SALARIES 167

(l) calculation of total contribution made by employer and employee to thefund up to the date of
recognition and taxable portion of employer 's contribution :
Basic Contribution @ 15% of Emp oyer's
Period salary basic salary contribution
in excess of 12%
By the employer By the employee

19.2021 to 31.3.2022 61,425 61,425 12,285

1 4.2022 to 31.3.2023 7, 12,500 21,375
14.2023 to 30.11.2023 72,675 72,675 14,535
48,195
Total
(2) Totaltransferred balance
Employer's contribution
Employee's contribution
Interest credited thereon (given) 48,650
Total transferred balance
(3) Transferred balance chargeable to tax :
Employer's contribution in excess of 12% of salary
(calculated in Table-I above) 48,195
Interest credited thereon (in excess of 9.5%) Nil
Taxable amount 48,195

(4) Inconzefromsalary for the previous year 2023-24 :

Basic salary 60,000 x 5 + 61,500 x 7)

Transferredbalance (taxable portion) 48,195
Employer's contribution to R.P.F. in excess of 12% of salary (from December, 2022) 7,380
[3% of 61,500 x 4)]
Gross income from salary
Less: Standard deduction under section 16(ia) 50,000
Incomefrom salary
Note: It is assumed that rate of contribution by the employer and employee to the provident fund and
rateof interest after November, 2023 remain the same.
Problem - 37 :
X owns a residential house at Kolkata which is let to his employer-company at a monthly rent of
25,[Link] municipal value and fair rent of such house are 2, 16,000 and 2,64,000 respectively.
The employer-company,however, provides the same to him as rent-free accommodation. Cash
emluments received by X from his employer during the previous year 2023-24 are : Basic salary
Dearness allowance 2,88,000. He is also allowed to use a company's car of 1800 ce (along
with a driver) both for official and private works free of cost. Compute gross total income of X for the
relevantassessment year.
Solution :
Computation of gross total income of X, a resident individual, for the
assessmentyear 2024-25relating to the previous year 2023-24

A. Income from salaries :

Basic salary
Dearness allowance
 TAX —I
168

Perquisites—Sec. 17(2) :
Rent-free accommodation—Sec. 17(2)(i) [refer to note 21
2,400 + 900) x 12] 39,600
Free use of car
Gross income from salary
uses : Standard deduction under section 16(ia) 50,000

B. Income from house property :

Gross annual value (refer to note 3)
Less : Municipal tax paid by owner—assumed such tax is assessed
@ 10% of net municipal value and paid by X 19,440
Net annual value
Iæss : Standard deduction under section 24(a)
(30% of net annual value) 84,168
Gross total income
Notes :
I. It is assumed that dearness allowance forms part of salary for computation of all retirement
benefits.
2. Valuation of rent-free accommodation :

For first 5 months (i.e. from April l, 2023 to August 31, 2023) :
Lower of the following alternative sums :
(a) 15% of salary of (salary for first 5 months) 78,000
(b) Rent paid (or payable) by the employer 20,000 x 5)
Lower of (a) and (b) 78,000
For last 7 months (i.e. from September 1, 2023 to March 31, 2024) :
Lower of the following alternative sums :
(a) 10% of salary of 7,28,000 (salary for last 7 months) 72,800
(b) Rent paid (or payable) by the employer (Z 20,000 x 7)
Lower of (a) and (b) 72,800
Value of perquisite
Salary for the purpose of the above is calculated as follows (on the assumption that salary per month
remains the same over the year) :
For first 5 months For last 7 months
8)
Basic salary (t 80,000 p.m.)
Dearness allowance 24,000 p.m.)
Salary
3. Reasonable expected rent of the house is (higher of gross municipal value and fair
As actual rent received or receivable from the house (i.e. is higher than reasonable
expected rent, gross annual value of the house is taken as
Problem —38 :
Miss S. Sen is employed in a private limited company in Kolkata on April 1, 2007. She furnishes the
following particulars of her income for the year 2023-24 :
(a) Basic salary on April 1, 2023 @ per rmnth (increment of 5,000 nwnth falls
due on 1st January each year).
 SALARIES 169
Dearness allowance @ 50% of basic salary.
(h)
City compensatoryallowance 6,000 per month.
(c) Entertainment allowmce 2,000 per month (she has been receiving this allowance since the date
of envloyment-— actual expenses incurred during the year for the same amount to 18,000).
A rent-free furnished accommodation in Kolkata is provided by the employer, the fair rent of
(e) whichis 20,000 per month. A gardener and a servant at a monthly remuneration of 12,200
and 18,000 respectively are provided by the employer. Cost of furnishing the accommoda-
Lionamounts to 8,70,000. Expenses of 62,500 have been incurred by the employer for the
maintenance of the garden attached to such accommodation. The accommodation is owned by
the employer.
Two cars of 1200 cc and 1800 cc are provided by the employer both for official and private
works. Entire expenses for running and maintaining the cars including driver's salary
amounting 5, 17,500 and 3,78,200 respectively are borne by the employer. Cost of the
above cars is 18,70,000 and 21,75,000 respectively.
(g) Miss Sen and the employer both contribute @ 12% of basic salary to the recognised provident
fund. Interest credited to provident fund @ 13.5% per annum during the year amounts to

(h) professional tax of 200 per month is deducted by the employer from her salary.
compute income from salary for the assessment year 2024-25 on the assumption that—
is not
(l) Miss Sen has exercised option for normal scheme of taxation (i.e. section 115BAC
applicable) ;
115BAC is
(2) Miss Sen has not exercised option for normal scheme of taxation (i.e. section
applicable).

