Name: Dev Shah

Roll No.: KSPMCAA012

Subject: Direct Tax
Class: M. Com Part II Sem 3

Computation of Total Income

Computation of income is a systematic presentation of all gains, exemptions, rebates, reliefs,
deductions, and the computation of taxes in connection with the calculation of taxes. Although
there is no standard format for this, the following elements are generally considered in the
computation of income.
1. Personal information of the assessee (name, father’s name, address, contact details, etc.)
2. Bank account information
3. Income information
4. Information on the calculation of total taxes and taxes paid
Steps of computing Total Income:
1. Determine the Assessment Year
2. Determine the Previous Year
3. Determine the Legal Status of Person
4. Determine Residential Status of Person
5. Ascertaining whether Receipt is in nature of Income
6. Determine Place of Accrual of Income
7. Determine Scope of Total Income
8. Exclude Exempt Income
9. Classify Income under various Heads
10. Compute Total Income
Total Income is to be computed by adding up income from all sources and deducting from such
“gross total income”, claims under Ch. VIA, to arrive at the “Net Taxable Income”.
Name: Dev Shah
Roll No.: KSPMCAA012
Subject: Direct Tax
Class: M. Com Part II Sem 3

Question (Salaries +OS – 80C; Tax on Woman)

Mrs. Doriaswamy, Sr. V. P. Ltd. Is paid the following remuneration by her
employers during the F.Y. 2016-17.
(1) Salary 20,000 p.m. (Net after TDS).
(2) Dearness allowance 2,000 (p.m.)
(3) Conveyance allowance 5,500 p.m. (for journey between home and office)
(4) Entertainment allowance 1,500 p.m.
(5) Leave Travel allowance 2,500 p.a. against tickets (LTA claimed continuously in last 3
years)
(6) Children Education allowance 500 p.m. per child. She has three school going children.
(7) Medical allowance 4,000 p.a.
(8) Office Lunch expenses re-imbursed 300 p.m.
(9) House Rent allowance 1 ,200 p.m. She resides in Chennai and pays rent of 700 p.m.,
throughout the previous year.
(10) Tax deducted at source 3,000 p.m.
Besides the above she earns the following income on her investments: -
(1) Dividend 2,400 on 20,000 units of UTI.
(2) lnterest 4,500/- on Post Office Savings Bank.
(3) lnterest 9,000/- on FD with Dena Bank.
(4) lnterest @ 10% on Debentures of 50,000- of a listed company.
(5) lnterest 2,500 on Deposits of a Co: operative Society.
She has contributed during the previous year 60,000 to PPF and purchased NSC of
10,000. Compute her taxable income and tax payable for the Assessment year 2017-18.

Solution: -
Name of assesse: Mrs. Doriaswamy Status: R & OR INDIVIDUAL
Previous year: 2016-17 Assessment Year: 2017-18

Computation of Total Income Rs. Rs. Rs.

A Income From Salaries
Basic Salary [(20,000 + 3,000) x 12)] 2,76,000
Dearness allowance (2,000 x 12) 24,000
Conveyance Allowance (5,500 x 12) 66,000
Name: Dev Shah
Roll No.: KSPMCAA012
Subject: Direct Tax
Class: M. Com Part II Sem 3

Less: Exempt u/s 10(14) (800 x 12) 9,600 56,400

Entertainment Allowance (1,500 x 12) 18,000
Leave Travel Allowance 2,500
Children Education Allowance (500 x 12 x 3) 18,000
Less: Exempt u/s 10(14) (100 x 2 x 12) 2,400 15,600
Medical Allowance 4,000
Home Rent Allowance Received (1,200 x 12) 14,400
50% of Salary + DA = 1,50,000
Rent paid 700 x 12 = 8,400 above 10% of
Salary + DA = Nil Nil 14,400
Income from Salary 4,10,900
B Income From Other Sources
UTI Dividend [Exempt u/s 10(34)] Nil
Post Office Savings Bank Interest 4,500
Less: Exempt u/s 10(15) 4,500 -
Bank Fixed Deposit Interest 9,000
Interest on Company Debentures 5,000
Interest on Co-operative Society Deposits 2,500
Income From Other Sources 16,500
C Gross Total Interest [A+B] 4,27,400
D Less: Deduction under Ch.VIA
u/s 80C: PF + NSC 70,000
E Net Taxable Income 3,57,400
F Tax (Woman) [(10,740 – 5,000) + 115 + 57]
G Tax Payable 5,912

Question (Salaries + Business+ OS – 80C)

M who does not maintain books of account for the year ended 31-3-2017 requests you to
compute his total income and the tax payable thereon for the assessment year 2017-18
from the following:
(1) Basic salary 20,000 p.m.
CCA 1,000 p.m.
HRA 5,000 p.m.
(2) M resides in Chennai paying a rent of 6,000 p.m.
(3) M is paid an education allowance of 500 p.m. per child for all the three of his children.
Actual expenses (tuition fees only) amount to 15,000, 10,000 and 5,000 respectively.
(4) Employer's contribution to Staff Group insurance Scheme 5,440.
(5) He bought a heavy goods vehicle on 7-6-2015 and has been letting it on hire from the
same date. He declares as income of 75,000 from the same.
(6) interest from company deposits is 15,000 and bank interest is 5,000.
Name: Dev Shah
Roll No.: KSPMCAA012
Subject: Direct Tax
Class: M. Com Part II Sem 3

(7) interest is payable on bank loans availed for making company deposits as follows:
Purpose Date of Loan Amount Interest Rate
Company deposit 1-10-2015 1,00,000 9% p.a.
(8) M has invested 12,000 in notified equity linked saving scheme of UTI, 52,000 in
notified infrastructure sector bonds, 9,000 as Life insurance Premium on his own life
(sum assured 40,000) taken on 31-7-2015 and 1 5,000 towards N.S.C.
Solution: -
Name of assessee: Mr. M Status: R & OR INDIVIDUAL
Previous year: 2016-17 Assessment Year: 2017-18

Computation of Total Income Rs. Rs. Rs.

A Income From Salaries
(1) Basic Salary (20,000 x 12) 2,40,000
(2) CCA (1,000 x 12) 12,000
(3) HRA
Actual Amount received (5,000 x 12) 60,000
Less: Exempt – Minimum of following
(a) 50% Salary 1,20,000
(b) Rent paid – 10% of salary (74,000 – 48,000
24,000)
(c) Actual HRA Received 60,000 48,000 12,000
(4) Education Allowance (500 x 5 x 12) 18,000
Less: Exempt (100 x 2 x 12) 2,400 15,600
(5) Staff Group Insurance (Not a perquisite) Exempt
2,79,600
Less: Deduction Nil
Income from Salary 2,79,600
B Income from Business
Truck Hire 75,000
C Income from Other Sources
Company Deposits 15,000
Less: Interest paid (1,00,000 x 9% x 6/12) 4,500 10,500
Bank Interest 5,000
Income from Other Sources 15,500
D Gross Total Income [ A + B + C] 3,70,100
E Less: Deductions
U/s 80C:
(i) Tuition Fee (2 Children: 15,000 + 10,000) 25,000
(ii) Equity linked saving scheme 12,000
(iii) Infrastructure bonds 52,000
(iv) LIP (limited to 10% of sum assured) 4,000
(v) N.S.C. 15,000
1,08,000
U/s 80TTA: S/A Interest 5,000 1,13,000
Name: Dev Shah
Roll No.: KSPMCAA012
Subject: Direct Tax
Class: M. Com Part II Sem 3

F Net Taxable Income [ D – E] 2,57,100

G Total Tax Payable (710 – Rebate u/s 87A NIL
710)