1. Site Map
  2. Contact Us

  Computation of Total Income



COMPUTATION OF TOTAL INCOME



Problem 1

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

Particulars

Amount

Amount

Amount

Income from house property




House 2: Self occupied [Sec. 23(2(a)] (Note 2)




Net Annual Value (NAV)


Nil


Less : Deduction u/s 24(b) Interest on loan


6000

(-) 6000

Profits and gains of business or profession



64000

Income from other sources




Rent received


28800


Less : Expenditure




Lease rent (Note 1)

12000



Salary of Durban

2400



Interest on loan

2400

16800

12000

Gross Total Income

70000

Notes

  • Since first house is taken on lease for a period less than 12 years, hence not taxable u/s 22.
  • Since second house is transferred to wife without adequate consideration, hence assessee shall be deemed as owner of such house u/s 27.

 

Problem 2

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

Particulars

Details

Amount

Profits and gains of business or profession



Income from letting cycle

40000


Salary received from firm (Note 1)

36000

76000

Capital gains (Note 2)


Nil

Income from other sources



Interest on fixed deposit with company

18000


Dividend received [Exempt u/s 10(34)]

Nil

18000

Gross Total Income


94000

Less : Deduction under chapter VIA (since Fixed deposit has not been made with the scheduled bank hence no deduction u/s 80C)


Nil

Total Income

94000

Notes

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

Computation of agricultural income

Particulars

Details

Amount

Lease rent

48000


Share of agricultural produce (being rent received in kind)

30000

78000

Less : Expenditure



Payment of Government tax

6000


Expenses on power, irrigation, cess and farm labour

10000


Purchase of seeds

1000


Tractor hire charges

2500

19500

Agricultural income


58500

Income on sale of agricultural land is not treated as income from agricultural business.

 

Problem 3

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

Particulars

Details

Details

Amount

Amount

Income from house property





Gross Annual Value (being rent received)



62000


Less : Municipal tax



2000


Net Annual Value



60000


Less : Deduction u/s





24(a) Standard Deduction (30% of NAV)


18000



24(b) Interest on loan


30000

48000

12000

Profits and gains of business or profession





Net profit as per books of accounts



373700


Add : Expenditure debited but not allowed





Donation to Gujarat Earthquake Relief Fund


15000



Municipal tax paid for house property


2000



Repairs, maintenance etc for car to the extent of personal use


3300



Interest on loan for construction of house property


30000



Depreciation (treated separately)


30500



Salary paid in cash in excess of Rs.20000


30000



Contribution to recognized provident fund (unpaid)


5000



Printing and stationery (being not related to previous year)


3000

118800





492500


Less : Expenditure allowed but not debited in Profit and Loss Account





Depreciation on (Working) -





- Car

10301




- Computer

45000




- Typewriter

2250




- Furniture

2500

60051



Less : Income not taxable but credited in Profit and Loss Account





Dividend except covered u/s 2(22)(e)


7000



Income from UTI


6500



Less : Income taxable under other head but credited in P/L A/c





Profit on sale of shares


20800



Dividend u/s 2(22)(e)


3500



Rent received from flat


62000



Honorarium received for evaluation work


4600

164451

328049

Capital gains





Short term capital gains on sale of shares #




20800

Income from other sources





Dividend u/s 2(22)(e)



3500


Honorarium received from various institution for evaluation of answer papers



4600

8100

Gross Total Income




368949

Less : Deduction u/s





80C: ELSS



80000


80D: As medical insurance premium paid in cash



Nil


80G: Donation -





- CS Benevolent Fund (50% of donation)



500


- Gujarat Earthquake Relief Fund



15000

95500

Total Income (Rounded off u/s 288A)

273450

Working: Calculation of depreciation u/s 32

Particulars

Car

Computer

Typewriter

Furniture

Rate of depreciation

15%

60%

15%

10%

W.D.V. as on 1-4-2010

85840

Nil

15000

25000

Add : Purchased during the year

Nil

150000

Nil

Nil


85840

150000

15000

25000

Less : Sale during the year

Nil

Nil

Nil

Nil

W.D.V. on 31-3-2011

85840

150000

15000

25000

Depreciation

12876

45000 1

2250

2500

Less : Asset used for personal purpose

2575

-

-

-

Depreciation u/s 32

10301

45000

2250

2500

# Assuming such transfer is subject to securities transaction tax.

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

Computation of tax liability

Particulars

STCG covered u/s 111A

Other income

Total

Taxable income

20800

252650

273450

Tax rate

15%

Slab


Tax liability before edcuation cess

3120

1265

4385

Add : Education cess @ 3%

132

Tax and Cess payable (rounded off)