Solution :
for the
(1) Computation of income from salary of Miss S. Sen, a resident individual,
assessment year 2023-24relating to the previous year 2022-23
(when she has exercised option for normal scheme of taxation)

Basicsalary x9+ x 3)
DeUnessallowance (50% of basic salary) 72,000
Citycompensatory allowance (Z 6,000 x 12) 24,000
Entertainmentallowance 2,000 x 12) of
Employer'scontribution to recognised provident fund in excess Nil
12%of salary
Interestcredited to recognised provident fund in excess of 9.5%
rate + 13.5 x 4]
Perquisites—Sec. 17(2) :
Rent-freefurnished accommodation (refer to note 4)—Sec. 17(2)(i) 7,44, 100
Car (refer to note 6)—Sec. 17(2)(iii)
2, 16,000
Servant(actual wages)—Sec. 17(2)(iii)
Grossincome from salaries
Less : Standard deduction — Sec. 16(ia) 50,000
2,400 52,400
Deductionfor payment of professional tax under section 16(iii)
Incomefrom salary
Notes :
salary
l. It is assuriEdthat salary becornes due on the last date of the month to which such
relates.
fund, it is
As dearness allowance is not considered for the purpose of contribution to provident
assunrd that it does not form part of salary for computation of retirement benefits.
 TAXATION -- 1
170

3. As Miss Sen IS a private sector employee, no deduction is allowed under section 1601)In
respect of entertainment allowance received by her.
4. Valuation of rent-free furnished accommodation .

15% of salary of (salary for first 5 months)

10% of salary of (salary for last 7 months)
Value of perquisite for accommodation 2, 11,750
For furniture (10% p.a. of cost of furniture of 8,70,000 87,000
Value of perquisite
Salary for the purpose of the above is calculatedas follows :
From April 1, 2023 From Septemberl, 2023
to August 31, 2023 to March 31, 2024

Basic salary p.m. for April to

December, 2023 and p.m. for
January to March, 2024) 9, 74,000
City compensatory allowance (V 6,000 p.m.) 30,000 42,000
Entertainment allowance 2,000 p.m.) 10,000 14,000
Salary
5. As the accommodationis owned by the employer,expenses(inclusive of gardener's salary)
incurred by the employer for the maintenanceof the garden attached to such accommodation are not
taxable separately (Circular No. 122, dated October 19, 1973).
6. When two or more cars provided by the employer are used by the employee both for official and
private works, one such car is to be treated as such and other car or cars are to be valued as if such car or
cars are exclusively used by the employee for private works, at the option of the employee. It is assumed
that Miss Sen selects car of 1800 cc both for official and private use for valuation of perquisite. On such
consideration, perquisite is valued as under :
For car of 1200 cc [Expenses : 5, 17,500 + Depreciation @10% p.a. of
cost :
For car of 1800 cc 2,400 x 12 + 900 x 12) 39,600
Value of perquisite
(2) If Miss S. Sen does not exercise option for normal scheme of taxation (i.e. section 115BACis
applicable) she will not be entitled to deduction for payment of professional tax under section 16(iii).
Therefore, in this case, income under the head 'Salaries' would be 39,87,350 39,84,950+
2,400).
Problem —39 :
X is employed in a private limited company in Mumbai. He furnishes the following particularsOf
his income for the year 2023-24. Compute his income from salary assuming that X has exercised option
for norrnal scheme of taxation (i.e. section 115BAC is not applicable).
(a) Net salary received 83,40,600.
(b) Amount deducted from salary •
Own contribution to R.P.F.
Income-tax
Professional tax 2,400
(c) He is provided with a car (cubic capacity of the engine : 1.2 litres)
both for official and private
works. Entire expenses including driver's salary are paid by the employer.
(d) HIS employer paid life insurance premium of on the life
(sum assured
of Mrs. X on his behalf.
 171
(e) His salary' includes medical allowance
of 10,000 per month and house rent allowance of
15,200 per month.
(D He lives in a rented accommodation in
Mumbai paying monthly rent of 26,000.
Solution :
computation of income from salary of X,
a
ycnr 2024-25 relating to the resident individual, for the assessment
previous year 2023-24

