FACULTY OF COMMERCE

2023 - 24
SEMESTER 2

SUBJECT: TAXATION -1

UNIT : 5 PERMANENT ACCOUNT NUMBER,TAX

EDUCTED AT SOURCE, ADVANCE TAX ,INCOME
TAX AUTHORITIES , EXEMPTED INCOMES

COMPILED BY :

CA DR. SNEHA MASTER PROF. MEGHAVI THAKER

STUDY MATERIAL FOR REFERENCE ONLY

 GLS UNIVERSITY

FACULTY OF COMMERCE
SEMESTER 2
SUBJECT : TAXATION -1
UNIT 5 : PERMANENT ACCOUNT NUMBER,TAX EDUCTED AT SOURCE,
ADVANCE TAX ,INCOME TAX AUTHORITIES , EXEMPTED INCOMES

SR. NO. TOPIC COVERED

1 Permanent Account Number [PAN]
2 Quoting of Aadhar Number
3 yme of Advance Payment of Tax [PAYE]
3 Tax Deducted Sources [TDS]
4 Income Tax Authorities
5 Exempted Incomes
6 Section A Theory Questions
7 Section B Multiple Choice Questions

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[1] PERMANENT ACCOUNT NUMBER (PAN)
It is a number which is allotted to the assessee for the purpose of identification.
The CBDT has introduced the scheme of allotment of Computerized 10 digit
Alphanumeric characters permanent account number in a laminated Plastic Card.
Therefore, everyone is required to apply for a fresh permanent account number even if
he had already been allotted an account number earlier.
The relevant provisions of Section 139A are as follows :
(1) If any person has taxable income and he has not been allotted any Permanent
Account Number, then he must apply in form No. 49A before 31st May of the
assessment year to the Assessing Officer for allotment of such number.
(2) A person whose income is not taxable, but is carrying on any business whose total
sales (turnover) or gross receipts are likely to exceed ₹ 5,00,000 in any accounting year
should also apply to the Assessing Officer for allotment of a Permanent Account Number
on or before the end of that accounting year.
(3) If he is required to furnish a return of income U/s 139 (4A), i. e. a charitable trust.
(4) An employer, who is required to furnish a return of fringe benefits.
(5) Any person who is entitled to receive any sum or income or amount, on which tax is
deductible in any financial year, shall apply for allotment of Permanent Account Number
before the end of such financial year.
(6) Any person (being a resident but not being an individual) who enters into a financial
transaction of an amount aggregating to ₹ 2,50,000 or more during a financial year.
(7) The Central Government has specified the following persons who shall have to apply
for allotment of Permanent Account Number :
(i) Exporters and importers
(ii) Seeking registration under the Central Excise / Service Tax /Sales Tax/ GST

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(8) The Income-tax officer may allot to any other person by whom tax is payable even
without an application.
Note : A person whose total income is not chargeable to tax or who is not required to
obtain PAN U/s 139A has to furnish a declaration in Form No. 15G or 15H to the payer of
income.
Where a Permanent Account Number has been allotted, the assessee would quote such
number in all his returns or correspondence with any income-tax authority and also in all
chalans for the payment of any sum due under this Act.
With effect from September 1, 2019 every' person who is required to furnish / quote /
intimate his PAN and who, has not been allotted a PAN but possesses the Aadhar
number may furnish his Aadhar number in lieu of PAN. Further, every person receiving
such documents shall also ensure that the PAN (or the Aadhar Number) has been duly
quoted and authenticated.
Every person is required to quote PAN in all the following documents :
(1) Sale or purchase of any immovable property valued at an amount exceeding
₹ 10,00,000 or valuation for stamp duty purpose exceeds ₹ 10,00,000.
(2) Sale or purchase of a motor vehicle or vehicles (excluding two wheelers with or
without side car), which requires registration (except two wheelers) Under Motor
Vehicles Act, 1988.
(3) A fixed (time) deposit exceeding ₹ 50,000 or aggregating to more than ₹ 5,00,000
during a financial year with a bank or Post Office Savings Bank or Co-operative Bank or
Nidhi or non-banking financial company.
(4) A contract of a value exceeding ₹ 1,00,000 for sale or purchase of securities [as stated
in Securities Contract (Regulation) Act, 1956.]
(5) Opening an account (not being a fixed deposit account) with a bank or co-operative
bank.

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(6) Opening of a ‘demat account’ with depository etc. as per SEB1 Act, 1992.
(7) Payment to hotels and restaurants bills for an amount exceeding ₹ 50,000 at any one
time.
(8) While taking a Bank draft, pay-order or Bankers cheque from a bank or co-operative
bank in excess of an amount aggregating ₹ 50,000 by making cash payment during any
one day.
(9) While depositing cash (including foreign currency) in bank or co-operative bank
₹ 50,000 or more on any day.
(10) While making payment in cash of ₹ 50,000 or more at any one time for foreign
travelling except travel to Bangladesh, Bhutan, Maldives, Nepal, Pakistan or Sri Lanka or
travel to Saudi Arabia for Haj or travel to China on pilgrimage to Kailash ManSarovar.
(11) Making an application to any banking company or co-operative bank or to any other
company or institution, for issuance of a credit or debit card.
(12) For payment of ₹ 50,000 or more in the following cases :
(i) Purchase of units of Mutual Fund;
(ii) Debentures issued by companies or other institutions;
(iii) Investment in RBI Bonds.
(iv) Payment of an amount aggregating ₹ 50,000 or more in a year as life insurance
premium to an insurer.
(13) Sale or purchase by any person of goods on services of any nature (other than those
specified in earlier points) exceeding ₹ 2,00,000 per transaction.
A person who has been allotted a Permanent Account Number must intimate to
the Assessing Officer any change in his address or in the name and nature of his business.
Failure to comply with provisions of Section 139A or quoting wrong PAN will
attract a penalty of 10,000.

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CLASSIFICATION OF CHARACTERS IN PAN CARD
Out of these 10 digits of PAN card:
The first five figures represents alphabets,
Next four digits are numbers and
The last number is again an alphabet
All these digits have some meaning and reveal the information of the account holder.
For better understanding of the classification we have divided 10 characters of PAN card
into five parts as follows:
(1) First three Characters:

The first three characters are normal alphabetic series starting from AAA to ZZZ.
Department of I.T allocates the digits randomly which is a combination of the letters like
AZT or ZRT.

(2) Fourth Character:

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The fourth character represents the status of the PAN card holder. It is one of the most
important character and those who deals in PAN card usually look at this character to
identify the status of that particular person. The fourth character for a majority of PAN
holders is the letter “P”, which stands for “person”. The other nine letters that can
represent the fourth character are C, H, F, A, T, B, L, J, and G.
These letters stands for:

C – Company
H – Hindu Undivided Family
F – Firm
A – Association of Persons
T – Trust
B – Body of Individuals
L – Local Authority
J – Artificial Juridical Person
G – Government

(3) Fifth Character:

Fifth character of PAN represents the first character of the PAN holder’s last
name/surname in case of an individual. In case of non-individual PAN holders fifth

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character represents the first character of PAN holder’s name. In the above card Neme of
Company is starting with Culture Multitrade Private Limited so fifth alphabet is C.
Suppose a person has Suman Mathur name then M will be the fifth character on her PAN
card because her last name’s first alphabet is M. Also, if your surname changes after
marriage or due to any other reason, then also your PAN card number will remain
unchanged.

(4) Sixth to Ninth characters:

These four characters are sequential numbers starting from 0001 to 9999. Like first three
characters, here too the selection is random.

