ASSIGNMENT ON TAXATION

Q)Mr B aged 63 years, has earned rupees 75,00,000 out of his

business. His ex- wife gifted him cash in account worth rupees 6
lakh. He spent a total of rupees 15 lakh during a family trip. He
won a lottery of 19 lakh rupees. Out of happiness he gifted his
wife cash of rupees 450000. He bought a life insurance policy
and paid a premium of 50000 annually. He paid tuition fee for
his daughter for rupees 50000. He invested rupees 80000 in
PPF. One of his existing life insurance policy got matured and he
received a total of rupees 32 lakh. Seeing his health conditions
the doctor advised him a medical test of rupees 6000 following
he bought a health insurance for rupees 27000. Calculate his
taxable income and tax liability.
Answer:
1. Mr B's total income from various sources: - Business
income: 75,00,000 - Gift from ex-wife: 6,00,000 (gifts from
relatives are not taxable) - Lottery winnings: 19,00,000
(taxable at a flat rate of 30%) - Maturity amount from life
insurance policy: 32,00,000 (taxable if the premium paid is
more than 10% of the sum assured)

2. Mr B's total expenses and deductions: - Family trip:

15,00,000 (not deductible) - Gift to wife: 4,50,000 (not
 deductible) - Life insurance premium: 50,000 (deductible
under section 80C) - Tuition fee for daughter: 50,000
(deductible under section 80C) - PPF investment: 80,000
(deductible under section 80C) - Medical test: 6,000 (not
deductible) - Health insurance premium: 27,000
(deductible under section 80D)

3. Calculate the taxable income: - Total income: 75,00,000 +

19,00,000 + 32,00,000 = 1,26,00,000 - Total deductions:
50,000 + 50,000 + 80,000 + 27,000 = 2,07,000 - Taxable
income = total income – total deduction
i.e 1,26,00,000 - 2,07,000 = 1,23,93,000

4. Calculate the tax liability: - Tax on lottery winnings:

19,00,000 * 30% = 5,70,000 - Tax on remaining income
(1,23,93,000 - 19,00,000) = 1,04,93,000
Up to 2,50,000: No tax
- 2,50,001 to 5,00,000: 5% of (5,00,000 - 2,50,000) =
12,500
- 5,00,001 to 10,00,000: 20% of (10,00,000 - 5,00,000) =
1,00,000
- Above 10,00,000: 30% of (1,04,93,000 - 10,00,000) =
28,47,900
 - Total tax on remaining income: 12,500 + 1,00,000 +
28,47,900 = 29,60,400

5. Total tax liability: Tax on lottery winnings + Tax on

remaining income = 5,70,000 + 29,60,400 = 35,30,400
So, Mr B's taxable income is 1,23,93,000 and his tax
liability is 35,30,400.