Net salary received

Add: Deductionsfrom salary •
Own contribution to R.P.F.
Income-tax
Professional tax
2,400
Gross salary
Iwss: House rent allowance 15,200 x 12)
Basic+ D.A. + Medical allowance (assumed) (refer to note l)
Houserent allowance
[rss : Exemption under section IO(13A)(refer to note 2) Nil
Perquisites—Sec. 17(2) :
car [€ 1,800+ 900) x 32,400
Life insurance premium paid by the employer— Sec. 17(2)(iv)
Gross income from salary
Less : Standard deduction — Sec. 16(ia) 50,000
Deduction for payment of professional tax under section 16(iii) 2,400 52,400
Income from salaries 99,47 ,500
Notes :
l. It is assumed that salary of X consists of basic salary, dearness allowance, medical allowance and
house rent allowance only. It is also assumed that dearness allowance forms part of salary for
computation of all retirement benefits.
2. Amount exempt under section IO(13A) :
Least of the following sums is exempt—
(a) Actual house rent allowance received
(b) Excess of rent paid over 10% of salary Nil
3, 12,000 - of (Basic + D.A.)]
(c) 50% of salary of
The amount of exemption is Nil, being least.
Problem —40 :
Suresh Kar is appointed in Greenco Manufacturing (P) Ltd. in Kolkata on January 1, 2006 on a scale
Of 45,000 —1,500 —60,000 —2,000 —80,000. From the following particulars of his incomes and
outgoingsrelating to salary income for the previous year 2023-24, compute his income from salary.
Ignore section 115BAC.
(a) Basic salary— as per scale.
(b) Dearness allowance—IOO% of first of 30,000 of pay plus 50% of the balance.
(c) Entertainment allowance 700 per month ; expenses incurred for the same 4,000.
(d) Medical allowance 4,000 per month ; expenses incurred by Kar for the medical treatment of
his wife 33,500.
(e) Bonus paid as per contract and 25,000 paid as gratuitous.
(D He is provided with an accommodationin Kolkata for which the employer pays rent of
18,500 per month. A gardener is also provided by the employer at monthly remuneration
of 4,500.
 TAXAIION I

Ile IS allowed to use a car (800 cc) free of cost both for official and private purposes.
Electricity expenses of 22,500 and education expenses of 33,200 for the education of his
children are reimbursed by the employer.
ne following deductionsare made by the employer from his monthly salary •
(1)Professional tax 200 ; (ii) Income tax 12,000 ; (iii) Provident fund (recognised)
contnbu_
tion 12.000 ; and (iv) House rent 6,000.
lhe employer contributes 12,000 per month to the recognised provident fund.
(k) Interest @ 13% per annum amounting is credited to this fund during the year.
Solution :
Computation of incomc from salaries of Suresh Knr, n resident individual,
for the
assessment year 2024-25relating to the previous year 2023-24

Basic salary 55,500 x 9 + 57,000 x 3)

Dearness allowance [(100% of 30,000 + of
25,500) x 9 + (100% of 30,000 + 50% of 27,000) x 31
Entertainment allowance 700 x 12)
Medical allowance 4,000 x 12) 8,400
Bonus (paid as per contract) 48,000
Employer's contribution to recognised provident fund
in excess of 12% of salary (Basic + D.A.) 12%of
Interest credited to recognised provident fund in excess of 9.5% rate 1,710
13 x 3.5)
Perquisites—Sec. 17(2) : 70,000
Accommodation provided at concessional rate [refer to note 5]—Sec. 17(2)(ii)
89,953
Car 1,800+ 900)x 32,400
Gardener (actual wages)— Sec. 17(2)(iii)
54,000
Bonus paid as gratuitous— Sec. 17(2)(iii)
25,000
Electricity expenses reimbursed by the employer—Sec. 17(2)(iv)
22,500
Education expenses reimbursed by the employer—Sec. 17(2)(iv)
33,200
Gross income from salaries
Iæss : Standard deduction under section 16(ia)
50,000
Deduction for payment of professional tax under section 16(iii) 2,400 52,400
Income from salaries
Notes :
1. It is assumed that dearness allowance forms part of salary for computationof all
retirement
benefi ts.
2. Actual entertainment expenses and expenses for medical treatment of assessee's
wife do not
affect the assessment.
3. It is assumed that salary becomes due on the last date of the month to
which such salary relates.
4. No exemption is allowed under section 16(ii) in respect of entertainment
allowance receivedby
by Mr. Kar, as he is an employee of a private sector.
5. Valuation of perquisite in respect of accommodation provided
at concessional rate :

• For first 5 months (i.e. from April 1, 2023 to August 31, 2023)
:
Lower of the following alternative sums :
(a) of salary of 77,213
(b) Rent paid (or payable) by the employer 18,500 p.m.) 92,500
Lower of (a) and (b) 77,213
 For last 7 months (i.e. from September l, 2023 to March 31, 2024) :
Lower of the following alternativesums :
(a) of salary of 84,740
(b) Rent paid (or payable) by the employer 18,500 p.m.)
Lower of (a) and (b) 84.740
Value of rent-free accommodation
Iwss : Rent charged by the employer 6,000 p.m.) 72,000
Value of accommodation provided at concessionalrate 89,953
Notc : Salary for the purpose of the above is calculated as follows :
For first 5 months For last 7 months

Basic salary 55,000 p.m. for first 5 month ;

