Taxation management

BBA (505)
ASSIGNMENT
Summer 2016-2017

Saurabh Bhalla(BBA 2)
1405009510
Q1) write short notes on
a) Assessee-in-default
b) Total income and gross total income
c) Rules for determining residential status of an
HUF
Ans) a) assessee-in-default :
Any individual who fails to carry out his or her legal duties is
termed asssessee555-in-default. For example, when an
employer pays salary to his employees or when one pays
interest, it is mandatory to subtract the amount of tax and
submit it to the government. In case the person fails to
submit the tax to the government, he become assessee-in-
default.
b) Gross total income and total income :
Under section 14, the term gross total income means
aggregate of income computed under the following five
heads:
I. Income under salaries
II. Income under house property
III. Income under profit and gains of business or
profession.
IV. Income under capital gain
V. Income under other sources.
After aggregating income under various heads, losses are
adjusted and the resultant figure is called gross total income.
From GTI deductions u/s80 is allowed. The resultant figure is
called total income on which rates of taxes are applied.
c)Rules for determining residential status of HUF :
Basic conditions : The control and management of the
affairs of HUF must be wholly or partly in India. Control and
management is said to be situated in a place where directing
power is situated and decision making functions are
performed. If HUF satisfies the basic condition it is ‘resident
in india’ otherwise treated as non-resident in India.
Additional conditions: Once an HUF satisfies basic
condition it becomes resident. To decide whether it is
ordinary resident in India one has to apply the additional
conditions concerned with karta’s stay in India.
 a) Karta has been resident in India in at least two out
of ten previous years immediately preceding relevant
previous year.
b) Karta has been present in India for a period of 730
days in seven previous years immediately proceeding the
previous year.
If Karta of the HUF satisfies both the additional conditions,
HUF is ‘ordinarily resident’ in India; otherwise it is ‘not
ordinarily resident’ in India.
Q2 ) _Ms. Trista, a resident individual, owns a house
property situated in Bangalore. The particulars
of the house are as under: Rs.
Municipal Value 1,20,000
Fair Rent 1,60,000
Standard Rent 1,40,000
Actual Rent (per 12,000
month)
Period of Vacancy NIL
Municipal Taxes for 20 % of Municipal
the year Value
Municipal tax paid 24,000
during the year

Discuss the advantages of VAT over sales tax.

Ans)
Municipal value 1,20,000
Less : municipal taxes 24000
Net annual value : 96,000
Actual rent : (12000x12) 1,44000
Net annual value: 2,40,000
Less : Standard rent 1,40,000
Fair rent: 1,60,000
Income from house property: 60,000

Advantages of VAT over sales tax :

 A VAT is a multi point tax with set-off for tax paid
on purchases, it prevents repeated taxation of the same
product.
 Simple and transparent: In the sales tax system, he
amount of tax levied on the goods at all stages is not
known. However, in VAT, the amount of tax would be
known at each and every stage of goods sale or
purchase.
 VAT has the flexibility to generate large and
buoyant revenues as it levies tax on value additions.
 Zero rating of tax on exports is possible in case of
VAT.
  Fair and equitable : VAT introduces uniform tax
rates across the state so the fair advantage cannot be
taken while levying tax.
 Procedure of simplification: Procedures related to
filing of returns , payment of tax, furnishing declaration
and assessment are simplified under the VAT system so
as to minimize any interface between the tax payer and
the tax collector.
 Ability to provide same revenue to the government
with lower rates of taxes
 Tax does not become a cost of doing business.

Q3 ) “Section 48 of the income tax act, 1961 discusses

the methods of computation of short term and long
term capital gains”. Enumerate with examples.
Ans) The method of computation of short-term and long-
term gain is as follows :
Computation of short term capital gain :
1) Calculate full value of consideration
2) Deduct the following
a) Expenditure incurred wholly and exclusively
in conection with such transfer
b) Cost of acquisition
c) Cost of improvement
3) From the resulting sum direct the exemption
provided under sections 54, 55B, 54EC, 54G and 54GA.
 4) The balance amount is the short term capital gain.
Computation of long-term capital asset:
1) Calculate full value of consideration.
2) Deduct the following :
a) Expenditure incurred wholly and exclusively in
connection with such transfer
b) Indexed cost of acquisition.
c) Indexed cost of improvement.
3) From the resulting sum deduct the exemption
provided under sections 54, 54B, 54D, 54EC, 54G, 54GA.
4) The balance e amount is long-term capital gain.