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Monday, March 20, 2017

Income Under the Head Salary Practical Problems

UNIT – 2: INCOME UNDER THE HEAD SALARY PRACTICAL PROBLEMS
Q.N.1. Mr. X receives Rs. 120000 p.a. as net salary. Employer has deducted Rs. 10000 as employee’s contribution to RPF, Rs. 5000 as TDS and Rs. 2500 as Professional tax. During the year employer had deducted Rs. 5000 towards the recovery of house building advance taken by Mr. X. The employer has paid him the following emoluments:
Dearness Allowance 5000 Per month
Dearness Pay 4000 Per month
Advance salary received Rs. 5000
Arrears of salary Rs. 5000
Bonus 6,000 per annum (Outstanding)
Bonus 6000 for the year 2009-10, received during previous year
Entertainment Allowance 15000 Per annum
Leave encashed during the year Rs. 5000.
Domestic Servant Allowance 500 per month (Full amount spent on engaging a domestic servant)
City Compensatory Allowance 6000 Per month
Gratuity received while in service Rs. 50000.
Project Allowance 1000 per month
Mobile phone expenses given by employer for official purpose Rs. 5000.
Free education by employer to employee’s son worth Rs. 800 p.m.
Car owned by employer having 1.6 ltrs capacity used for both official and personal purpose. All expenses and Salary of chauffeur are met by employer.

Another Car owned by employer having 1.8 ltrs capacity used for both official and personal purpose. All expenses and Salary of chauffeur are met by employer. Cost of such car is 100000 and total expenses incurred Rs. 5000 during the year.
Goods of Rs. 15000 sold by employer to Mr. X for Rs. 7000.
Computer and laptop worth Rs. 60000 provided for both official and personal use.
Transfer of car without any consideration worth Rs. 60000. (Car is used for more than 10 years)
Interest free Loan taken for treatment of  notified illness Rs. 500000.
Lunch Allowance 300 per month
Transport Allowance 900 per month
Pension received from previous employer 3600 p.m. He got 75% of his pension commuted for which he receives Rs. 180000 from his employer.
Deputation Allowance 1000 per month
Medical treatment of Employees Brother in a hospital maintained by employer Rs. 30000.
Children Education Allowance (for 3 children) 400 per month
Hostel Expenditure Allowance (for 3 children) 600 per month
Professional tax paid during previous year 2500
Employer’s contribution to RPF 15% of salaries.
Employee’s contribution to RPF 10%.
Interest on RPF @ 13% amounting to Rs. 11700.
Outstanding salaries received from previous employer Rs. 50000.
Voluntary foregoing of salary Rs. 10000.
Surrender of salary Rs. 5000. {Exempted from tax}
House Rent Allowance 10000 per month. He is having a family house at the place of his posting but he is living in a rented house and is paying a rent of 7000 per month. Compute his gross salary and taxable salary for the assessment year 2013-14.

Q.N.2. Mr. X who is working with a company at Delhi submits the following information about the salary income for the previous year 2012-13:
Salary Rs. 8000 p.m.
DA Rs. 2000 p.m.
Bonus Rs. 15000 (Outstanding)
Bonus Rs. 15000 (Paid)
PPf deposit Rs. 100000.
Medical bills reimbursed by employer Rs. 40000. Treatment was done in a notified hospital.
He has engaged a helper at Rs. 1200 p.m. and his employer pays him Rs. 1500 pm on this account.
Free education by employer to employee’s son worth Rs. 1800 p.m.
Employer’s car costing Rs. 100000 is used 100% for personal purpose. Expenses on car: salary of driver 500 p.m., repairs Rs. 10000. Amount recovered from employee: 5000.
An air conditioner was transferred by employer for Rs. 26000 on 1-10-2012. It cost on 1 – 9 – 2009 was Rs. 1000000.  (Market Value: 40000)
A car was transferred by employer for Rs. 26000 on 1-10-2012. It cost on 1 – 10 – 2009 was Rs. 1000000.
Furniture was transferred by employer for Rs. 26000 on 1-10-2012. It cost on 1 – 10 – 2009 was Rs. 1000000.
His employer paid him Rs. 2000 p.m. as HRA upto 30-11-2012 and it was raised to Rs. 5000 p.m. from 1-12-2012. He lived with his parents in a house owned by his father and no rent was paid by him. From 1-9-2012 he shifted to a rented house and paid Rs. 5000 p.m. as rent. Compute his gross salary for the assessment year 2013-14 if salary is due on the last date of every month.