55,500 p.m. for September to December,
2023 and 57,000 p.m. for January to March,
2024
Dearness allowance 42,000 p.m. for 5 month;
42,750 p.m. for September to December, 2023
and 43,500 p.m. for January to March, 2024)
Entertainment allowance 700 p.m.) 3,500 4,900,
Medical allowance (e 4,000 p.m.) 20,000 28,000
Contractual bonus (assuming bonus is accrued
at the end of the year)
Salary
Problem —41 :
2023-24 •
P. Sethi submits the following particulars of his salary income for the previous year
(a) Net salary received 12,35,000.
a rented house at
(b) His salary includes house rent allowance of 7,000 per month. He stays in
Asansol paying monthly rent of 9,500.
(c) In addition to net salary he draws an annual bonus of 35,000.
the employer both for private and
(d) A car (cubic capacity of the engine : 1.9 litres) is provided by
the chauffeur relating to
official purposes. Expenses of the car excluding the remuneration of
private use are borne by Sethi.
for a holiday trip to Kashmir.
(e) He is granted a leave travel concession of? 18,500
from his salary : (i) Income-tax 2,500 per
(f) The following deductions are made by the employer
provident fund
rmnth; (ii) Professional tax 200 per nyjnth ; (iii) Contributionto unrecognised
15,000per month.
provident fund account.
(g) The employer contributes 12,000per month to his unrecognised
Interest of 24,500 is credited to this fund during this year.
(h) The employer makes the following payments on his behalf :
(B)licy
(i) Telephone bill 13,500 ; (ii) Life insurance premium on the life of his wife 11,500
value ; (iii) Electricity bill 12,000.
are provided by the
(i) Free refreshment and free lunch worth 13600 and 18,700 respectively
employer during office hours.
has exercised
Compute his income from salary for the relevant assessment year assuming that he
option for normal scheme of taxation (i.e. section 115BAC is not applicable).
 174 TAXATION
-1
Solution :
Computation of incomc from salary of P. Sethi, n resident individual, for the
asscssmcnt year 2024-25to the previous ycnr 2023-24

Net salary received

Add : Deductions from salary •
Income tax 30,400
Professional tax 2,400
Own contribution to unrecognised provident fund 2, 12,400

Less : House rent allowance (e 7000 x 12) 84,000

Basic + D. A. (assumed) [refer to note Il
House rent allowance 84,000
Less : Exemption under section of the
following sums :
(a) Actual house rent allowance received 84,000
(b) Excess of rent paid over 10% of salary
Nil
(c) 40% of salary
Amount of exemption is nil, being least Nil 84,000
Bonus
35,000
Perquisites—Sec. 17(2) :
Car 900+ 900)x 21,600
Electricity charges paid by employer—Sec. 17(2)(iv) 12,000
Life insurance premium paid by employer—Sec. 17(2)(iv)
Gross income from salaries
Less : Standard deduction under section 16(ia) 50,000
Deduction for payment of professional tax under
section 16(iii) 2,400 52,400
Income from salaries
Notes :
1. It is assumed that salary of P. Sethi consists of basic salary, dearness allowance, house
rent
allowance and bonus only. As bonus is paid in addition to net salary, it is charged separately.
2. It iS assumed that deamess allowance forms part of salary for computation of all
retirement
benefits.
3. Employer's contribution to unrecognised provident fund is not taxable
in the year of such
contribution. Similarly, interest on such fund is not taxable in the year
of credit of such interest.
4. Free refreshment provided by the employer during office
hours is not taxable. Free lunch
provided by the employer during office hours is not taxable
on the assumption that cost of each
meal does not exceed 50. Telephone bill paid by the
employer is also not taxable.
5. Leave travel concession received by the employee
is exempt from tax under section 10(5).It is
assunrd that all conditions prescribed in this
section are fulfilled.
Problem —42 :
Mrs. Purabl Sen, a senior executive
officer of a private limited company, furnishes the following
particularsof her inconks and outgoings
for the year [Link] her income from salary
Ignore section 115BAC.
(a) Basic pay on Apnl l, 2023 45,000
(increnrnt of 3,000 per rmnth falls due on 1st January
each year).
 SALARIES 175
(b) Dearness allowance @ 100% of
first of
to a maximum of 38,000 per month. 30,000 of basic pay plus 50% of the balance subject
(c) Project allowance 3,000 per month.
(d) A rent-free accommodation (owned
is by employer) at Raniganj is provided the fair rent of which
9,000 per month. It is provided
in the agreementof service that if she is posted outside
Raniganj in any branch office of
the said company, she will have to leave the accommodation
on the date of such posting and in
such a
lion but will grant house rent allowance case, the company will not provide any accommoda-
@ 6,000 per month.
(e) A car (1200 cc) is provided by the
similar terms
concern both for official and private purposes under the
as mentioned above. The
concern will, however, grant a car allowance of 2,500
per month during her period of stay outside
(D She contributes 10% of basic pay Raniganj.
to the recognisedprovident fund where the employer also
makes a matching contribution. Interest
@ 9.5% per annum is credited to this fund on March
31, 2024 on accumulated balance of 12,70,000.
(g) Tie concern deposits her professional
tax of 2,400 after deducting the same from her salary.
(h) She is transferred to Darjeeling Branch of the
company on January l, 2024 on the similar scale
of pay. In addition, she is allowed a hill compensatoryallowance
@ 4,000 per month. She
arranges an accommodation at Darjeeling at a monthly rent of 8,500.
Solution :
Computation of income from salary of Mrs. Purabi Sen, a resident individual, for the
assessment year 2024-25 relating to the previous year 2023-24