(5) Tenth Character:

The last or Tenth character in the PAN card is an alphabetic check digit which can be
any alphabet.

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PAN CARD ALSO CONSISTS OF:
Name of cardholder - Individual or Company
Name of the father of the cardholder - Applicable for individual cardholders.
Date of birth/incorporation - The cardholder's date of birth in case of an individual or
date of incorporation/formation is mentioned in case of company or firm .
Signature of the Individual - PAN card has individual signature as a proof required for
financial transactions.
Photograph of the Individual - PAN card acts as a photo identity proof of the individual.
In case of companies and firms, photographs are not present on the card.

[2] QUOTING OF AADHAR NUMBER

Section 139AA has been inserted with effect from April 1, 2017. Provisions of this section
are as under :
(1) Every person who is eligible to obtain Aadhar number shall, on or after the 1st day
of July, 2017, quote Aadhar Number -
(i) in the application form for allotment of Permanent Account Number;
(ii) in the Income-Tax Return;
provided that where the person does not possess the Aadhar Number, the
enrolment ID of Aadhaar application form issued to him at the time of enrolment shall be
quoted in the application for Permanent Account Number or, as the case may be, in the
Return of income furnished by him.
(2) Every person who has been allotted Permanent Account Number as on the 1st day
of July, 2017, and who is eligible to obtain Aadhaar number, shall intimate his Aadhar
number to such authority in such form and manner as may be prescribed, on or before a
date to be notified by the Central Government (i.e. December 2019 ).
provided that in case of failure to intimate the Aadhar number, the Permanent Account

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Number allotted to the person shall be deemed to be invalid and the other provisions of
this Act shall apply, as if the person had not applied for allotment of permanent account
number.
(3) The provisions of this section shall not apply to an individual who does not possess
the Aadhaar number and is
- a person residing in Assam, Jammu & Kashmir and Meghalaya,
-a non-resident
-super senior citizen [above 80]
-and a non-citizen.

[3] ADVANCE PAYMENT OF TAX [Pay As You Earn]

(1) Every person is liable to pay Advance Tax if Advance Tax payable is ₹ 10,000 or more.
(2) Provisions of Advance Tax shall not apply to a Resident Senior Citizen (who is of the
age of 60 years or more) who has not any income chargeable to tax under the head
‘Profits and Gains of Business or Profession.’
(3) Amount of advance tax shall be determined as under :
Total Income-tax on estimated Current income ...
Less : Rebate and Relief (if any) ...
Add : Surcharge (if applicable) ...
Add : Health and Education Cess (4%) ...
Less : Tax deducted at source (TDS) ...
Advance Tax Payable in Installments ...

(4)The advance tax is payable by all the assessees in four installments on or before
15th June, 15th September, 15th December and 15th March.

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(5) Due Dates and Quantum of Advance Tax :
Date of installment in the Tax payable by All Assessee must not be less than
relevant previous year
On or before 15th June Not less than 15% of Advance Tax Payable
On or before 15th September Not less than 45% of Advance Tax Payable
On or before 15th December Not less than 75% of Advance Tax Payable
On or before 15th March The whole amount of such advance tax, as reduced by
the amount of earlier installments paid.

(6) Any amount paid by way of Advance Tax by the end of the relevant previous year
(after 15th March but on or before 31st March) shall also be treated as tax paid during
the relevant previous year.
(7) If the date of payment of advance tax is a Banking Holiday, it becomes due on the
next immediately following working day.
(8) Now, all assessees are required to pay advance tax on their own. An assessee who is
liable to pay advance tax is allowed to revise his estimate of current income at any time
after making payment of first / second installment of advance tax and accordingly will
pay the next installment.
Levy of Interest
(1) If he fails to pay the above mentioned installment by the due date or amount paid by
him is less than the amount payable, simple interest @ 1% p.m. or a part thereof will be
charged on the shortfall of tax payable by him. [Section 234(B) .]
(2) If the advance tax paid by the assessee falls short (i.e. less than 90% of tax payable on
regular assessment) of the assessed tax, then simple interest is payable at 1% per month
on the shortfall of advance tax, for every month or part of a month comprised in the
period from the 1st April of the assessment year to the date of determination of total

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income. |Section 234 (B)|.
(3) If the assessee has paid more sum as advance tax or TDS than the tax determined as
payable by him in regular assessment and the excess tax paid is more than the assessed
tax, then the Government will allow simple interest at 0.5% per month on the excess tax
amount, from the first day of Assessment Year till the date of granting the refund.

[4] TAX DEDUCTED AT SOURCE (TDS)

It is obligatory for certain persons to deduct tax at source while making payments. The
amount so deducted must be credited to the account of the Central Government. Such
deductions are to be made from (i) salary (ii) interest on securities (iii) other interest
(iv) winnings from lottery, cross-word puzzle etc. (v) payment to resident contractors and
sub-contractors (vi) winning from horse-race (vii) insurance commission
(viii) sums payable to non-resident Sportsmen or Sports Association, (ix) payment's in
respect of deposits under national savings scheme etc. (x) payment on account of re-
purchase of Units by mutual fund or U.T.I. etc.

(1) Salary (Section 192) : Any person responsible for paying salary is required to deduct
income-tax at the time of payment (and not at the time of its accrual) of the salary. It
should be deducted from the amount payable at the average rate of income-tax on the
basis of the rates in force for the financial year in which the payment is made.
The following points are to be kept in view :
(a) The salary for the purpose of TDS shall be rounded off to the nearest multiple of ten
rupees.
(b) The liability of the employer extends only to the amount of salary. If the employer
makes a default in deduction after getting an assurance from the employee that he has
made alternative arrangement for payment of the tax, employer is said to be in default

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and is liable to penalty.
(c) The employer can increase or reduce the amount to be deducted for the purpose of
adjusting the excess or deficiency arising out of any previous deduction.
(d) The employer should also take into consideration other admissible deductions under
sections 80.
(e) Employer has to obtain from the employee the evidence or proof or particulars of
prescribed claims in such form and manner as may be prescribed.
(f) An employer can also deduct tax in respect of other incomes voluntarily declared by
an employee.
(g) The employer is required to send monthly returns in Form No. 21 and an annual
return in Form No. 24. The annual return should be sent within 30 days from 31st March
in each year. The details of such TDS must be provided to the employees in Form No. 16
or 16AA.

(2) Interest on Securities (Section 193) : The person responsible for paying income (to a
resident) chargeable under the head "Income from other sources" is required at the time
of payment, to deduct income-tax at the rate of 10% the amount of interest payable.
No TDS is made in respect of certain approved deposits and Government securities
including listed Demat Security, Gold Bonds, National Savings Certificates etc.
Tax is not to be deducted at source if the amount of interest payable on government
security does not exceed ₹ 10,000 p.a. In case of debenture interest, TDS is not required
to be made if annual interest payable does not exceed ₹ 5,000.

(3) Other Interest Income (Section 194A): Any person who is responsible for paying to a
resident, any interest other than the 'Interest on securities' is required to deduct income-
tax there on @ 10%, while making payment or while crediting it to payee's account. This

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is subject to the following conditions :
(1) This provision does not apply if the payer is an individual or an H. U. F.
(2) No deduction is to be made if the person entitled to receive such interest,
furnishes to the payer, a statement in writing that his estimated total income will be less
than the minimum liable to income-tax. He should also give an affidavit to that effect.
(3) If the amount of such interest from Bank, Co-operative Society, Post-Office or any
other person does not exceed ₹ 40,000 during the financial year, then no such tax is to
be deducted at source.
(4) In case of senior citizens TDS @ 10% is deductible only if interest on deposits with
Bank / Co-operative Bank or Post Office exceeds ₹ 50,000 during the financial year.
(5) The rate of deduction of income-tax is 10%

(4) On Lottery Income/Crossword Puzzle/ Card Games &Other game : Tax @ 30% is to
be deducted at source if winnings from lotteries and crossword puzzles or card games
and other games of any sort exceeds ₹ 10,000 (whether in cash or in kind).

