Test Questions (not for evaluation)

Part A Class Quiz

Question 1 1 mark each

1. As per rules of a private limited company, the salary of an employee

becomes due on the last day of every month and the employee is paid the
salary on the first day of the next month. Accordingly, the salary for the
month of March becomes due on 31st of March and is paid to the employee
on 1st April. For a particular employee, the salary income to be included for
Assessment Year 2019-20 will comprise of:

(a) salaries from March 2018 to February 2019

(b) salaries from April 2019 to March 2020
(c) salaries from April 2018 to March 2019
(d) none of the above

2. True or False?
(a) Any salary, due to an employee from an employer, is chargeable to tax as
salary income whether such salary is paid or not during the previous year.
TRUE
(b) Excess tax deducted at source by the employer and already deposited
with the tax authorities, cannot be recovered by the employee unless
he/she files a return of income. TRUE

Question 2 2 marks each

Choose the correct option (s) by indicating option no.(s). More than one
option may be correct.

1. Salary received by a partner of a firm

(a) is treated as salary income qualifying for standard deduction
(b)is treated as income under the head "Profits and Gains from
Business or Profession"
 (c) is not treated as an income at all since this income is exempt under
section 10 (2A) being share of profits from a firm

2. Mrs. Sharmila, a woman executive-director of a public limited company,

who retired on 31 December, 2019, is entitled to provident fund and gratuity
on retirement. Such gratuity and pension income to be received by her:

(a) Cannot be treated as salary income since directors can never have
employer-employee relationship with a public limited company - such
gratuity and pension income will be taxed as income from other sources.

(b) Gratuity and Pension incomes of an Executive Director received after

retirement from the company, cannot be taxed as salaries since after
retirement, her employer-employee relationship with the company will
cease to exist and such gratuity and pension income will be taxed as
income from other sources.

(c) can be taxed as Income from Salaries provided her service agreement
or Articles of Association establishes employer-employee relationship
leading to salary income

(d) All incomes of a Woman Director (whether an executive director or a

non-executive director) received from the company even after retirement,
can only be taxed as salaries since a Director, by definition, is a specified
employee.

(e) None of the above (please explain correct position as per your
views ............................................................................................................
......................................................................................................................
....................................................................)

3. A capital receipt in the hands of an assessee-employee

(a) is taxed under the head 'Income from Other Sources' and not under
'Salaries' since income from salaries necessarily are revenue receipts
(b) is fully taxable in the hands of the employee unless such item of
income is specifically exempted under any section of Income-tax Act
(c) is taxable in the hands of the employee only when such item of
income is specifically taxed under any section of Income-tax Act
(d) is not taxable at all since Income-tax Act taxes only revenue receipts
(e) None of the above (specify reasons)
Question 3 2 marks each

Put tick ( ) against [ T or F ] to indicate whether the following statements

are TRUE or FALSE; no explanation required:

A. Commission received by an employee-director from his employer company

is treated as salary income. In case commission is received by a non-
executive director from a limited company and such director, as per his
contract with the company, only participates in board meetings and involves
himself with governance of the company, board meeting fees will be treated
as income from business/ profession or alternatively as Income from Other
Sources while such commission will be treated as salary income. FALSE
[T/F]

B. Mr. Sahay, an employee of V K Serology Research Labs Limited, foregoes

his salary for the month of April and May 2020 for helping fundamental
research on Covid-19 vaccination. For AY 2021-22, he will be taxed on
salary for 10 months. FALSE
[T/F]

C. Even if an employee pays correct amount of tax on his own as Advance Tax
on designated dates and gives declaration to the employer in support of this
payment, the employer must still effect deduction of tax at source from the
employee’s salary income. TRUE

[T/F]