Basicpay (v 45,000 x 9 + 48,000 x 3)

Dearness allowance (refer to note 5 ) 4,51 ,500
Projectallowance (V 3,000 x 12) 36,000
Car allowance for the period of stay at Darjeeling 2,500 x 3) 7,500
Less: Exemption under section that entire
amount is expended for official works 7,500
Nil
Houserent allowance for the period of stay at Darjeeling
6,000 x 3) 18,000
Iwss: Exemption under section 10(13A) — Least of the following
sums :
(a) Actual house rent allowance received 18,000
(b) Excess of rent paid over 10% of salary (salary for the
period of stay at Darjeeling is considered)
25,500- of 11,100
(c) 40% of salary of 57,600
11,100, being the least, is exempt 11,100
6,900
Hill compensatoryallowance 4,000 x 3) 12,000
lyss : Exemption under section 300 per month 900 11,100
Perquisites—Sec. 17(2) :
Rent-free accommcxlation (refer to note 6)—Sec. 17(2)(i) 27,600
Car + 900) x 91—Sec. 24,300 51,900
Gross income from salaries
Less : St:ndard deduction under section 16(ia) 50,000
for paynrnt of professional tax under section 16(iii) 2 400 52,400
InuprJkfrom salaries
176 -1
TAXATION
Notcs :
l. It is assumed that salary becomes due on the last date of the month to which such salary relates
As dearness allowance is not considered in calculating provident fund contribution, it is
assumed that it does not form part of salary for computation of retirement benefits.
3. Employer's contribution to recognised provident fund is not taxable as such amount does not
exceed 12% of salary. Interest on such fund is not taxable as the rate of interest does not exceed
9.5% per annum.
4. As the professional tax is merely deposited by the concern which is actually paid by Mrs. Sen
it is not a perquisite.
5. Calculation of dearness allowance :
For first 9 months (April 2023 to December, 2023) :
(100% of 30,000 + of e 15,000)or 38,000
per month, whichever is lower i.e. 37,500per month is
the amount of D.A. for the above period
For last 3 months (January, 2024 to March, 2024) :
38,000, being less than 39,000 (100% of 30,000
+ 50% of 18,000) per month is the amount of D.A.

6. Valuation of rent-free accommodation:

7.5% of salary of 2,48,000 (salary for first 5 months) 18,000

5% of salary of (salary for last 4 months) 9,600
Value of rent-free accommodation 27,600

Salary for the purpose of the above is calculated as follows :

For April, 2023 For September, 2023
to August 2023 to December, 2024

Basic salary (Z 45,000 p.m.)

Project allowance (Z 3,000 p.m.) 15,000 12,000
Salary
Salary for the period during which the accommodationis occupied by the assessee (i.e. from April,
2023 to December, 2023) is considered as per rule.
Problem —43 :
R. Singha is employed in a Government concern on 1st April, 2019 on a pay scale of 52,500-
2,500 —77,000 —4,000 —l, 17,500. Other particulars relating to his salary income for the year 2023-24
are as follows :
Dearness allowance 60% of basic pay ; Lunch allowance 3,000 per month ; Entertainment
allowance 1,200 per month ; Interim relief 4,000 per month ; Arrear salary (relating to the previous
year 2022-23) ; Rent-free accommodation at Nagpur (Fair rent 20,000 per month ; Licence
fee determined as per Governnrnt rules 13,500 per month) ; Free use of furniture costing
Electricity bill for personal consumptionarnounting 71,200 is paid by employer ; Own contributi0n
to statutory provident fund @ 10% of basic and D. A.
makes a matching contributi0fl);
Interest credited to such fund 32,600 (rate being 8% per
annum) ; Leave salary 42,500 ; Income tax
and professionaltax paid by Singha 2,25,000 and
2,400 respectively.
 compute his income from salary for the relevant
assessment year (ignore section 115BAC).
solution :
computation of income from salary of R. Singhn,
n resident individual, for the
assessment year 2024-25relating to the
previous year 2023-24

Basic salary 62,500 x 12)