(5) Income from Horse Races : Any person paying for winning from Horse Races , at the
time of payment TDS is required if winnings from horse races exceeds ₹ 10,000.

(6) If any person pays any sum to any resident contractor or subcontractor : If any
person pays any sum to any resident contractor or subcontractor for carrying out any
works contract , the income tax at the rate of 1% (in case of recipient being Individual &
HUF) and 2% (in case of other person) of such sum is to be deducted at the time of
payment or at the time of crediting such amount to contractor's account.
No tax is to be deducted if the aggregate sum to be paid is ₹ 1,00,000 or less and single
payment is ₹ 30,000 or less.

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(7) Insurance Commission : Any person paying insurance commission to resident person
, Tax to be deducted @5% at the time of payment or at the time of credit whichever is
earlier if the amount exceeds ₹ 15,000 to be calculated on aggregate bases in the
financial year.

(8) On payment to non-resident Sportsmen or Sports Association : Tax @ 20% to be

deducted at source for payment made to a non-resident foreign player, similar deduction
is to be made for payment to non-resident Sports Association / Institutions at the time of
payment or at the time of credit whichever is earlier.

(9) Payments in respect of National Savings Scheme : Payment [Principal + Interest]

done by Post Office to any person in respect of NSS , 1987 is subject to tax deduction at
the time of payment @10% if the amount of payment exceeds ₹ 2,500.
This provision is not applicable if payment is done to legal heirs of deceased depositor.

(10) Payments on account of repurchase of units of Mutual funds or UTI : Mutual Fund
or UTI doing payment on account of repurchase of units to unit holder u/s 80CCBis
required to deduct tax 20% at the time of Payment.

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[5] INCOME–TAX AUTHORITIES
The authorities constituted to administer the Act are of two types:
(i) Executive, and (ii) Judicial.
The executive authorities have to see that the provisions of law are properly
implemented and people comply with the tax laws. The appellate or judicial authorities
see to it that proper justice is done to honest tax payer and guilty persons are penalised.

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EXECUTIVE (ADMINISTRATIVE) AUTHORITIES
[1] CENTRAL BOARD OF DIRECT TAXES
The Central Board is the topmost executive authority for the administration and
execution of the Income-tax law. This Board was created under the Central Board of
Revenue Act, 1963. The Board consists of a chairman and six members.
(1) It has the powers to make rules under the Act [Section 295].
(2) Under Section 119, it has the powers to issue orders, instructions and directions to
all the officers responsible for the execution of the Act and under Section 118, they are
bound to observe and follow such orders of the Board. The Central Government shall
cause every order issued by the CBDT to be laid before each House of Parliament. At
present the Board, consists of many members, one of them is the Chairman of the Board.
(3) The Board is authorised to accord sanction for insurance of reassessment order.
(4) The Board can declare an organisation as company.
(5) It can entertain objections in respect of search and seizure under the Act
(6) It can also approve reduction or waiver of penalty.
(7) It can issue orders containing guidelines, principles or procedures to be followed
by Income-tax authorities, in the work relating assessment or collection of revenue etc.
However, the Board has no powers to issue orders, instructions or directions so as to
interfere with the discretion of the Appellate Assistant Commissioner or the
Commissioner (Appeals) in the exercise of the appellate function.

[2] DIRECTOR GENERAL OF INCOME-TAX OR CHIEF COMMISSIONER OF INCOME-TAX

The Central Government appoints the Directors General who are required to perform
such functions as may be assigned by the Central Board of Direct Taxes. The powers of
Director General are as stated below :
(i) To give instruction to Assessing Officer.

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(ii) To enquire or investigate into concealment of income.
(iii) To search and seizure.
(iv) To requisite books of account.
(v) To survey, and
(vi) To make any enquiry.

[3] COMMISSIONERS OF INCOME-TAX

The Central Government appoints Commissioners of Income-tax. He is the head of the
Income-tax administration of specified area, which is usually a state. If the work-load of a
particular state is heavy, two or more Commissioners may be appointed for that state,
e.g., Gujarat, Maharashtra etc. The Commissioner works under the control and
supervision of the Board and is given powers to Act like a civil court under the ‘Code of
Civil Procedure’. He has the power :
(i) to appoint income-tax officers and also Inspectors of Income-tax. The 1AC and
Income-tax officers work under his direct control and supervision. They have to observe
the instructions issued by the Commissioner.
(ii) to transfer any case from one Income-tax officer to another officer.
(iii) to initiate procedure regarding discovery and inspection, production of books of
account, issuing commission etc.
(iv) to waive or reduce any penalty, interest etc. levied by an Income-tax officer.
(v) to allow an Income-tax officer to issue notice for assessment in such cases where the
time limit of four years has expired.
(vi) to make any inquiry under the Act.
(vii) to direct the Income-tax officer to make an appeal to the Appellate Tribunal against
the order of an AAC.
(viii) to authorize the ITO to withhold the refund under certain circumstances or can set-

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off the amount of refund due to any person against the arrears of tax due from such
person.

[4] DIRECTORS OF INCOME-TAX DEPUTY COMMISSIONERS OR DEPUTY

They are also appointed by the Central Government. The main functions of such Deputy
Commissioners is to detect tax evasion and supervise subordinate officers. They are
empowered to accord approval to adopt fair market value as full consideration for the
transfer of capital asset in case of understatement of its value. They are authorised to
approve orders of additions to tax on undistributed profits, to instruct the I.T.O. to
exercise all powers of income-tax officer, to hear and examine draft assessment orders
and to cancel registration etc.

[5] ASSESSING OFFICERS (INCOME-TAX OFFICERS)

(1) There are two classes of Income tax officers : Class I ITO and Class Il ITO. Class I
Income-tax Officers are appointed by the Central Government, whereas Class II Income-
tax officers are appointed by the Commissioner of Income-tax.
(2) He occupies a very important position in the whole set up of income- tax law
administration. He is the first person who comes in direct contact with the assessees. He
is the person who initiates the assessment, makes the assessment order after verifying
the particulars given in the return by the assessee. He makes the demand for income-tax.
(3) He has to make assessment of assesses covered under his department. He has to also
supervise the work done by inspectors and other employees working under him.
If an assessee is not satisfied with the order passed by the ‘Assessing
Officer’, an appeal can be filed with the Income-tax Commissioner (Appeals) within a
period of 30 days from the- service of notice of demand.
Income-tax Officers are subordinate to the Commissioner and the Inspecting Assistant

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Commissioner and also to the Director of Inspection. They perform their functions in
respect to such areas or such class of persons as the Commissioner may direct.
Some of the powers given to an 'Assessing Officer' are as under :
(1) Power to make assessment and issuing notice of demand to an assessee.
(2) Power to instruct an assessee to get his accounts audited.
(3) Power to reassess income which has escaped assessment.
(4) Power to allot Permanent Account Number (PAN).
(5) Power to call for information.
(6) Power to collect certain information.
(7) Power to inspect register of company.
(8) Power to impose penalty for non-payment self-assessment tax.
(9) Power of determining the proportion of expenses allowable as deduction in respect
of premises partly used for business or profession.
(10) Power regarding discovery, recording statement on oath, production of evidence
(11) Power to requisition of books of accounts.
(12) Power of search and seizure, if authorised by higher authorities.
(13) Power to rectify apparent mistakes on his own or on application made by the
assessee.
(14) Power to impose penalty for default in payment of taxes.
(15) Power to grant refund or to adjust the refund against any outstanding tax from the
assessee.
(16) Power to withhold refund in certain cases.
(17) Power to issue a certificate to an assessee for receiving any income without
deduction of tax at source.
(18) Power to grant relief in respect of 'arrears of salary' received by an assessee.
(19) Power to apply the asset seized and retained in satisfaction of the existing liabilities
of the assessee under the Direct Taxes Laws.
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[6] INCOME-TAX INSPECTOR
The Income-tax Inspectors are appointed by the Commissioner subject to rules and
orders of the Central Government. They are subordinate to the Income-tax Officers. They
perform such functions as are assigned to them by the Commissioner. They have no
particular powers or functions. Their main function is to assist the Income-tax Officer or
any other Income-tax authority under whom they are placed. Generally, they move into
the wards under their jurisdiction to find out persons who are liable to pay income-tax
and issue notices to them.

