treat bad debt recovered but disallowed earlier?

bad debt recovered but disallowed earlier is fully exempted from tax hence should be dedu cted
from net profit.
[Link] is grossing up and why it should be done?
"Grossing up" is calculating the before-tax income amount from the after-tax amount.
calculating the taxable value of the income it is necessary to gross it up and take the grossed-up
value as taxable income. The net amount is divided by 70 and multiplied by 100 to gross up th e
casual income.
[Link] are the listed and unlisted securities?
Listed Securities are shares, debentures or any other securities that is traded through an
exchange such as BSE, NSE, etc. When a private company decides to go public and issue
shares, it will need to choose an exchange on which to be listed.
Unlisted Securities are shares, debentures or any other securities t hat are n ot t raded on an
exchange but through the over-the-counter (OTC) market. Unlisted secu rities are also called
OTC securities. Market makers facilitate the buying and selling of u nlisted secu rities in t he
OTC market.
[Link] do you treat family pension received by the family members of deceased
person?
Family pension received by the family members shall be computed aft er allowing slan dered
deduction. Such deduction is to be allowed either at 33.33% or Rs 15,000, Which ever is less.
[Link] any four incomes chargeable under the head Other Sources.
• Casual Income
• Composite rent
• Interest on securities
• Rent from Land
[Link] TDS, DTC
TDS: Tax Deducted at Source
DTC: Direct Tax Code

Mr. CHIRANJEEVI, [Link]. N.S.A.M FGC

INCOME TAX-II 2 MARKS 5

[Link] do you treat expenditure on patents while calculating taxable business income
The expenditure on patents is treated as inadmissible and added to net profit on the ot her h and
depreciation is allowed hence it will be deducted from net profit.
[Link] is meant by block of assets?
Section 2(11) of Income Tax defines ‘Block of Assets’ as a ‘group of assets’ in respect of
which the same percentage of depreciation is to be applied, i.e. proper calculation of
Depreciation based on WDV of each block of assets has been prescribed for determining exact
tax liability on capital gains/ business profits.
[Link] is bond washing transaction?
Bond washing transaction under section 94 (1)
A bond washing transaction is narrated as a transaction which consist of selling securities t o a
friend or relative sometimes before the due date and acquiring back the same or similar
securities after the due date of interest is over. This practice generally adopted by high in come
class assesses to avoid the tax.
[Link] the meaning of inter head setoff.
Inter head setoff is adjustinf the loss from one head against income from other head, E.g., Loss
under the head of house property to be adjusted against salary.
[Link] Capital Asset.

Capital asset include property of any kind held by the assessee weat her con nected wit h t he
business or not, fixed or floating, movable or immovable, tangible or intangible under section 2
(14)
[Link] any two types of assessment.
• Self assessment –u/s 140A.
• Summary assessment –u/s 143(1)
• Scrutiny assessment –u/s 143(3)
• Best Judgment Assessment –u/s 144.
• Protective assessment.
• Re-assessment or Income escaping assessment –u/s 147.
• Assessment in case of search –u/s153A.

Mr. CHIRANJEEVI, [Link]. N.S.A.M FGC

INCOME TAX-II 2 MARKS 6

[Link] is gross total income?

The ‘gross total income’ (GTI) is the total income earn by adding all heads of income. In come
from salary, property, other sources, business or profession, and capital gains earned in a
financial year are all added to arrive at the GTI.
[Link] is total income?
The ‘total income’ (TI) is derived after subtracting the various deductions u nder Sect ion 80
from the GTI. So, you first calculate the GTI and then subtract the deductions t o arrive at t he
TI.
[Link] PAN and CBDT
PAN Permanent Account Number
CBDT Central Board of Direct Taxes
[Link] do you calculate indexed cost of acquisition?
Indexed cost of acquisition = Cost of acquisition * Cost In flation In dex (CII) of t h e year in
which the asset is transferred / Cost inflation index (CII) of the year in wh ich asset was first
held by the seller or 2001-02 whichever is later.
[Link] do you calculate indexed cost of improvement?
Indexed cost of improvement = Cost of improvement * Cost inflation index of the year in
which the asset is transferred / Cost inflation index of t h e year in wh ich im provement t ook
place
[Link] any four items deductible under section 80c
The deductions that are eligible for tax exemption under section 80C of t h e In come Tax Act
are:

• Home loan payment.

• Life insurance.
• Registration charges of house and stamp duty.
• Fixed deposit.
• Health Insurance.
• National Savings certificate.
• Provident fund.
• Infrastructure bonds.

