SET B

Roll No. R129216092

SAP ID 500055666
UNIVERSITY OF PETROLEUM AND ENERGY STUDIES
End Semester Examination, July 2020
Open Book – Through Blackboard Learning Management System

Course:Corporate Tax Planning (LLBL 485) Semester: VIII

Programme:Integrated B.Com. (LLB) Taxation Laws

Time: 03 hrs. Max. Marks: 100

Instructions:
As this examination is in open-book format, the students are expected to demonstrate a very high degree of Academic Integrity
and not copy contents from resources referred. Instructors would look for understanding of the concept by the students and any
similarity found from resources online/ offline shall be penalized in terms of deduction of marks andeven cancellation of paper in
requisite cases. The online examination committee of the School would also look for similarity of two answer scripts and if
answer scripts of two or more students are found similar, both the answer scripts shall be treated as copied and lead to
cancellation of the paper.In view of the aforesaid points, the students are warned that they should desist from using any unfair means.

All Questions are Compulsory

Answer each question in not more than 500 words

S. No. M
a
r CO
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1 Fixed monetary payments for a specific purpose is known as allowance whereas any casual
emolument, free or profit attached to an office or position, in additional to salaries or
wages is called as perquisites. One such perquisite if Rent Free House/ Accommodation. 2
CO2
0
In light of the above statement discuss how the value of Rent Free House is calculated under
the head Salary?
Ans. Value of RFA is determined in the following way.
A. When the accommodation is owned by the employer
i. When accommodation is provided by the government to its employees
a. Unfurnished house : License  Fee determined by the government has reduced by the
rent actually paid by the employee
b. Furnished house: The value calculated will be increased by- 10% p.a. of the cost of
furniture if owned by employer or actual hire charges table in case the furniture is
taken on hire. Any charges recovered from the employee shall be deducted.

ii. For other employees

a. Unfurnished accommodation: In cities having a population-
 SET B

1. exceeding 25 lakh as per 2001 census: 15% of salary

 2. exceeding 10 lacs but not exceeding 25 lakhs: 10% of salary 
3. Not exceeding 10 lacs population: 7.5% of salary 
Any charges recovered from the employee shall be deducted.
b. Furnished accommodation: The value calculated will be increased by- 10% p.a.Of
the cost of furniture if owned by employer or actual hire charges payable in case the
furniture is taken on hire. Any charges recovered from the employee shall be
deducted.

B. Such accommodation is taken on lease or rent by the employer

a. Unfurnished Accommodation: Lower of-
i. Actual rent paid by the employer; or
ii. 15% of salary;
Any charges recovered from the employee shall be deducted.
b. Furnished accommodation: Value calculated above will be increased by- 10% p.a. of
the cost of furniture if owned by the employer or Actual hire charges payable in case
the furniture is taken on hire. Any charges recovered from the employee shall be
deducted.
C. Accommodation on concessional rent
Value of unfurnished/furnished house
Less: amount paid or payable by employee
= value of concessional rent

# Salary for this purpose = basic salary + DA(if for retirement) + bonus + commisiion
on sales + fess + taxable allowances

2 Tax planning should be an integral part of one’s finances. It’s a loss if one doesn’t make
use of the available deductions and exemptions to save on taxes. Paying taxes is a way of
contributing to the nation’s development, but when the government provides with options to
save taxes, it is always wise to do so. The Income Tax Act, 1961, provides taxpayers with
several options to reduce their tax payable. Various sections offer tax deductions, out of
which Section 80C is the most popular. 2
CO2
0
In light of this statement explain the deduction under section:-
(a) 80 C
Assesses
(b) 80 G