APPELLATE OR JUDICIAL AUTHORITIES

The Income-tax officer is an executive authority who assesses the income of the assessee
and issues the assessment order. The assessee may be dissatisfied with the assessment.
In that case, appellate authorities are appointed by the government who would listen to
the appeals and try to give justice. The following appellate authorities are appointed
under the Act.
[1] DEPUTY COMMISSIONERS (APPEALS)
The Deputy Commissioner is appointed by Central Government.
(1) His main function is to hear the appeals filed by an assessee who is dissatisfied
with the order of the Income-tax Officer. Such appeal is to be made to him within 30
days from the date of the order. Deputy Commissioners are under the control of the
Board. But the Board cannot interfere with their discretion in the exercise of their
appellate function. If the Deputy Commissioner gives a decision against the Income-tax
department, it can go in appeal to the Appellate Tribunal.
(2) In disposing of an appeal they can confirm, reduce, enhance or annual the
assessment of the ITO.

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(3) He may set aside the assessment and refer the case back to the Income-tax officer for
making a fresh assessment.
(4) If there is an appeal against the order of the ITO imposing a penalty, he may confirm
or cancel the penalty.

[2]COMMISSIONER (APPEALS)
Commissioners of Income–tax (Appeals) are also appointed by the Central Government.
They are empowered regarding discovery, production of evidence etc., to call for
information, to inspect registers of companies, to set off refunds against tax unpaid, to
dispose of appeals and to impose penalty. An assessee has to submit the appeal within
30 days from the date of receiving ‘Assessment Order’ from the Assessing officer and has
to pay prescribed fee.

[3] APPELLATE TRIBUNAL

This is an independent body from the executive wing of the Income-tax department. Its
function is to hear appeals against the order of the Deputy Commissioner (Appeals). The
Tribunal is constituted by the Central Government. It functions under the Ministry of
Law.
The Tribunal consists of two classes of members, viz., judicial members and accountant
members. The Central Government may appoint as many judicial and accountant
members as it may think fit. A judicial member is appointed as the President of the
Tribunal by the Government.
(1) Both the assessee or the Income-tax department has a right to make an appeal to
it within 60 days from the date on which the order was received by him. The assessee
has to pay a fee alongwith such appeal which is equal to 1% of assessed income subject
to a maximum of ₹10,000.

21 | P a g e B.COM.[HONS] SEM 2 TAXATION – 1 UNIT 5

(2) The order passed by the Tribunal on questions of fact is final and conclusive. But
on the question of law, a reference can be made to the High Court.
(3) If the Tribunal refuses to make a reference to the High Court, the aggrieved party
can itself make an appeal directly to the High Court.

[4] HIGH COURTS

Only questions of law arising out of the order of the Tribunal can be referred to the High
Court. It can be made through the Tribunal. The application to the Tribunal for making a
reference in the High Court is to be made within 60 days from the date of the service of
the order of the Tribunal. If the Tribunal refuses to refer the case to the High Court on
the ground that no question of law is involved, then the applicant may apply to the High
Court directly within 120 days from the date on which he is served with notice of such
refusal. If the High Court is not satisfied with the correctness of the decision of the
Tribunal, it may ask the Tribunal to state the case and to refer it. In that case the Tribunal
is bound to do so.

[5] SUPREME COURT

An appeal can be made to the Supreme Court from any judgement of the High Court
given in reference made to it within 90 days period from the date of such judgement. But
the High Court should certify that the case is fit for appeal to the Supreme Court.
If on an application made U/s 256, the Tribunal is of the opinion that on account of a
conflict in the decisions of High Courts in respect of any particular question of law, it is
necessary to make a reference direct to the Supreme Court, the Tribunal can make a
direct reference to the Supreme Court through its President. The decision of the
Supreme Court on the question of law is final.

22 | P a g e B.COM.[HONS] SEM 2 TAXATION – 1 UNIT 5

[6] SETTLEMENT COMMISSION
Settlement Commission was set up on 1st April, 1979. The Commission is empowered to
settle any case which is pending for disposal before an Income- tax authority. It is not an
appellate authority. It is extra legal remedy for settlement of cases. It consists of a
chairman, one or more vice-chairmen and other members who are appointed by the
Central Government. The main Bench of the Commission is in New Delhi and three
additional benches are in Mumbai, Kolkata and Chennai.
Objects :
(1) The object behind the setting up the Settlement Commission is to create a channel
whereby tax disputes can be settled expeditiously and in a spirit of conciliation rather
than prolonging them through adversarial attitude.
(2) The Commission is not designed to provide an escape route for tax evaders. It is, in
fact, designed to provide a balanced resolution of tax disputes with a view to avoid
lengthy litigation which helps neither the department nor the member of the Trade and
Industry.
(3) In the proceeding before the Commission, there are no adversaries but only parties to
the settlement.
(4) Any assessee can make an application in such form and in such manner as may be
prescribed by the Commission and containing ‘Full & True’ disclosure of his tax liability
which has not been disclosed before the proper officer having jurisdiction, the manner in
which such liability has been derived.
Powers :
(1) The Settlement Commission has powers to grant immunity from prosecution for any
offence under the Central Excise Act, the Custom Act or under the Indian Penal Code or
under any other Central Act for the time being in force in respect of the case covered by
the Settlement Commission.

23 | P a g e B.COM.[HONS] SEM 2 TAXATION – 1 UNIT 5

(2) The Commission also has powers to grant immunity either wholly or in part from the
imposition of any penalty and fine under Central Excise Act or the Customs Act, as the
case may be in respect of the case covered by the Settlement Commission.
(3) The proceedings before the Settlement Commission shall be deemed to be a judicial
proceeding within the meaning of Section 193 and 228, and for the purposes of Section
196 of the Indian Penal Code.
An application for settlement of cases can be made by an assessee as explained below:
(a) When an application is filed before the settlement commission, in cases where
proceedings for assessment have been initiated as a result of search or as a result of
requisition of books of accounts or other documents or any assets:
•Application can be filed only if the additional amount of income tax payable on the
income disclosed in the application exceeds ₹ 50 lakhs.
(b) Where an application is filed in any other case:
• Application can be filed only if the additional amount of income tax payable on the
income disclosed in the application exceeds ₹ 10 lakhs.
He is required to submit relevant accounts and the prescribed fees of ₹ 500 along with
the application. If books of account, documents, cash, gold or silver, jewellery or any
precious items of assessee is seized under Sec. 132, then an application can be made for
settlement of the case only after 120 days of such seizure. It is required that assessee
should have produced his income-statement. After examination of the relevant records,
reports etc. and after hearing the applicant and the commissioner, it may pass any order
as it thinks fit. The order of the Commission is final and no appeal shall lie against it. The
order of settlement could be void, if it is found later on that the assessee obtained it by
fraud or misrepresentation of the facts.