4520

 

Problem 4

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

Particulars

Details

Details

Amount

Amount

Salaries





Basic



16000


Bonus



2000


Salary in lieu of leave



12000


Allowances





House Rent Allowance (As she resides in her own house)


6800



Entertainment allowance


3000

9800


Perquisites





Free gas & electricity


6000



Domestic servant


12800



Free education facility

12000




Less : Exempted up to Rs.1000 p.m. per child

12000

Nil



Free lunch in office


Nil



Cook's salary


12000

30800

70600

Income from house property





House I: Let out [Sec. 23(1)]





Gross Annual Value (Working)


12000



Less : Municipal tax paid


2100



Net Annual Value (NAV)


9900



Less : Deduction u/s





24(a) Standard Deduction (30% of NAV)

2970




24(b) Interest on loan

Nil

2970

6930


House II: Self occupied [Sec. 23(2)(a)]





Net Annual Value


Nil



Less : Deduction u/s 24(b) Interest on loan


Nil

Nil

6930

Income from other sources




26000

Gross Total Income




103530

Less : Deduction u/s 80C




28500

Total Income

75030

Working: Computation of Gross Annual Value

Particulars

Notes

Amount

RER (Fair rent)

Rs.2000 * 9 (property was acquired on 1/7/2010 no matter when it was constructed)

18000

ARR

Rs.2000 * 6

12000

Higher of above


18000

Gross Annual Value

ARR is less than RER due to vacancy period, otherwise ARR would have been Rs.18000 (being Rs.2000 * 9)

12000

 

Problem 5

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

Particulars

Workings

Details

Details

Amount

Salaries





Salaries from law college




27000

Income from house property





Gross Annual Value

Rent received


15000


Less : Municipal tax



Nil


Net Annual Value



15000


Less : Deduction u/s 24(a)

30% of NAV


4500

10500

Profits & gains of business or profession





Income





Legal fees


145000



Special commission fee


5500

150500


Less : Expenses allowed





Subscription and membership


4500



Rent of office

of Rs.47500

23750



Car expenses


14000



Office expenses


8500



Electricity charges

of Rs.4000

2000



Depreciation





- on car

15% of Rs.220000

33000



- on books

(Rs.2000 * 100%) + (Rs.5500 * 100% * )

4750

90500

60000

Capital gains





Sale proceeds of residential property



290707


Less : Indexed cost of acquisition

Rs.50000 * 711/125


284400

6307

Income from other sources





Interest on bank deposits



3500


Dividend from co-operative society



1000


Dividend from UTI

Exempt u/s 10(35)


Nil


Examination remuneration



1480

5980

Gross Total Income

109787

Less : Deduction u/s



80C (LIC Premium)

6000


80G (50% of Donation to approved institution)

1000


80GG (Rent paid being minimum of the following)



- Statutory amount 24000



- 25% of Adjusted GTI [Rs.109787 - Rs.6307 (LTCG) Rs.6000 Rs.1000]         24120



- Rent paid for residence 10% of Adj. GTI [Rs.23750 - 9648]                      14102

14102

21102

Total Income (Rounded off u/s 288A)

88680

Notes

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

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

 

Problem 6

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

Particulars

Details

Details

Amount

Amount

Salaries





Basic



86000


Bonus



10200


Allowances





Entertainment allowance


8000



Education allowance (no deduction for grand children)


4000

12000


Perquisites





Income tax penalty


2000



Medical expenses reimbursed

2000




Less : Exempted (up to Rs.15000)

2000

Nil



Leave travel concession [Exempt u/s 10(5)]


Nil



Free residential telephone


Nil



Free refreshment


Nil



Payment of electricity bill by employer


1060



Reimbursement of gas bill


1000



Professional tax paid by employer


300

4360


Gross salary



112560


Less : Deduction u/s





16(iii) Professional tax being paid by -





- Employer


300



- Mrs. X


150

450

112110

Income from house property





House I: Let out [Sec. 23(1)]





Gross Annual Value (Working)


43000



Less : Municipal tax paid


4800



Net Annual Value (NAV)


38200



Less : Deduction u/s





24(a) Standard Deduction (30% of NAV)