Ans. (a) 80 C
Assesses entitled to deduction under section 80C are
 SET B

i. Hindu undivided family

ii. An individual
Quantum of deduction: up to Rs 1,50,000
Eligible payments and deposits
1. Employees contribution to Provident Fund (PF) & Voluntary Provident Fund
(VPF):
2. Public Provident Fund (PPF):
3. Life Insurance Premiums:
4. Equity Linked Savings Scheme (ELSS):
5. Home Loan Principal Repayment:
6. Stamp Duty and Registration Charges for a home:
7. Sukanya Samriddhi Account :
8. National Savings Certificate (NSC) (VIII Issue): 
9. Infrastructure Bonds:
10. Pension Funds – Section 80CCC:
11. 5-Yr bank fixed deposits (FDs):
12. Senior Citizen Savings Scheme 2004 (SCSS):
13. Amount Contributed (for a fixed period of not less than 3 years) by a Central
Government employee to his NPS (Tier –II) account (Applicable from the
Assessment Year 2020-21):
14. 5-Yr post office time deposit (POTD) scheme:
15. NABARD rural bonds:
16. . Unit linked Insurance Plan 
17. Employees contribution Superannuation fund
18. Subscription  to  equity shares  or  debentures forming  part of any eligible issue of
capital made by a public company, which is approved by the Board or by any public
finance institution
19. Tuition fees, whether at the time of admission or thereafter, paid to any university,
college, school or other educational institution situated in India, for the purpose of
full-time education of any two children of the employee.
20. Interest due on National Savings Certificate (NSC) (VIII Issue): 
21. Contribution to PPF in the name of any member of a family
22. Subscription to notified securities of the central government
23. Section 80C(3) & 80C(3A) states that in case of Insurance Policy other than contract
for a deferred annuity the amount of any premium or other payment made is
restricted to:
Policy issued before 1st April 2012: 20% of the actual capital sum assured
Policy issued on or after 1st April 2012: 10% of the actual capital sum assured
Policy issued on or after 1st April 2013 * – In cases of
persons with disability or person with severe disability as per Sec 80 U or suffering
from disease or ailment as specified in Sec 80DDB: 15% of the actual capital sum
assured.
 SET B

(b) 80 G
Deduction of the amount contributed/ donated from Gross Total Income of the
assessee for the previous year depends on the kind of funds/ organizations where
such amount is contributed/ donated. Deduction is available as a certain percentage
of contributions/ donations made. For the purpose of calculation of the amount that
is available as a deduction from Gross Total Income, we can classify the deductions
available as:

1. Deduction without any limit.

Contributions/ Donations to certain Funds as set up and notified by the Government

are eligible for 100% or 50% deduction from Gross Total Income of the assessee.
I. Where 100% allowed:
 National Defence Fund set up by the Central Government
 Prime Minister’s National Relief Fund
 Prime Minister’s Armenia Earthquake Relief Fund
 Africa (Public Contribution – India) Fund
 National Children’s Fund
 National Foundation for Communal Harmony
 Approved University or Educational Institution of National Eminence
 Chief Minister’s Earthquake Relief Fund, Maharashtra
 Clean Ganga Fund
 Swachh Bharat Kosh
 National Illness Assistance Fund

II. Where 50% is allowed:

 Rajiv Gandhi Foundation
 Indira Gandhi Memorial Fund
 Prime Minister’s Drought Relief Fund
 Jawaharlal Nehru Memorial Fund

2. Deduction subject to limit.

Contribution/ donation made to any other institution or fund notified (other than
those mentioned in the table above) under section 80G is also eligible as deduction
from Gross Total Income. However, the deduction in respect of such donations/
contributions is restricted to 50% or 100% of the Net Qualifying Amount.
 Where 100% of the QA is allowed
a) Donation to Government or any approved local authority, institution or
association
b) Donation to be utilized for the purpose of promoting family planning.
 Where 50% of QA is allowed
 SET B

a) Donation to Government or any local authority for the purpose of utilization

for any charitable purpose other than promoting family planning
b) Any authority constituted in India for dealing with and satisfying the needs
for housing accommodation or for the purpose of planning/development
of  towns, villages, etc.
c) Any notified temple, mosque, gurdwara, church or other places for the
purpose of renovation or repairs

Computation of Qualifying Amount

Gross Total income

Less: Long term Capital Gain
Less: Short term Capital gain on sale of shares u/s 111A (taxable @10%)
Less: Deductions u/s 80CCC to 80U (excluding 80G)
Qualifying Amount

Therefore, the amount of deduction available under section 80G having constraint of the
limit shall be:

10% of QA or actual donation (Whichever is less)

Deduction = 50% or 100%  of QA (as the case may be)*

Total donations u/s 80G

3 Payments in cash made by the employer to his employees monthly, other than salary, a
fixed sum of money paid regularly in addition to salary for the purpose of meeting some
particular requirement connected with the services rendered by an employee.