24 | P a g e B.COM.[HONS] SEM 2 TAXATION – 1 UNIT 5

[6] EXEMPTED INCOMES U/S 10

What is Exempt Income?

Any income earned which is not subject to income tax is called exempt income. As per
Section 10 of the Income Tax Act, 1961, there are certain types of income which will be
subjected to income tax within a financial year, provided they meet certain guidelines
and conditions.

Exempt Income vs Tax Deduction

A deduction is an amount which reduces the total taxable income of an individual.
Exempt income is like an exclusion, any income earned, which is categorized under
exempt income does not contribute to the total income of the person.

Income Exempt from Tax as per Section 10

Mentioned below is the list of income exempt from tax specific to Section 10:
(1) Agriculture Income : Agricultural income is defined as :
(i) Rent or revenue derived from land (situated in India) used for agricultural purposes;
(ii) Income derived from agricultural operations;
(ii) Income front farm building.
As Agriculture is a state subject, the Central Government has no powers to impose tax on
agricultural income. Hence, agricultural income is fully tax- free. However, this provision
was misused by many assessees. Hence, from assessment year 1974-'75, the agricultural
income is added to the non- agricultural taxable income of non-company assessees, and
then tax on agricultural income is allowed as deduction from total tax payable.
Thus, the agricultural income is totally tax-free, yet it is included in the total income for
rate purposes, so that the assessee is required to pay income-tax at higher rates on his
non-agricultural income.
If the non-agricultural income of an assessee from all sources is (₹ 2,50,000; for senior
citizen and super senior citizen ₹ 3,00,000 and ₹ 5,00,000 respectively.) or less, no
income-tax is payable irrespective of the amount of agricultural income. [Section 10(1)]

25 | P a g e B.COM.[HONS] SEM 2 TAXATION – 1 UNIT 5

Such partial integration is done to compute the tax on non-agricultural income only
when the following two conditions are satisfied:
(i) Non-agricultural income of an assessee exceeds the maximum exemption limit of
₹ 2,50,000 or (₹ 3,00,000 or ₹ 5,00,000 for senior citizen or super senior citizen assessee)
and (ii) The net agricultural income also exceeds ₹ 5,000 [Section 10(1)]

(2) Amount received out of family income, Hindu Undivided Family (H.U.F.) : Any sum
received by an individual as a member of Hindu Undivided Family is exempted, provided
it is paid out of the income of the family. [Section 10 (2)]

(3) Share of profit of a partner from a firm : (Which is separately assessed as such) in the
hands of a partner of that firm is fully exempted from tax. [Section 10 (2A)]

(4) Interest to a non-resident:

(i) Any income from interest (including premium on redemption) on securities notified by
the Central Government received by a non–resident is exempted.
(ii) In the case of an individual, being a citizen of India or a person of Indian origin, who is
also a non-resident person any interest on money standing to his credit in a ‘Non-
resident External Account’ in any bank in India under FEMA, 1999 is exempted.
(iii) In the case of an individual, being a citizen of India or a person of India origin, who is
also a non-resident, any income from interest on such savings certificates issued (before
1-6-2002) by the Central Government provided that he has made such investment
(subscribed) in convertible foreign exchange remitted under the provisions of FEMA,
1999.[Sec. 10 (4) (i), (ii) and (4B)]

26 | P a g e B.COM.[HONS] SEM 2 TAXATION – 1 UNIT 5

(5) Remuneration received by foreign diplomates of all categories : The following
incomes of individuals who are not the citizens of India are exempted :
(a) Remuneration received by foreign diplomates of all categories. [Sec. 10(6)(ii)]
(b) Remuneration received by a foreign citizen an employee of a foreign enterprise,
provided his stay in India does not exceed 60 days. [Sec. 10(6)(vi)]
(c) Remuneration received by a non-citizen who is non-resident for services rendered on
a foreign ship provided his total stay in India does not exceed 90 days in the previous
year.[Sec. 10(6) (viii)]
(d) Remuneration received by a non-citizen as an employee of a foreign government
during his training in India in any undertaking owned or approved by the Central
Government.[Sec. 10(6) (xi)]

(6) Leave Travel Concession (L.T.C.): leave travel assistance extended by an employer to
an employee for going anywhere in India with his family is exempt subject to certain
provisions.
Here, the word 'family' includes the spouse and children as well as the parents, brothers
and sisters mainly or wholly dependent on him. [Sec. 10 (5)]

(7) Foreign Allowance etc. :

(i) Any allowance or perquisite paid by the Indian Government to a citizen of India for
rendering services outside India. (Basic salary is taxable.).[Sec. 10 (7)]
(ii) Remuneration from Foreign Government under co-operative technical assistance
programmes in accordance with agreement with the Central Government.[Sec. 10 (8)]
(iii) Remuneration or fees received by non-resident consultants and their foreign
employees.[Sec. 10 (8A)]
(iv) Income of any member of the family of such individual accompanying him to India,

27 | P a g e B.COM.[HONS] SEM 2 TAXATION – 1 UNIT 5

which arises outside India and is not deemed to accrue or arise in India. [Sec. 10 (8B), (9)]

(8) Incomes received by Employees

[1] Any death-cum-retirement gratuity received by a government servant or by an
employee under the Payment of Gratuity Act, 1972 or received by any employee on his
retirement or on termination of his employment, subject to certain limitations (Gratuity
received by employees covered under the Payment of Gratuity Act, 1972 is exempted
upto Rs. 20,00,000 and for other private sector employees the exemption is limited to Rs.
20,00,000). [Sec. 10(10)]
[2] Any payment in commutation of pension received by employees of Central or State
Government or of a local authority or of a statutory corporation. In case of employee in
private sector, such payment is exempted subject to following limits.
(a) in a case where the employee also receives any gratuity, the commuted value of one-
third of the pension which he is normally entitled to receive is exempted, and
(b)in any other case, the commuted value of one-half of such pension is exempted.[Sec.
10 (10A)]
[3] Any payment received by an employee of Central or State Government for leave
encashment at the time of his retirement. For other employees, it is exempted subject to
following limits : [Sec. 10 (10AA)]
(i) Cash equivalent of leave salary,
(ii) 30 days' salary for each completed year of services,
(iii) Maximum 10 months' salary (based on last 10 months' average salary), or
(iv) Maximum amount Rs. 3,00,000, whichever is the least is exempted from tax.