Dearness allowance (60% of
Lunch allowance 3,000 x 12) 36,000
Entertainment allowance 1,200 x 12) 14,400
Interim relief 4,000 x 12) 48,000
Leave salary 42,500
Arrear salary (refer to note 4)
Perquisites—Sec. 17(2) :
Rent-free accommodation—Sec. 17(2)(i)
[Licence fee + 10% per annum of cost of furniture]
Electricity charges paid by the employer— Sec. 17(2)(iv) 71,200
Gross income from salaries
Less : Deductions under section 16
Standard deduction under section 16(ia) 50,000
Deduction in respect of entertainment allowance under section 16(ii)
(refer to note 5) 5,000
Deduction for payment of professional tax under section 16(iii) 2,400 57,400
Income from salaries
Notes :
l. It is assumed that salary becomes due on the last date of the month to which such salary relates.
2. Employer's contribution to statutory provident fund and interest credited to such fund are
exempt from tax.
3. No exemption under section IO(IOAA)is allowed in respect of leave salary as the same is
received by Singha during the continuance of his service.
4. Arrear salary is treated as taxable in this year on the assumption that the same has not been
taxed in the previous year 2022-23 on accrual basis. He can, however, claim tax relief under
section 89 for the same.
5. Deduction in respect of entertainment allowance under section 16(ii) :
Least of the following sums is exempt :
(i) Actual entertainment allowance received during this year 14,400
J th of basic salary of
(iii) Maximum 5,000
5,000, being the least sum, is exempt from tax.
Problern-44 :
Mr. M. Roy (aged 49 years) is employed in a Central Government concern on February 15, 2023.
He furnishes the following particulars for the previous year 2023-24 :
(a) Basic salary 48,500 per month.
(b) Dearness allowance (forming part of salary) 26,500 per month.
(c) Dearness pay (not forming part of salary) 14,600 per month.
(d) Medical allow,mce 2,500 per month.
(e) Children education allowance @ 1,800 per rwnth per child for 2 children.
(f) He contnbutes 10% of his salary to National Pension ScheriE (NPS). The Government makes
Qntnbuuon @ 14% of salary to such scherr.
 TAXATION - 1
178
employer also
(g) He contributes of his salary to statutory provident fund where the
contributes an equal amount.
by cheque (for insurance of his health).
(h) He pays medical insurance premium of ( 16,500 to GICI
banks.
(1) He earns interest of 2,75,200 from fixed deposits in
He invests in NSC (Vill issue).
July l, 2024 and thereafter on
(k) His first increment of salary of 2,500 per Imnth becomes due on
July I of every year. year on the
Compute total Income and tax liability of M. Roy for the relevant assessment
assumption that—
(l) he has exercised option for normal scheme of taxation (i.e. section 115BAC is not applicable)
(2) he has not exercised option for normal scheme of taxation.
Also state whether Mr. Roy should exercise option for normal scheme of taxation.
Solution :
(1) Computation of total income of M. Roy, n resident individual, for the
assessment year 2024-25relating to the previous year 2023-24

A. Income from salaries :

Basic salary 48,500 x 12)
Dearness allowance 26,500 x 12) 3, 18,000
Dearness pay 14,600 x 12)
Medical allowance 2,500 x 12) 30,000
Children education allowance 43,200 —Exemption under
section 10(14) 2,400 100 x 2 x 12)1 40,800
Contribution made by the Central Government in notified
pension scheme (14% of salary of —refer to note l)
Gross income from salaries
Iæss : Standard deduction under section 16(ia) 50,000
B. Income from other sources :
Bank interest from fixed deposits
Gross total income
: Deduction under section 80C (Own contribution to
Statutory Providend Fund + Deposit in NSC — subject to
a maximum of
Deduction under section 80CCD(l) (Own contribution to
NPS— of salary of 90,000
Total deduction under section 80C and 80CCD(l) is restricted
to as per section 80CCE
Deduction under section 80CCD(2) (Employer's contribution
to NPS— of salary of
Deduction under section 80D (for payment of medical insurance
premium)
16,500
Total income

Tax liability of M. Roy for the assessment ycnr 2024-25

Tax on total income of

Add : Health and Education Cess @
4% 6,956
Tax liability (rounded off)
 SALARIES 179

salary for the purpose of determning the amount of contribution In notified penston scheme
meansbasic salary. It includes dearness allowance as it forms part of salary for computation of
retirementbenefits. However, such salary excludes all other allowances.
As contributionmade by the employer to NPS during the previous year does not exceed 7.5
[Link] specified in section and 17(2)(viia) are not applicable.
3. As Mr. Roy is not a senior citiæn, deduction under section 80TTB is not allowed In respect of
Incomeaccrued from fixed deposits with banks.
(2) If Mr. Roy does not exercise option for normal scheme of taxation (i.e. when provisions of
section 115BAC are applicable) the following exemptions and deductions are not available
(i) Exemption under section 10(14) in respect of children education allowance ;
(ii) Deductions under sections 80C, 80CCD [except under section 80CCD(2)l and 80D.
Based on such considerations, total income of M. Roy for the assessment year 2024-25 IS
computedas follows :

A. Incomc from salaries :

Basic salary
Dearnessallowance 3, 18,000
Dearness pay
Medicalalowance 30,000
Children education allowance 43,200
Employer's contribution to NPS 1 26 000
Gross income from salaries
ITS.s: Standard deduction under section 16(ia)