In light of this statement discuss briefly the difference between the two and write anote on: 2
CO2
0
Write notes on:-
(a) Dearness Allowance

(b) Recognised Provident Fund

Ans. Difference b/w Payments in cash made by the employer to his employees monthly, other
than salary,and a fixed sum of money paid regularly in addition to salary for the purpose of
meeting some particular requirement connected with the services rendered by an employee
Payments in cash made by the employer to a fixed sum of money paid regularly in
his employees monthly, other than salary, addition to salary for the purpose of
meeting some particular requirement
connected with the services rendered by an
employee
 SET B

These are known as allowance These are known as perquisites

It is fixed or flat amount given to the
employees.
They can be fully taxable, partially taxable
or fully exempted.
The amount of allowances paid forms part
of pay package of the employee.As a
general rule, all allowances are to be
included in the total income unless
specifically exempted
Example: House Rent Allowance,Children
Education Allowance,Hostel Expenditure
Allowance
Allowance are provided only in cash
whereas
.
It is a facility or benefit given to the
employees.
Perquisites are fully taxable or taxable in
case of specified employees.
Perquisites are additional benefits in
addition to the normal salary received by an
employee. Perquisite may or may not form
part of the pay package of the employee
Example: Education Facilities,Rent free
furnished accommodation
Perquisites can be either provided in cash
or in kind

(a) Dearness Allowance

(b) Dearness allowance is a cost of living adjustment allowance paid to government
employees, public sector employees and pensioners and is calculated as a percentage
of basic salary to mitigate the impact of inflation. Dearness Allowance can be
basically understood as a component of salary which is some fixed percentage of the
basic salary, aimed at hedging the impact of inflation.
DA or dearness allowance is calculated as a specific percentage of the basic salary
which is then added to the basic salary along with other components like HRA
(House Rent Allowance) to make up the total salary of an employee of the
government sector.
For Central Government employees:
Dearness Allowance % = ((Average of AICPI (Base Year 2001=100) for the past 12
months -115.76)/115.76)*100
For Central public sector employees:
Dearness Allowance % = ((Average of AICPI (Base Year 2001=100) for the past 3
months -126.33)/126.33)*100
Where, AICPI stands for All-India Consumer Price Index.
As per the latest updates, DA is fully taxable for salaried employees. If the employee
has been provided with an unfurnished rent-free accommodation, it becomes that
part of the salary up to which it forms the retirement benefit salary of the employee,
provided that all other pre-conditions are met.

(c) Recognised Provident Fund

As per Section 2(38) of Income Tax Act, 1961, unless the context otherwise
requires, the term “recognised provident fund” means a provident fund which has
been and continues to be recognised by the Principal Chief Commissioner or Chief
Commissioner or Principal Commissioner or Commissioner in accordance with the
rules contained in Part A of the Fourth Schedule, and includes a provident fund
established under a scheme framed under the Employees’ Provident Funds Act, 1952
(19 of 1952).
A recognised Employees’ Provident Fund is a scheme approved by an income tax
commissioner. It applies to organisations or factories with 20 or more employees.
The employer’s contribution to a recognised EPF to the extent of 12% of the salary
 SET B

(basic salary + dearness allowance) is exempt from tax. The remaining contribution
is added to the employee’s income. 3. An employee can claim a deduction of up to
Rs 1.5 lakh under Section 80C of the Income Tax Act, 1961, for his own
contribution to the EPF. Up to 9.5% of the interest credited to the recognised EPF is
exempt from tax. The rest is added to the employee’s income.
All RPF schemes must be approved by The Commissioner of Income Tax. Here the
company can either opt for government approved scheme or the employer and
employees can together start a PF scheme by forming a Trust. The Trust so created
shall invest funds in specified manner. The income of the trust shall also be exempt
from income taxes.