[4] Retrenchment Compensation : Any compensation received by a workman under the

Industrial Disputes Act, 1947 subject to certain conditions. (Up to a maximum amount of

28 | P a g e B.COM.[HONS] SEM 2 TAXATION – 1 UNIT 5

₹ 5,00,000)[Sec. 10 (10B)]
Compensation received by victims of Bhopal gas leakage disaster is fully exempted from
tax.[Sec. 10 (10BB)]
Similarly, compensation on account of any disaster (means catastrophe,
mishap, calamity or grave occurrence in any area, arising from natural or man-made
causes) received or receivable from Central Government or State Government or local
authority is also fully exempted from tax. [Sec. 10(10BC]
[5] Amount received on voluntary retirement: Any payment (upto a maximum of
₹ 5 lakhs) received or receivable by an employee of a public sector company or any other
company or from any state government at the time of his voluntary retirement.
[Sec. 10 (10C)*]
* The benefit of such exemption has been extended to the employees
serving with any authority under a central or state or provincial Act. The maximum
amount exemption is ₹ 5 lakhs.
[6] The amount of tax actually paid by an employer, on the income in the nature of
perquisite, not provided for by way of monetary payment, on behalf of an employee.
[Sec. 10 (10CC)]
[7] Any amount (including bonus) on Life Insurance Policy is tax-free. But this does not
apply to a Keyman Insurance Policy.[Sec. 10 (10D)]
[8] Any payment from a provident fund to which the Provident Fund Act, 1925 applies or
from any other provident fund set up by the Central Government.[Sec. 10 (11)]
[9] Any payment from an account, opened in accordance with the Sukanya Samriddhi
Account Rules, 2014 made under the Government Saving Bank Act, 1873 is exempted.
[Sec. 10 (11 A)]
[10] The accumulated balance of a recognised provident fund payable to the employee,
subject to conditions laid down in the Act.[Sec. 10 (12)]

29 | P a g e B.COM.[HONS] SEM 2 TAXATION – 1 UNIT 5

[11] Any payment from the National Pension System Trust to an employee on closure of
his account or on his opting out of the pension scheme to the extent it does not exceed
40% of total amount payable to him at that time.[Sec. 10 (12A)]
Any payment from the National Pension System Trust to an employee on partial
withdrawal made out of his account to the extent it does not exceed 25% of the amount
contributed by him.[Sec. 10 (12B)]
Any payment from an approved superannuation fund subject to conditions laid down in
the Act.[Sec. 10 (13)]
[12] House rent allowance granted to an assessee by his employer to the extent it is
exempted from tax.[Sec. 10 (13 A)]
[13] Any special allowance or benefit (declared exemption by the Central Govt.)
specially granted to meet expenses wholly, necessarily and exclusively incurred in the
performance of his duties, e.g., travelling expenses.[Sec. 10(14)]

(9) Income from interest on certain securities : [Sec. 10(15)]

(1) Interest on following notified securities, bonds and certificates :
(i) 12 years National Savings Annuity Certificates;
(ii) National Defense Gold Bonds 1980;
(iii) Special Bearer Bonds, 1991;
(iv) Treasury Savings Deposit Certificates;
(v) Post Office Cash Certificates (5 years)
(vi) National Plan Certificates (10 years)
(vii) National Plan Savings Certificates (12 years)
(viii) Post Office National Saving Certificates (12/7 years)
(ix) Public Account of Post Office Savings Account Rules (interest upto ₹ 3,500),
(x) Special Deposit Scheme, 1981, and

30 | P a g e B.COM.[HONS] SEM 2 TAXATION – 1 UNIT 5

(xi) Non-Resident (Non-Repatriable) Rupee Deposit Scheme.
(2) Interest to an individual and HUF on 7% Capital Investment Bonds.
(3) Interest on notified bonds (NR1 Bonds issued by the State Bank of India).
(4)Interest on securities held by the Issue Department of the Central Bank of Ceylon.
(5) Interest on 9% Relief Bonds with an individual or a HUF.
(6) Interest on notified debentures of public sector company.
(7) Interest on deposit made in a notified scheme by a retired employee of government
and public sector company (out of the money due to him on retirement).
(8)Interest payable to any foreign bank (not functioning in India) on their deposits with
any scheduled bank in India.

(10) Allowances, Awards etc.

(1) Scholarship granted to meet the cost of education.[Sec. 10 (16)]
(2) Daily allowance received by Members of the Parliament or Members of State
Legislature or of any of its committee.
Other allowances received by these persons are exempted subject to certain conditions.
Any constituency allowance received by any person who is a member of State Assembly
[Sec. 10(17)]
(3) Awards : Any payment made, whether in cash or in kind, for awards of literary;
scientific or artistic work or attainment or for proficiency in sports and games instituted
by Central or State Governments. [Sec. 10 (17A)]
(4) Pension to gallantry award winners and family pension received by family members
of armed forces.[Sec. 10 (18) and 10 (19)]
(5) The annual value of any one palace in the occupation of an Ex-ruler. This should be
the palace whose annual value was exempted from income-tax before the
commencement of the Constitution (26 the Amendment) Act, 1971.[Sec. 10 (19A)]

31 | P a g e B.COM.[HONS] SEM 2 TAXATION – 1 UNIT 5

(11) Other / Miscellaneous Exempted Incomes
(1) Income of a member of Scheduled Tribe residing in Nagaland, Manipur, Tripura,
Arunachal Pradesh, Mizoram or Ladakh region of the state of Jammu and Kashmir from
any source arising by reason of his employment therein and income from securities and
dividend income. [Sec. 10 (26) & (26A)]
(2) Income of “Sikkimese” individual which accrues or arises to him from any source in
the state of Sikkim or by way of dividend or interest on securities (wherever generated)
is fully exempted (except in case of a woman marrying a non-Sikkimese individual).
[Sec. 10 (26 AAA)]
(3)In the case of the assessee who carries on the business of growing and manufacturing
tea in India, the amount of any subsidy received from Tea Board under any scheme for
replantation or replacement of tea bushes as the Central Govt, may specify.[Sec. 10 (30)]
(4) In the case of an assessee who carries on the business of growing and manufacturing
rubber, coffee, cardamom or such other commodity in India, as the Central Govt, may
notify, the amount of any subsidy received through the concerned Board under any
such scheme for replantation etc. [Sec. 10 (31)]
(5) In the case of an assessee whose total income includes minor child's (not being a
minor child suffering from permanent physical disability) income U/s 64 of the Act, an
exemption upto Rs. 1,500 per child is to be allowed to him. [Sec. 10 (32)]
(6) Capital profit on transfer of units under U/s. 64 of U.T.I. [Sec. 10(33)]
(7) Any capital gain (whether short-term or long-term) from transfer of Urban
agricultural land (by way of compulsory acquisition) [Sec. 10 (37)]
(8)Income from any international sporting event.[Sec. 10(39)]
(9)Any amount received by an individual as a loan, either in lump sum or in instalments,
in a transaction of reverse mortgage.[Sec. 10(43)]

32 | P a g e B.COM.[HONS] SEM 2 TAXATION – 1 UNIT 5

(10) Perquisites/Allowances to chairman/members of UPSC are fully exempted from tax
[Sec. 10 (45)]

SECTION A - THEORY QUESTIONS

[1] Write Short Notes on :
(i) Permanent Account Number (PAN)
(ii) Advance Payment of Tax (PAYE)
(iii) Tax Deducted at Source (TDS)
(iv) Director General of Income Tax
(v) Settlement Commission
(vi) Appellate Tribunal
(vii) Powers of Assessing Officers
(viii) Central Board of Direct Taxes (CBDT)
(ix) Explain any Ten Exempted Incomes

SECTION B – MULTIPLE CHOICE QUESTIONS

1. Certain income which do not form part of the “Total Income”, are called __________.
(a) Exempted Income (b) Deductions (c) Reliefs (d) None

2. Which argument/s support – ‘There is Difference between Exemption and Deduction.”

(a) Exempt income is not included in the computation of total income but deduction is
given from Gross total Income.
(b) Deductions can never exceed the amount of income
(c) Exemption can be less than, equal or more than the amount of Income
(d) All of the Above

3. Agricultural income is _________________.

(a) Fully Exempt (b) Fully Taxable (c) Taxable at a special rate of 10%
(d) Although fully exempt but it is to be aggregated in case of certain assesse for the
purpose of determining the rate of tax on Non agricultural income.

