Q.No. 1 Mrs. Narayani working as “Accountant” in Super India Ltd.

, Pune has given you the

following details of her emoluments for the F.Y.2019-20

Basic Salary Rs. 15,000 p.m.

D.A. – 40% of Basic Salary (Part of Retirement benefit)
HRA 10% of Basic Salary
City Compensatory Allowance 5% of Basic Salary
Children Educational allowance 2% of Basic Salary
Conveyance Allowance Rs 12000 P.A.
Mrs. Narayani has got one son studying in Vth standard. She stays in a rented flat by paying
monthly rent Rs. 3,000. She is provided with a car of 1200 CC for official and personal use.
The entire expenditure of the car is borne by the employer. A chauffeur/driver is also
provided with the car.

A medical expenditure of Rs 15,500 is reimbursed by the employer. Mrs. Narayani has

contributed Rs. 35,000 to the Recognised Provident Fund. An equal amount is contributed by
the employer also. Interest @ 15% has been credited to her R.P.F A/c. amounting to Rs.
13,500.

You are required to compute taxable income under head salary of Mrs. Narayani. For the
A.Y.2020-21.

Computation of Taxable income From salary of Mrs. Narayani

For the Assessment Year 2020-21

Particular Amt Total Amt

Basic Salary 1,80,000
D.A. (40% of Basic Salary) 72,000
HRA (10% of Basic Salary) 18,000
Less:- Exempted from tax (Note 1) 10,800 7,200
CCA (5% of Basic Salary) 9,000
Education Allowance (2% of Basic Salary) 3,600
Less – Exempted from tax (100*12) 1,200 2,400
Motor Car (Note 2) 32,400
Conveyance Allowance 12,000
Reimbursement of medical expenses 15,500
Employers Contribution to RPF 35,000
Less :- Exempted from Tax At 12% of Salary (2,52,000) 30,240 4,760
Interest Credited to R.P.F @ 15% 13,500
Less :- Exempted from Tax@ 9.5% 8,550 4,950
Gross Salary 3,40,210
Deduction U/s 16 :-
1. Standard Deduction 50,000
2. Professional Tax Nil 50,000
Taxable Income from Salary 2,90,210
Note 1
Least amount of the following is exempted from tax.
1.HRA Received 18,000
2. Rent Paid – 10% of Salary
(3000*12) – 10% of 2,52,000 10,800
Salary Component are Basic Salary and D.A
3.40% of Salary 1, 00,800
The least amount is 10,800

Note 2
Car is owned by the employer
Use for both official and private purpose
Expenses given by employer
C.C.of Car is 1200 cc
Hence Valuation is 1800*12 + Driver Salary 900*12

Q.No.2 Mr Akash is a General Manager of a Textile Company of Delhi has submitted the
following particulars of his Income for the Financial Year 2019-20
Basic Salary Rs. 2,10,000 (Annual)
D.A.Rs. 12000 p.m. (Rs. 5000 per month enters into retirement benefit)
Education Allowance for two children at Rs. 1300 p.m. per child and Hostel Allowance for
Elder son @ Rs. 1450 per month.
Commission on sales Rs. 20000
Entertainment Allowance Rs..800 p.m.
Travelling Allowance for his official tour Rs. 40000 (Actual expenditure on tours amounted
to Rs. 27000)
He was given cloths worth Rs. 2000 by his employer free of cost.
He resides in the Bungalow of the company its fair Rent is Rs.12000 per month, he pays Rs.
51000 p.a. as rent for the house.
watchman and cook have been provided by the company who were paid Rs. 1400 per month
each.
He has been provided with a motor car of 1.8 litre engine capacity power with driver for his
official as well as personal use, maintenance expenses for private use are born by Mr
Akshay. The company has contributed 10% of salary to national pension account and Rs.
35000 to his Recognised Provident Fund.
Interest credited to RPF Account was @ 13 % per annum amounted to Rs. 16250.
Professional Tax paid Rs. 2500.
Compute his income from salary for the Assessment Year 2020-21.

Particular Amount Total

Amount
Basic Salary 2,10,000
D.A. (12000 * 12) 1,44,000
Education Allowance (1300 * 2 * 12) 31,200
Less : Exempted From Tax (100 * 2 * 12) 2,400 28,800
Hostel Allowance (1450 * 1 * 12) 17,400
Less : Exempted From Tax (300 * 1 * 12) 3,600 13,800
Commission on Sales 20,000
Entertainment Allowance (800 * 12) 9,600
Travelling Allowance for Official Tour 40,000
Less: Exempted Actual Expenditure 27,000 13,000

Cloth given at free of cost – perks (Gift in kind exempted upto

NIL
Rs. 5,000)
Value of accommodation Provided at concessional rent (Note 1) 53,280
Less : Rent Paid 51,000 2,280
Value of Facility of Cook (1400 * 12) 16,800
Value of Facility of Watchman (1400*12) 16,800
Motor Car (Note 2) (900+900) * 12 21,600
Employers Contribution to Pension Scheme -10% of Salary 27,000
(Note 3)
Employers Contribution to R.P.F 35,000
Less:- Exempted upto 12% of Salary 32,400 2600
Interest credited to R.P.F. at 13% 16,250
Less :- exempt at 9.5% 11,875 4,375
Gross salary 5,30,655
Less Deduction u/s 16 :
1. Standard Deduction 50,000
2. Professional Tax 2,500 52,500
Taxable income from Salary 4,78,155