4 Mr. Brij received the following incomes during the Previous Year 2018-19:

Rs.
(i) Interest on fixed deposit with Punjab National Bank 5,000
(ii) Royalty on stone mine 17,000
(iii) Dividend on shares of Arvinda Mills Ltd. 4,000
(iv) Prize of U.P. State Lottery (Gross) 20,000
(v) Horse race income (Gross) 10,000
(vi) Agricultural income in Myanmar 13,000
(vii) Interest on Post-office saving bank 2,700 2 CO3,
(viii) Salary from a trader for part-time service 12,000 0 CO4

Considering the following points, find out his income from other sources for the
Assessment Year 2019-20:

(a) Bank Commission Rs.50 for dividend collection.

(b) He has purchased Lottery Tickets Rs.4,800 during the Previous Year.
(c) Rs.1,000 spent to keep account and collection of royalty.
(d) Tax deducted at source @ 30% in respect of lottery prize.

Ans. Computation of income from other sources for the assessment year 2019-20
Particulars Rs Rs
Interest on fixed deposit with Punjab National Bank 5000
Royalty on stone mine 17000
(-) expense on royalty (1000) 16000
Dividend on share of Arvinda Mills Ltd. nil
Prize of U.P. State Lottery (Gross) 20000
Horse race income (Gross) 10000
Agricultural income in Myanmar 13000
Interest on Post-office saving bank (exempt up to Rs Nil
3500)
 SET B

64000
Notes:
1. Bank commission will not be deducted because the dividend received is from a
Indian company and it is exempted. So any expenses related to it will not be
deducted from this section
2. There is no deduction of purchase of lottery
3. The gross value of lottery in question is given so we will not gross up the value.
5 From the following particulars of Miss MinalBhatnagar calculate her total income and tax
liability for the Assessment Year 2019-20:

Rs.
(i) Net salary 6,68,000
(ii) Business income 1,83,000
(iii) Royalty on CBSE Books 66,000
(iv) Rent from house property 36,000
(v) Dividend from Indian company 28,500
(vi) Bank interest on time deposit 16,600
(vii) Income from minor son 15,500 2 CO3,
(viii) Long term capital gain 28,000 0 CO4
(ix) Contribution to P.P.F. 40,000
(x) Life Insurance Premium paid 26,000
(xi) Medical Insurance Premia paid by cheque 32,000
(xii) Donation to National Defence Fund by cheque 10,000

Ans.

Computation of total income for the AY 2019-29

Particulars Rs Rs
 SET B

Income from salary

Net salary 668000
Income from house property
Rent(A.V.) 36000
Less: 30% of AV (10800) 25200
Income from business 183000 183000
Income from capital gains
LTCG 28000
Income from other sources
i. Royalty on books 66000
ii. Dividend from Indian company Exempt
iii. Bank interest 16600
iv. Deemed income: income of minor son
(15500-1500) 14000 96600

Gross total income 1000800

Less: deductions
Deductions under section 80C
i. Contribution to P.P.F. 40000
ii. Life Insurance Premium paid 24000 66000
Deductions under section 80D medical insurance
(max deduction allowed) 25000
Deduction u/s 80G donation to NDF 10000
(ded. Allowed 100%) 101000
Total income 899800

Computation of tax liability for the AY 2019-20

Particulars Rs Rs
Tax on LTCG Rs.28000 @20% 5600
 SET B

Tax on other income Rs 871800

On first Rs 250000 Nil
Next on Rs 250000 @ 5% 12500
On balance Rs 371800 @ 20% 74360 86860
Total tax liability 92460
Add:
Surcharge Nil
Health and education cess @ 4% of 92460 3698
Gross taxable liability 96158

I, SONAL AGARWAL understand that submitting work that isn’t my own may
result in failure in this paper and I may also be subject to Disciplinary
Proceedings as per the Academic Integrity policy of the University.