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Mba 3 Tax

Mba 3 Tax

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Published by: kapil3518 on Jun 06, 2010
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10/31/2010

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Master of Business Administration- MBA Semester 3
MF0003 – Taxation Management - 2 Credits
(Book ID: B1037)Assignment Set- 1 (30 Marks
ANS.1 AGRICULTURAL INCOME SEC. 2(1A) 
Agricultural income is totally exempt from liability to income tax.However, agricultural income is factor in determining the tax on the non-agricultural income of an individual, Hindu undivided family, Association of  persons and Body of individuals whose total income exceeds Rs 5,000.
ITEMS THAT ARE INCLUDED IN AGRICULTURE INCOMEUNDER SEC 2(1A) ARE AS FOLLOWS:
1)(a) Any rent or revenue derived from land situated in India. When one person grants to another a right to use his land situated in India for agricultural purposes; the former receives from the latter rent or revenue in consideration of such user. Such rent or revenue is treatedas agricultural income.(b) used for agricultural purposes. It means cultivation of a field, tillingof the land, watering it, sowing of the seeds, planting and similaoperations on the land.2)(a) Income derived from such land by agricultural operations.(b) Income derived from such land by the performance of any processordinarily employed by a cultivator to render the produce raised by himfit to be taken to market. The process employed in curing of coffee, fluecuring of tobacco, ginning of cotton, etc, is such a process.(c) Income derived from such land by a sale by a cultivator or receiver of rent-in-kind the produce raised or received by him.3)Income from farm house. The income from a farm house is treated asagricultural income if the following conditions are satisfied.(a)It is situated on or in the immediate vicinity of the agricultural land
 
(b)The building is, by reason of his connection with the land, used asdwelling house or a store-house or an out-house by the cultivator or receiver of rent-in-kind(c)The land is either assessed to land revenue in India or is subject tolocal rate assessed and collected by the officers of the government,or alternatively(d)If the land is situated in ‘non-urbanarea, i.e, an area whichthough, is with in municipality or cantonment board jurisdiction,has a population of less than 10,000 or is beyond a notifieddistance (maximum 8 kilometer) from the local limits of any suchmunicipality or cantonment board.
EXAMPLES OF AGRICULTURAL INCOMES:
1)Income from growing flowers and creepers.2)Rent from agricultural land.3)Profit on sale of standing crops or produce after harvest by thecultivating owner or tenant of agricultural land.4)Income from leasing out agricultural land for grazing cattlerequired for agricultural purposes.5)Interest on capital received by a partner from his firm engagedin agricultural operations.6)Conversion of latex into smoked sheets.7)Rent from agricultural land received from sub-tenants by themortgagee in possession.8)Income from sale of mulberry leaves grown on agriculturalland.9)Compensation received from an insurance company fodamages caused by hailstorm or floods to the tea plantations.
TAX AVOIDANCE:
Tax avoidance can be defined as the art of dodging tax without breaking the law. Objective of tax avoidanceis minimizing the incidence of tax by adjusting the affairs in such amanner that although it is with in the four corners of the taxationlaws but the advantage is taken by finding out loopholes in thelaws. But where the main purpose is to defer, reduce or completelyavoid the tax payable under the law.
TAX EVASION:
In the tax evasion, facts are deliberatelymisrepresented and tax liability is understated by employing thefollowing means:
 
a)concealment of income b)inflation of expensesc)falsification of accountsd)violation of rulesthese devices are unethical. Evasion, once proved, not only attractsheavy penalties but may also lead to prosecution.
ANS.2 A.
Gratuity actual received = 3,25,000 RSMaximum limit = 3,50,000 RS He is covered under the gratuity act. For this calculation is asfollows:15/26*13000*29 = 2,17,500 RSTAXABLE GRATUITY= 3,25,000 – 2,17,500= 1,07,500
B.
a) If he is in receipt of gratuityTAXABLE COMMUTED PENSION= Commuted pension – 1/3Of commuted pension= 1,60,000 – 53,333.33= 1,06,666.67 RS b) If he not in receipt of gratuityTAXABLE COMMUTED PENSION= Commuted pension – 1/2Of commuted pension= 1,60,000 – 80,000= 80,000 RS
ANS.3 PERQUISITES:
The term perquisites means any benefit, attachedto an office or position in addition to salary or wages. It may be given incash or in kind. If it is given in kind it is measured in terms of money andadded to find out employee’s salary for tax purpose. The perquisites aretaxable under the head salary only if they are (a) allowed by an employer toan employee(b) allowed during the continuance of employment(c) directly dependent on service

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