33 | P a g e B.COM.[HONS] SEM 2 TAXATION – 1 UNIT 5

4. Any sum received by an individual as a member of HUF from the income HUF shall be
_____
(a) Fully Exempt (b) Fully Taxable (c) Taxable at a special rate of 15%
(d) Included in the total income of member for rate purpose

5. In case of a partner , the share of the profits from the firm shall be
(a) Fully Exempt (b) Fully Taxable (c) Exempt upto ₹ 1,50,000
(d) Included in the total income of the partner and relief u/s 80C shall be allowed

6. Casual income received by the assesse is

(a) Fully Exempt (b) Fully Taxable
(c) Taxable at a special rate of 10% (d) Exempt upto ₹50,000

7. The daily allowance received by Member of parliament is _______.

(a) Exempt (b) Fully Taxable (c) Exempt upto ₹ 1,50,000 (d) Exempt to the extent spent
by him

8. Scholarship granted to meet the cost of education.

(a) Taxable (b) Exempt (c) Exempt upto 1,00,000 (d) None

9. Family pension received by the legal heir of an army personnel who died during
operational duties shall be _____
(a) Taxable (b) Fully Exempt (c) Exempt upto 2,00,000 (d) None

10. Pension received by government employee is_______________

(a) Full tax Free (b)Taxable as salary income
(c)taxable as“income from other sources” (d)None

11. The maximum exempted amount of leave encashment is__________

(a) ₹ 1,00,000 (b) ₹ 2,00,000 (c) ₹ 3,00,000 (d) ₹ 4,00,000

12. Notified awards and rewards instituted by the Central/State Government for the
specified purpose is exempt if received for ______________.
(a) Literary work (b) Artistic Work (c) Scientific Work (d) All of the above

34 | P a g e B.COM.[HONS] SEM 2 TAXATION – 1 UNIT 5

13. Family Pension received on death of member of armed forces where the death
occurred in course of operational duties and in prescribed conditions shall be exempted
if received by
(a) Widow of member (b) Children of member
(c) Nominated heirs of member (d) All of the above

14. Perquisites/Allowances to chairman/members of UPSC are ____________

(a) Fully Exempt (b) Fully Taxable
(c) Taxable at a special rate of 10% (d) Exempt upto ₹50,000

15.Amount received on voluntary retirement is exempt upto maximum ₹ ____________.

(a) ₹ 10,00,000 (b) ₹ 5,00,000 (c) ₹ 2,00,000 (d) None

16. Which of the following income are exempt ,

(a) Income of a member of Schedule tribe residing in Nagaland , Manipur , Tripura ,
Arunachal Pradesh or Ladakh region of J&K from any source in these states or income
from securities and dividend
(b) Income of Sikkimese individual which accures to him from any source in the state of
Sikkim or by way of dividend or interest on securities [Except woman marrying non
Sikkimese individual]
(c) In case of assesse who carries on the business of growing and manufacturing tea in
India, the amount of subsidy received from Tea Board under any scheme of replantation
or replacement od tea buses as specified by Central Govt.
(d) All of the above

17. Which incomes of local authority are exempt from tax ?

(a) Income under the head House Property (b) Income from Capital Gains
(c) Income from Other Sources (d) All of the above

18.Any amount received by an individual [generally senior citizen] as a loan either in

lumpsum or in installments, in a transaction of reverse mortgage
(a) Exempt (b) Not Exempt (c) Partly Exempt Partly Taxable (d) None

19. Any constituency allowance received by any person who is a member of State
Assembly is
(a) Taxable (b) Fully Exempt (c) Exempt upto 2,00,000 (d) None

35 | P a g e B.COM.[HONS] SEM 2 TAXATION – 1 UNIT 5

20. Its obligatory to deduct tax from which of the following income ?
(a) Income from salary (b) Interest from Securities & other Interest
(c) Winnings from Lottery & Crossword Puzzle (d) All of the above

21. The deduction of tax at source from the Salary shall be made at the time of
(a) Accrual of Salary (b) Credit or Payment of salary whichever is earlier
(c) Payment of Salary (d) Credit or Payment of salary whichever is later

22. Salary for purpose of TDS should be round off to the nearest multiple of ___ rupees.
(a) Ten (b) Twenty (c) Hundred (d) Thousand

23. Deduction of tax from salary as per Section 192 shall be :

(a)@ 10% of Salary (b) @ 20% of salary (c) @ maximum marginal rate 30%
(d) at the average rate of income tax computed on the basis of rates in force for the
financial year in which payment is made

24. The certificate of TDS in relation to salary income will be given to employee in
________.
(a) Form No 16A (b) Form No. 23D (c) Form No 15H (d) None

25. The person responsible for paying any income by way of winnings from lottery an
amount exceeding ₹10,000, shall deduct
(a) TDS@30% (b) TDS @ 40% (c) TDS@20% (d) TDS @ 50%

26. Rate of tax deduction at source in case of winnings from camel race will be:
(a) 30% (b) 20% (c) 10% (d) NIL

27. While making payment of winnings from horse race, tax will be deducted at source, if
the payment exceeds
(a) ₹2,000 (b) ₹10,000 (c) ₹15,000 (d) ₹30,000

28. Tax is to be deducted at source on lottery winnings at the time of:

(a) Payment of such income to the payee
(b) Crediting of such income to the account of payee
(c) At the time when the winner of lottery income spends his winnings
(d) None of the above

36 | P a g e B.COM.[HONS] SEM 2 TAXATION – 1 UNIT 5

29. Mr. A won a cash prize of ₹ 8,000 from a crossword puzzles published by Times of
India. The amount of TDS, payable will be-
(a) ₹800 (c) ₹1600 (b) ₹2400 (d) NIL

30. The liability to deduct tax at source in case of income from interest on securities
arises at the time of :
(a) payment of Interest (b) accrual of Interest
(c) Credit of interest to the account of Payee/interest payable account or payment there
of whichever is early
(d) Credit of interest to the account of Payee/interest payable account or payment there
of whichever is later

31. TDS rate on Interest income from securities or other interest is ________%
(a) 30% (b) 20% (c) 10% (d) NIL

32. Tax to be deducted at source if interest payable on government securities exceeds

_______.
(a) ₹2,000 (b) ₹10,000 (c) ₹15,000 (d) ₹30,000

33. Tax to be deducted at source if interest payable on debenture exceeds _______.

(a) ₹5,000 (b) ₹10,000 (c) ₹15,000 (d) ₹30,000

34. If any person pays any sum to any resident contractor/sub contractor [payee being
individual or HUF] for carrying out work , tax to be deducted from payment @ rate of
_______%.
(a) 3% (b) 2% (c) 1% (d) NIL

35. If any person pays any sum to any resident contractor/sub contractor [payee being
other than individual or HUF] for carrying out work , tax to be deducted from payment @
rate of ______%.
(a) 3% (b) 2% (c) 1% (d) NIL

36. While deducting tax from payment to contractor No TDS should be deducted if
(a) the amount of any single sum paid/credited or likely to be paid or credited to the
contractor exceed ₹ 30,000
(b) the aggregate of the amount of such sums paid /credited or likely to be paid or
credited during the financial year to the contractor does not exceed ₹ 1,00,000
(c) Both (a) & (b) (d) None of the above

37 | P a g e B.COM.[HONS] SEM 2 TAXATION – 1 UNIT 5

37. In case of failure to deduct/collect tax at source, the defaulter shall be liable to pay -
(a) Simple interest @ 12% p.a. (b) Simple interest @ 10% p.a.
(c) Simple interest @ 1% p.m. or part there of. (d) Simple interest @ 1% p.m

38. Advance tax is payable by any person in respect of current income if tax payable is -
(a) ₹10,000 or more (b) ₹20,000 or more (c) ₹5,000 or more (d) ₹8,000 or more.