B. Incomefrom other sources :

Bank interest from fixed deposits
Gross total income
Loss : Deduction under section 80CCD(2)
Total income
Tax liability of M. Roy for the assessmentyear 2024-25 (when he not exercise option for
normalscheme of taxation i.e. when provisions of section 115BAC are applicable) is computed as under
(taxrates are different— refer to point 2.10.5) :

Tax on total income of 13,73,600

Iwss : Rebate under section 87A (refer to note below) Nil
Balance
Add : Health and Education Cess @ 4% 4,989
Tax liab;!ity (rounded off)
Comment : As tax liability under section 115BACis lower than tax liability under the normal
Provisionsof the I.T. Act, Mr. Roy should not exercise option for normal scheme of taxation.
Note : Rebate under section 87A : Income-tax on total income i.e. 1,24,720 —(Total income i.e.
— The resultant figure is (—) 5,48,880. As the figure is negative, rebate under
this section is nil.
 TAXATION I
ISO

Problem--45 :
Mr. Kar, an enlployee of a Govemment concern, retires on June 30, 2023 after completing
)ears and 5 months of service. He furnishes the following particulars of his Income for the year 2023.24
(l) Basic salary on April l, 2023 32,500 per month.
(2) Dearness allowance—IOO%of basic salary.
(3) Commission 5200 per rmnth.
(4) Gratuity received 18,70,000.
(5) Monthly pension received 19,500 per month; Commuted pension received 5,20 000
(6) Received from provident fund account 32,70,000.
(7) Received leave salary 6,50,000.
(8) Received bank interest from fixed deposits interest from NSC (Vlll Issue)
93, 120, interest from P.O.S.B. 5,700.
Compute his gross total income for the assessment year 2024-25. Ignore section 115BAO
Solution :
Computation of gross total income of Mr. Kar, a resident individual, for the
assessment ycnr 2024-25relating to the previous year 2023-24

A. Income from salaries :

Basic salary (for April, May and June, 2023) 97,500
Dearness allowance (100% of 97,500) 97,500
Commission 5,200 x 3) 15,600
Monthly pension @ 19,500 per month (from July 2023 to March 2024)
Commuted pension— exempt under section Nil
Gratuity— exempt under section Nil
Leave salary— exempt under section IO(10AA)(i) Nil
Amount received from provident fund— exempt under section 11) Nil
Gross income from salaries
Iæss : Standard deduction under section 16(ia) 50,000
B. Income from other sources :
Bank interest from fixed deposits
Interest from NSC (VIII Issue) 93,120
Interest from P.O.S.B.— exempt under section 10(15) up to 3,500
assuming that the account is held in the name of the individual assessee 2,200
Gross total income
Note : It is assumed that salary and pension become due on the last date of each month.
Problem —46 :
R (aged 58 years), an employee of a private company, retires on September 30, 2023 after
completing 25 years and 7 months of service with the company. He furnishes the following particulars
of his incorne for the year 2023-24 •
(l) Basic salary on April 1, 2023 54,500 per month (increment of 2,500 per month fallsdue
on 1st January each year).
(2) Dearness allowance 50% of basic salary.
(3) Commission 5,000 per rwnth.
(4) Gratuity
(5) Pension is fixed at 32,500 per rmnth. He has commuted 75% of his monthly pensionand
received for the sarne.
 SALARIES 181
(6) Leavesalary received 4,35 000. He has availed 8 months' leave during the tenure of his
service. savings
(7) He received interest of 82,700 from fixecideposits with SBI and 18,500 from
accountin that bank, interest from NSC (VIll Issue) 33,735 and dividend from a foreign
company 16,300.
Mrs. R.
(8) He received interest of 9,500 from P.O.S.B held in the joint name of Mr. R and
investment in NSC Issue)
(9) He made
compute total income of R for the assessment year 2024-25. Ignore section 115BAC.
:
solution computation of total incomc of R, n resident individual, for the assessment
ycnr 2024-25relating to the previous ycnr 2023-24