Q.N.3. Compute gross salary of Mr. X from information given below for each situation separately:
a.       Basic salary Rs. 3500 p.m.
b.      DA Rs. 1000 p.m.
c.       CCA Rs. 200 p.m.
d.      HRA Rs. 1000 p.m.
e.      Car owned by employee having 1.6 ltrs capacity used for only official purpose. All expenses and Salary of chauffeur are met by employer.
f.        Another Car owned by employee having 1.8 ltrs capacity used for both official and personal purpose. All expenses and Salary of chauffeur are met by employer. Expenses incurred Rs. 34000 during the year.
g.       Gas and electricity bill paid by employer Rs. 4000
h.      Sweat equity shares alloted whose FMV is Rs. 150000 for Rs. 40000.
i.         A loan of Rs. 400000 taken from employer for construction of house @ 4% p.a. interest prescribed by SBI for similar loan @ 10%.
j.        Salaries in lieu of notice Rs. 5000 (fully taxable under this head)
k.       Reimbursement of medical expenditure Rs. 18000. Treatment was done in a private hospital.
l.         Cash gift from employer worth Rs. 20000
m.    Gift of car Rs. 100000 from employer.
n.      Use of employer’s furniture worth Rs. 100000 for six months.
o.      Medical insurance premium paid by employer Rs. 10000. [80D]
p.      Commission on turnover achieved by him Rs. 6000
Situation (a) Living in own house
(b) Living in rented house at Delhi as DA enters into pay for retirement benefits and rent paid is Rs. 1500 p.m.
(c) Living in a rented house at Punjab and DA does not enter into pay for retirement benefits and rent paid is Rs. 1000 p.m.