39. Provisions of Advance tax is also known as _______________.

(a) Pay as you Earn (b) Earn as you Pay (c) Tax after you earn (d) None

40. Advance tax is payable by

(a) only individuals (b) Only company assesse (c) Any assesse other than individual
(d) Any assesse other than individual who is a senior citizen and does not have income
under the head PGBP

41. Advance tax is payable by the assessee in __________ installments

(a) One (b) Two (c) Three (d) Four

42. In case of individual assessee, amount of advance tax payable in the first instalment
(i.e. on or before 15th June) shall be-
(a) Not less than 15% of the advance tax payable
(b) Not less than 75% of the advance tax payable
(c) Not less than 45% of the advance tax payable
(d) Not less than 25% of the advance tax payable

43. In case of individual assessee, amount of advance tax payable in the second
installment (i.e. on or before 15th September ) shall be-
(a) Not less than 15% of the advance tax payable
(b) Not less than 65% of the advance tax payable
(c) Not less than 45% of the advance tax payable
(d) Not less than 25% of the advance tax payable

44. In case of individual assessee, amount of advance tax payable in the third installment
(i.e. on or before 15th December ) shall be-
(a) Not less than 15% of the advance tax payable
(b) Not less than 75% of the advance tax payable
(c) Not less than 95% of the advance tax payable
(d) Not less than 85% of the advance tax payable

38 | P a g e B.COM.[HONS] SEM 2 TAXATION – 1 UNIT 5

45. In case of Company assessee, amount of advance tax payable in the fouth installment
(i.e. on or before 15th March) shall be
(a) Not less than 15% of the advance tax payable
(b) Not less than 75% of the advance tax payable
(c) Not less than 100% of the advance tax payable
(d) Not less than 85% of the advance tax payable

46. In case of individual assessee, amount of advance tax payable in the last installment
(i.e. on or before 15th March) shall be
(a) Not less than 15% of the advance tax payable
(b) Not less than 75% of the advance tax payable
(c) Not less than 95% of the advance tax payable
(d) The whole amount of such advance tax as reduced by the amount of earlier
installments paid

47. If an assessee fails to pay advance tax as required under the Act, or the advance tax
paid by him is less than-----------------of the assessed tax, he shall be liable to pay interest
u/s 234B
(a) 80% (b) 90% (c) 95% (d) 98%

48. Any payment of tax on & before ____________ will be treated as advance tax paid
during the financial year 22-23.
(a) 31st March, 23 (b) 31st May, 23 (c) 31st July, 23 (d) 31st Dec ,22

49. If an assessee fails to pay installment by due date or amount paid by him is less than
amount payable, he shall be liable to pay simple interest @ _______per month on
shortfall of advance tax u/s 234B
(a) 3% (b) 2% (c) 1% (d) NIL

50. If the assesse has paid more sum as advance tax than the tax payable , government
will allow simple interest @ ______per month on the excess tax amount.
(a) 0.5% (b) 2% (c) 1% (d) NIL

51. Permanent Account Number (PAN) is a _____ digit unique alphanumeric number
issued by the Income Tax Department.
(a) Twenty (b) Fifteen (c)Ten (d) Five

39 | P a g e B.COM.[HONS] SEM 2 TAXATION – 1 UNIT 5

52. PAN is 10 digit _______________________number.
(a) Computerized Alphanumeric (b) Computerized Numeric
(c) Manual numeric (d) None of the above

53 .The first _____characters of PAN represent the alphabetic series running from AAA to
ZZZ.
(a) Ten (b) Seven (c) Three (d) Four

54.The __________character of PAN represents the status of the PAN holder.

(a) Fourth (b) Fifth (c) Seventh (d)Tenth

55. Application for PAN is done in Form No. ____________.

(a) 49A (b) 41A (c) 10E (d) None

56.If a person fails to comply with the provisions relating to PAN (i.e. obtaining PAN,
quoting PAN, etc.), then penalty can be levied ₹ _________ u/s_______
(a) ₹ 10,000 u/s 272 (b) ₹ 5,000 u/s 272A (c) ₹ 10,000 u/s 272B (d) ₹ 5,000 u/s 271

57. Failure to comply with the PAN provisions or quoting of wrong PAN will attract
penalty of
(a) ₹20,000 (b) ₹10,000 (c) ₹15,000 (d) None

58.__________________ is the topmost executive authority for the administration and

execution of income tax law in India
(a) Supreme court (b) Settlement Commission (c) CBDT (d) Income tax inspectors

59. Appellate Tribunal is an independent body which is constituted by ___________

(a) Supreme Court (b) CBDT (c) Central Government (d) Commissioner of income tax.

60. Only those assesses who have to pay income-tax in excess of _________ are entitled
to file an appeal before the Settlement Commission.
(a) 1,00,000 (b) 10,00,000 (c) 5,00,000 (d) None

61. Within how many days an assesse has to submit an appeal to Commissioner[Appeals]
From the date of receiving ‘Assessment Order’ from Assessing Officer ?
(a) 30 days (b) 60 days (c) 90 days (d) None

40 | P a g e B.COM.[HONS] SEM 2 TAXATION – 1 UNIT 5

62. Both the assesse and the Income tax department has a right to make an appeal
within__________ days against the order of Deputy Commissioner [Appeals] from the
date on which order was received
(a) 30 days (b) 60 days (c) 90 days (d) None

63. Assistant Commissioner or any higher authority are appointed by _________.

(a) Supreme Court (b) CBDT (c) Central Government (d) Commissioner of income tax.

64. Inspectors of Income tax are appointed by ______

(a) Supreme Court (b) CBDT (c) Central Government (d) Commissioner of income tax.

65. Powers of Assessing officer include power to _____.

(a) make assessment and issue notice of demand to assesse
(b) instruct an assessee to get his accounts audited
(c) reassess income which has escaped assessment
(d) All of the above

66. which of the following statement is correct regarding circulars issued by the CBDT.
(a) They are binding only on assessee
(b) They are binding only on Income tax Authorities
(c) They are binding on assessee as well as income Tax Authorities
(d) They are neither binding on Income Tax Authorities nor on assessee

67. Assessee is required to submit relevant accounts and the prescribed fees of
₹________ with an application made to settlement commission.
(a) ₹ 500 (b) ₹ 1,000 (c) ₹ 1,500 (d) None

68. Which is not Executive authorities :

(a) CBDT (b) Commissioner of Income Tax (c) Income Tax Officers (d) Appellate Tribunal

69. The application to the Tribunal for making a reference in the High Court is to be made
within________ days.
(a) 30 days (b) 60 days (c) 90 days (d) None

70.The appeal can be made to the Supreme Court from any judgment of the High Court
given in reference made to it within a period of ___________.
(a) 30 days (b) 60 days (c) 90 days (d) None

41 | P a g e B.COM.[HONS] SEM 2 TAXATION – 1 UNIT 5

Above work is a compilation form various Reference Books on Financial
Accounting , Online sources/Websites and Study Materials prepared by
Professional Exam conducting Institutes.
List of References :
Author/ Study Material Source Publication
Dr. Vinod Singhania Taxman
Dr Girish Ahuja, Dr Ravi Gupta Bharat Law House
T.N.Manoharan Snow White
Study Material of ICAI ICAI

42 | P a g e B.COM.[HONS] SEM 2 TAXATION – 1 UNIT 5