Mr. CHIRANJEEVI, [Link]. N.S.A.M FGC

INCOME TAX-II 2 MARKS 7

[Link] are tax free government securities

Tax free government securities are those securities on which interest is fully exempted from tax
under section 10 subsection 15 for example interest on 7 percentage capital in vestment bon ds
special bearer bonds 1991.
[Link] do you treat daily allowances given to member of parliament
The salaries of MPs are taxable under the head "Income from other Sources" an d n ot Income
under the head Salaries. However all the daily allowances and all other allowance received by
the MPs and MLAs are fully exempted under section 10(17) of income tax act, 1961.
[Link] the provisions of section 80GGC
Assessees other than local authorities and artificial juridical person fully or partly funded by the
government can claim deduction for contribution made towards political party
Condition any some contributed during the previous year qualifies for deduction provided such
contribution made by cheque from the assessment year 2014-15. No deduction shall be allowed
in respect of any some contributed by the way of cash
Amount of deduction 100 percentage of such contribution qualifies for deduction
[Link] the rules for carry forward of speculation business loss
loss from speculation business can be set off against income from speculation business
unabsorbed loss from speculation business can be carried forward for 4 years and search carry
forward loss can be set off against speculation business income.
[Link] is reassessment?
Reassessment means reopening the already completed assessment on fulfillment of cert ain
conditions and reassess the total income of the assessee by in cluding t he in come wh ich h as
escaped earlier assessment. Reassessment is completed under section 147 of t h e In come Tax
Act.
[Link] is an inspector of income tax?
A job in this section includes work related to desk job details that come with the title of Income
Tax Inspector. He will be responsible for assessing income tax that people, company or
partnership firms are liable to pay. He will also have to handle refund claims an d TDS (Tax
Deduction at Source) queries.

Mr. CHIRANJEEVI, [Link]. N.S.A.M FGC

INCOME TAX-II 2 MARKS 8

[Link] is Cost Inflation Index (CII)

Cost Inflation Index (CII) is used for calculating the estimated increase in t he prices of goods
and assets year-by-year due to inflation.
[Link] is Speculative Transaction?
Speculative transaction means a transaction in which a contract for the purchase or sales of an y
commodity including stocks and shares is periodically or ultimately settled ot herwise t han by
the actual delivery or transfer of the commodity or scrips [section 43(5)].
[Link] any four long term capital assets for which benefit indication is not available
In the following cases the benefits of indexation is not available even if the Capital asset is long
term Capital asset

• Depreciating assets
• Slump sale
• Shares and debentures in an Indian company acquired by non resident in foreign
currency
• Bond or debenture other than a capital indexed bond issued by the government or
sovereign gold

[Link] is self-assessment?
The assessee himself determines the income tax payable. The tax department has made
available various forms for filing income tax return. The assessee consolidates his income from
various sources and adjusts the same against losses or deductions or various exemptions if an y,
available to him during the year.
[Link] is Mercantile System of accounting?
Under this method total income and total expenditure pertaining to previous year are t o
be taken. That is outstanding and prepaid adjustments are to be taken into account
Total income = income received + accrued or outstanding - income received in advance.

[Link] is written down value?

Written down value refers to actual cost incurred by the assessee in purchasing an asset du ring
the previous year however if assessee purchased prior to previous year WDV is th e difference
between actual cost and depreciation charged on asset

Mr. CHIRANJEEVI, [Link]. N.S.A.M FGC

INCOME TAX-II 2 MARKS 9

[Link] do you mean by expressly admissible expenses?

Expressly admissible expenses are those expenses which are allowed in t he in terest of
business and treated as incidental expenses.

[Link] is cost of acquisition?

Cost of acquisition means total of all the expenses incurred by the assessee on acquiring
the asset that is purchase price + expenses incurred after purchase till its first use.
Example installation charges etc.

[Link] is a zero-coupon bond?

Zero coupon bond also known as accrual bond is a debt security that does not pay interest
but is traded at a deep discount redeeming profit at maturity when the bond is redeem ed
for its full-face value.

[Link] the types of securities

It can be broadly classified into four categories
▪ Tax free government securities
▪ Less tax government securities
▪ Tax free commercial securities
▪ Less tax commercial securities

[Link] is the rate of TDS for casual income and interest on securities?
The rate of TDS for casual income is 30 % and on interest on securities 10 %.

[Link] is PAN?
Permanent Account Number (PAN) is a code that acts as an identification for individuals,
corporates (Indian or foreign) especially those who pay in come t ax. It is a u n ique 10-
character Alpha number identifier issued to all ju dicial en tries iden tifiable under t he
Income tax act 1961.

Mr. CHIRANJEEVI, [Link]. N.S.A.M FGC

INCOME TAX-II 2 MARKS 10

[Link] is extinguishment

It means the right of ownership comes to an end by t h e operat ion of an y law . Th at is

insurance company taking over the damaged assets after paying the insurance amount

[Link] the meaning of slump sale.

Slump sale means sale of running concern for a lump sum consideration . In case of
slump sale the benefit of indexation of cost is not available to the assessee.

[Link] is income from other sources?

It is the last head of income where in any income which is chargeable to tax but does n ot
find place under the first four heads of income will be assessed t o t ax u nder t he h ead
income from other sources

All the Best

Mr. CHIRANJEEVI, [Link]. N.S.A.M FGC