11460




24(b) Interest on loan

4000

15460

22740


House II: Self occupied [Sec. 23(2)(a)]





Net Annual Value


Nil



Less : Deduction u/s 24(b) Interest on loan


16000

(-) 16000

6740

Income from other sources





Agricultural income [Exempted u/s 10(1)]



Nil


Dividend [Exempted u/s 10(34)]



Nil

Nil

Gross Total Income




118850

Less : Deduction u/s





80C (Investment in PPF and Repayment of loan to LIC)



31000


80G (Donation to PM National Relief Fund)



2000

33000

Total Income

85850

Tax on above

Nil

Working: Computation of Gross Annual Value

Particulars

Notes

Amount

Municipal Value


43000

Standard Rent


50000

RER


43000

ARR Unrealised rent

Rs.46000 Rs.20000

26000

Gross Annual Value

Higher of above

43000

Contribution to unrecognised provident fund is not eligible for deduction.

 

Problem 7

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

Particulars

Details

Details

Amount

Amount

Amount

Salaries






Basic (Note 1)




54450


Profit in lieu of salary






Amount received from Keyman insurance policy




6000


Allowances






Leave Travel Allowance (assume fixed in nature)



3600



House Rent Allowance


4500




Less : Exempted u/s 10(13A) being lower of -






- Actual allowance

4500





- 40% of salary (40% of Rs.54450)

21780





- Rent paid over 10% of salary [Rs(4500 5445)]

Nil

Nil

4500

8100


Employer's contribution to provident fund


4950




Less : Exempted (12% of Rs.54450)


6534

Nil



Interest on PF (Exempted as below 9.5%)



Nil

Nil

68550

Capital gains






Short term capital gain on 2 nd Bonus share (Note 2)





2200000

Income from other sources






Dividend [Exempted u/s 10(34)]





Nil

Gross Total Income





2268550

Less : Deduction u/s






80C: Contribution to PPF and PF




8950


80GGA: Contribution to National Laboratory




5000

13950

Total Income

2254600

Notes

1.Calculation of basic salary

Net basic received

Rs.48000

Add : Own contribution towards provident fund

Rs.4950

Add : Tax deducted at source

Rs.1500

Basic salary

Rs.54450

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

Computation of tax liability

Particulars

STCG covered u/s 111A

Other income

Total

Income

2200000

54600

2254600

Less : Maximum exemption limit

105400

54600

100000

Balance income

2094600

Nil

2154600

Tax rate

15%

Slab


Tax liability before cess

314190

Nil

314190

Add : Education cess @ 3%

9426

Tax liability (Rounded off u/s 288B)

323620

 

Problem 8

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

Particulars

Working

Details

Amount

Amount

Basic

50000 * 12



600000

Commission

150000000 * 0.1%



150000

Bonus

50000 * 2



100000

Allowances





Dearness allowance

20000 * 12


240000


Entertainment allowances



30000


Children education allowances


15000



Less : Exempted (Note 1)

(100 + 300) * 2 * 12

9600

5400

275400

Perquisites u/s 17(2)





Rent free accommodation (Note 2)

Lower of 15% of salary or 70000



70000

Employer's contribution to RPF


300000



Less : Exempted (Note 2)

12% of salary

118800

181200


Interest on RPF

Being not in excess of 9.5%


Nil

181200

Gross Salary




1376600

Less : Deduction u/s





16(ii) Entertainment allowances

As a non-Govt. employee



Nil

Taxable Salary/Gross Total Income




1376600

Less : Deductions





U/s 80C

RPF contribution & LIC premium

315000



U/s 80CCC (LIC Pension Fund)


10000




* Maximum limit

325000

100000 *


U/s 80D (Mediclaim)



10000


U/s 80G (Donation)

Note 3


63330

173330

Total Income

1203270

Tax on above including education cess (being senior citizen)

213190

Notes

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

2. Salary for the purpose of -

Particulars

RFA

RPF

Basic salary

600000

600000

Dearness allowance

240000

240000

Commission

150000

150000

Bonus

100000


Entertainment allowance

30000


Children education allowances

5400


Total

1125400

990000

3. Calculation of deduction u/s 80G

Limit of donation

=

10% of adjusted GTI


=

10% of (Rs.1376600 Rs.100000 Rs.10000) = Rs.126660

Eligible donation

=

Rs.126660

Deduction u/s 80G

=

50% of above (i.e. Rs.63330)