from snlnrics :
A. Incomc
Basicsalary for 6 months (from April to September, 2023)
Dearnessallowance (50% of 3,27,000)
Commissionfor 6 months 5,000 x 6) 30,000
Monthlypension (from October, 2023 to March, 2024-—25%
48,750
of 32,500per month)
Commutedpension
Iwss : Exemption under section
1
x
75
Gratuity
Izss : Exemption under section IO(10)(iii) (refer to note 3) 10, 12,500
Leavesalary
Less: Exemption under section IO(10AA)(ii) (refer to note 4) Nil
Grossincome from salaries
50,000
Iwss: Standard deduction under section 16(ia)
B. Incomefrom other sources :
Bank interest (Interest from fixed deposit with Bank 82,700
+ Savings bank interest 18,500)
Interest from P.O.S.B.— exempt under section 10(15) up to
7,000 as it is held in the joint names 9,500 7,000) 2,500
Interestfrom NSC (VIll Issue) 33,735
Dividend from foreign company 16,300
Gross total income
Less: Deduction under section 80C (Interest from NSC
+ Investment in NSC— subject to a maximum of
1.5 lakh)
Deductionunder section 80TTA in respect of interest from
savingsbank account and interest from P.O.S.B. [to the extent
not exempt under section 10(15)]— subject to a maximum of
10,000 10,000
Total inconr (rounded off under section 288A)
Notes :
I It ISassumed that salary and pension become due on the last date of the rmnth to which such
Inconrs relate.
It IS assurmrdthat dearness allowance forms of salary for computation of all retirenrnt
Qaneflts.
 182 TAXATION
3. Arnount exejupt unelecsx•ction :
Least of the 'l lowing sunusis exenipt
(i) Gratuity actually received
(ii) One-half month's salary for each cotnpleted year of service
( x 25)
(iii) Maxinnurn liliiit
10.12,500. being the least sunu is exempt.
Average Ilionthly salary is calculated as iollows :
Basic and D.A. for 10 rnonths preceding the month of retirement
(i.e.. from November. 2022 to August, 2023) :
Basic salary 52,000 x 2 + 54,500 x 8)
Dearness allowance (50% of
2,[Link]
Total
Average salary per month : 81,000 (C 8, 10,000 + 10).
4. Amount exempt under section IO(10AA)(ii):
Least of the following sums is exetnpt—-
(i) Actual anujunt of leave salary received
(ii) Cash equivalent of leave to the credit of the employee at the time of retirement
(iii) 10 months' average salary (10 x 81,375*)
(iv) Maximum limit
being the least sum, is exempt.
* Average salary is calculated on the basis of last 10 months' salary preceding retirement
(i.e. from December l, 2022 to September 30, 2023) as follows :
Basic salary (C 52,000 x 1 + 54,500 x 9)
Dearness allowance (50% of 5,42,500)
Total
8,13.750
** Cash equivalent of leave to the credit of the employee at the time of retirement :
Maximum entitlement of leave (30 days for every year of actual service) 25 months
Leave actually availed of during the period of service 8 months
Leave at the credit of the employee on the basis of maximum entitlement
(Leave eamed —Leave availed) 17 months
Cash equivalent of leave salary (17 x 81,375)
Problem —47 :
X retired on June 30, 2023. He submits the following information :

Basic salary (since January, 2023) 20,000 p.m.

Dearness allowance (one-third of which is part of salary for retirement benefits) 6,000 p.m.
Employer's contribution to provident fund (X makes a matching contribution) 3,000 p.m.
Interest credited to PF @ 15% per annum 7,500
Pension after retirement 10,000 p.m.
Payment of provident fund received at the time of retirement
as per details below :
Employer's contribution
Interest thereon 44,000
X's contnbution
Interest thereon 46 ,
Salary and pension become due at the end of each month.
 SALARIES 183
X hasdeposited the entire provident fund payment Witha
company (rate of interest W/op.a.). Find
euttotalIncomeof X for the assessment Year2024-25 on the assumption that the provident fund is .
(a)statutoryprovident fund, (b) recognised
X provident fund and, (c) unrecognised provident fund.
Alsoassume that has exercised option for normal scheme of taxation.
//CWA (Inter.) June. 2008-—Adapted/
solution :
Computation of total income of X
for the asscssmcnt year 2024-25
Statutory Recognised Unrecognised
Provident Provident Provident
Fund Fund Fund
(Z) (Z)
salary :
A. Income from
Basic salary (Z 20,000 x 3) 60,000 60,000 60,000
Dearnessallowance 6,000 x 3) 18,000 18,000 18,000
Employer's contribution to PF taxable in excess
of 12%of salary in case of RPF i.e.
3,000x 3 - of 66,000 1,080
Interestcredited to PF—taxable in excess of 9.5%
rate in case of RPF i.e. 7,500 + 15 x 5.5 2,750
Pension (V 10,000 x 9) 90,000 90,000 90,000
Payment from PF Account —taxable to the extent
of employer's contribution and interest included
thereonin case of unrecognised provident fund
Gross income from salaries
Ins : Standard deduction under section 16(ia) 50,000 50,000 50,000
1, 18,000
B. Incomefrom other sources :
Intereston own contribution to URPF 46,000
Intereston company deposits (9% p.a.
on from July 1, 2023 to
March 31, 2024) 51,300 51,300 51,300
51,300 51,300 97,300
Gross total income [(A) + (B)] 553,300
Iwss : Deduction under section 80C 9,000 9,000 Nil

Total income
Notes :
l. Deduction under section 80C is allowed for contribution made by X to statutory provident fund
and recognised provident fund during the previous year 2023-24.
2. Lumpsum payment from recognised provident fund is treated as non-taxable on the assumption
that X has rendered continuous service with this concern for a period of not less than 5 years.
Problem— 48 :
particu-
P Bhattacharjee(aged 58 years), a not ordinarily resident assessee, furnishes the following
larsof his salary InconE for the year 2023-24 .
(a) Basic salary for April to July, 2023 from Robson Ltd. for serving in that company in Delhi—
85,200 per rmnth.
(b) Basic salary for August, 2023 to March, 2024 for serving in the branch office of the company at
Anerica---æ I per rwnth.
(c) Dearness allowance—50% of basic salary throughout the year.