Note 1:- Valuation of accommodation : Te accommodation is owned by the employer, the

population of Delhi is more than 25 lacs therefore the valuation is 15% of salary .
Salary is equals to basic pay + dearness allowance which is a part of retirement benefit +
bonus + commission + fees + all other taxable allowances.
In this particular problem we have to consider 2,10,000 + 60,000+ 20,000 + 28,800 + 13,800
+ 9,600 + 13,000 = 3,55,200
15% of Rs. 3,55,200 is equals to 53,280.

Note 2 :- Car is owned by the employer, Car is used partly for official and partly for private
purpose, Maintenance and running expenses for private use are borne by the employee and
the CC of Car exceeds 1600 CC therefore evaluation is 900 Rs. per month and driver is also
provided so we have to add 900 per month for his salary hence valuation of car is 1800 * 12.

Note 3 :- Employers contribution to NPS is firstly included in salary and employers as well
as employees contribution both to the extent of 10% of salary is allowed for deduction under
section 80CCD
For this salary we have to considered is Basic + Dearness allowance which is a part of
retirement benefit
So here in this particular problem 210000 + 60000 = to 270000
So 10% of 270000 amount is 27000

Note 4 : Contribution to RPF given 35000 out of which 12% of salary is exempted,
Salary component are Basic pay + Dearness allowance which is a part of retirement benefit +
commission percentage basis (in this particular problem commission is given on lump sum
basis so we are not considered commission)
So the salary component are Basic pay 210000 + Dearness allowance which is a part of
retirement benefit 60,000 = 270000 and 12% of 270000 = 32400

Q.No.3 Mr Rajesh is working as an Assistant Manager in Cipla Limited Pune, has submitted
the following data regarding his income for the financial year 2019-20.
He is drawing a basic salary of Rs. 15000 in the month January 2019. His date of increment
in the pay is 1st July every year and salary paid on 25th date of each particular month, he gets
increment of Rs. 2,000 every year in basic salary.
Dearness Allowance Rs.5000 p.m.
Contribution to RPF @ 14% of salary
City compensatory allowance Rs.100 p.m.
Tiffin allowance (Actual expenses Rs. 3700) Rs 6000 p.a.
HRA Rs. 1000 p.m
Travelling Allowance Rs.2000 (unspent amount Rs.. 200)
Assistant Allowance for performance of duties Rs. 3000 p.m. paid Rs. 2000 p.m. to assistant)
Professional Development Allowance Rs. 4000 p.m. (Actual expenses Rs. 20,000 for the
year).
He has been allotted equity shares of which fair market value was Rs. 62,000 under
employees stock option plan the company deducted Rs. 27,000 from his salary for these
shares.
The assesses two children are studying in the school run by the employer the cost of
education in similar institution per student is Rs. 1000 p.m.
The assessee is supplied with free gas water and electricity for which the employer pays Rs.
1,000 to an outside agency p.m.
Rent paid by the assessee for the house is Rs. 1650 p.m
Professional tax deducted from salary is Rs. 225 p.m.
Compute his income from salary for the assessment year 2020-21

Particular Amount Total

Amount
Basic Salary (15,000*3)(April 2019 to June 2019) + 1,98,000
(17,000*9)( July 2019 to March 2020)
D.A. (5000*12) 60,000
Employers Contribution to RPF 27,720
Less : Exempt at 12% of Salary 23,760 3,960
City Compensatory Allowance (100*12) 1,200
Tiffin Allowance (Fully Taxable) 6,000
HRA 12,000
Less : Exempted from tax 00,000 12,000
Travelling Allowance 2,000
Less Spent Amount 1,800 200
Assistant Allowance (3,000*12) 36,000
Less Exempted Actual expenses 24,000 12,000
Professional Development Allowance (4,000*12) 48,000
Less Exempted Actual Exp. 20,000 28,000
Value of equity shares allotted (62,000-27,000) Note 2 35,000
Cost of Children Education (Exempted upto Rs. 1,000 p.m.per
Nil
child)
Cost of free Gas, Water and Electricity (1,000*12) 12,000
Gross Salary 3,68,000
Less Deduction U/s 16
1. Standard Deduction 50,000
2. Professional Tax (225*12) 2,700 52,700
Taxable income From Salary 3,15,000

Note 1 : HRA Least of the following amount is exempted

1. HRA Received 12,000

2. Rent paid (1650*12) 19,800
-10% of salary(10% of 1,98,000) 19,800 00,000

3. 40% of Salary 79,200

The least amount is Zero. Hence there is no any exemption and HRA Received Rs. 12,000 is
fully taxable.

Note 2 : Allotment of specified security or sweat equity shares to the employee at free of cost
or at concessional rate is perks so the valuation is
Fair Market value on the date on which the option is exercised less amount paid by or
recovered from the assessee (62,000 – 27,000 = 35000)