Q.N.4. Mr. X is employed in P Ltd. getting a tax free basic salary of Rs.20, 000 per month. Tax on salary paid by employer is Rs. 12000. The employer has paid him the following emoluments:
Dearness Allowance 5000 Per month
Dearness Pay 4000 Per month
Bonus 6,000 per annum (Outstanding)
Bonus 6000 for the year 2009-10, received during previous year
Entertainment Allowance 15000 Per annum
Domestic Servant Allowance 500 per month (Full amount spent on engaging a domestic servant)
Conveyance Allowance 7000 (spend 70% on official duties)
Project Allowance 1000 per month
Travelling Allowance Rs. 5000 (Actual expenses 4000)
Transfer allowance Rs. 5000 (Actual expenses 6000)
Daily Allowance Rs. 5000 (Actual expenses nil)
Transport Allowance 900 per month
Deputation Allowance 1000 per month
Children Education Allowance (for 3 children) 400 per month
Salaries received as a Partner of a firm Rs. 50000.
Hostel Expenditure Allowance (for 3 children) 600 per month
Professional tax paid during previous year 2500
Entertainment allowance Rs. 50000
Employer provided him with rent free house at chennai for which he pays rent Rs. 4000 p.m. Serivces of gardener also provided at a cost of Rs. 800 p.m. Compute his gross salary and taxable salary for the assessment year 2013-14.
Q.N.5.Mr. X Joined central governments job on 1st oct 2009in the grade of 30000-2000-50000-500 with two advance increment. The employer has paid him the following emoluments:
Dearness Allowance 5000 Per month
Dearness Pay 4000 Per month
Commission on Turnover 5000
Entertainment Allowance 50000 Per annum
Water and Electricity allowance 2000 Per month
Non Practicing Allowance 50000 Per annum
Marriage Allowance 500 Per month
Uniform allowance Rs. 10000 (Acual Expenditure 3000)
Medical treatment of parents in govt. hospital Rs. 50000.
Helper Allowance 15000 Per annum (Actual expenditure 10000)
Academic Research Allowance 15000 Per annum (Actual expenditure 10000)
Conveyance Allowance 15000 Per annum (Actual expenditure 10000)
Children Education Allowance (for 3 children) 400 per month
Employers contribution to SPF Rs. 5000
Employees contribution to SPF Rs. 5000
Interest on SPF Rs. 1000.
Refund of SPF received Rs. 100000 from previous employer.
Hostel Expenditure Allowance (for 3 children) 600 per month
Professional tax paid during previous year 2500 by employer on behalf of Mr. X
Employer provided him with rent free house at chennai for which is owny the central government.  Serivces of gardener also provided at a cost of Rs. 800 p.m.
Compute his gross salary and taxable salary for the assessment year 2013-14.
Q.N.6.Mr. X, Corporate manager (Sales) in Vodafone ltd. Receives the following income during the year ending march, 31st, 2008:
a)      Basic Salary 300000
b)      Leave travel concession for proceeding on leave (actual expenditure on rail fare Rs. 11000) 10000
c)       Tiffin allowance 4000
d)      Re – imbursement of medical expenses incurred for his own treatment 31300
e)      Besides, he enjoys the following perks:
f)       Free unfurnished flat in Delhi (Rent paid by the company Rs. 86000)
g)      The company provides two watchman (Salary Rs. 700 pm per person)
h)      Free use of Maruti 800 car for official as well as personal purposes (log book was not maintained by the employer)
i)        Free meal at the work place Rs 14700 (@ Rs. 70 per day for 210 days, amount is directly paid to the canteen by the company)
j)        Interest free loan for purchasing home appliances (Amount Rs. 120000, date of taking loan march 1st, 2004. Amount outstanding between April 1st, 2007 to November 30th, 2007 Rs. 76000 and after November 30th, 2007: Rs. 50000). The SBI lending rate for similar loan on 1st April, 2007 was 15.25%.
Compute his taxable income from salary for the assessment year 2008 – 2009 from the above information.
Q.N.7.Mr. X has the following income during the previous year 2008-09:
Basic salary --- Rs.1, 20,000.
Dearness allowance (forming part of salary)—Rs 24,000
Medical allowance (actual expenditure Rs 4,000)—Rs, 6,000
Educational allowance (for three children)—Rs 6,000  
Rent free house in Delhi for which the employer company paid Rs 5,000 p.m. as rent. The house was furnished with rented furniture. The rent of the furniture is Rs 300 p.m.
The company provided two servants and one watchman. The company paid Rs 300 to each of them per month.
The company paid Rs 2,500 on his training programme.
Mr. X paid his professional tax of Rs 2,400 and deposited Rs 20,000 as LIP on his own life and Rs 15,000 for NSC.
Compute his taxable income for the assessment year 2009-10.
Q.N.8.From the following information, compute the taxable income for assessment year 2010-2011 under the head “Salaries” of Mr. X who is an employee of a transport company:
Salary @ Rs. 10000 p.m.
Arrears of salary Rs. 5000
DA @ Rs. 4000 p.m.
Employer is paying insurance premium of Rs. 1000 pa on his life.
Bonus Rs. 15000
Education allowance for his two children @ Rs. 300 p.m.
Cash gift Rs. 20000
City compensatory allowance @ Rs. 1000 p.m.
Medical expenses paid by employer Rs. 18000
He contributes 15% of his salary to a recognised provident fund and his employer also contribute the same.
He is given lunch allowance @ Rs. 100 for 250 days during the previous year.
He is provided with a mobile phone, the bill of which is paid by the company Rs. 6000.
Q.N.9. Mr. X is a manager of a textile company at japer since 1986. He submits the following particulars of his income for the financial year 2010 – 2011:
a)      Basic salary 240000per
b)      Dearness allowance  5000 p.m. (200 p.m. enters into retirement benefit)
c)       Education allowance for two children @ 150 p.m. per child
d)      Commission on sales @1% of turnover of 1000000
e)      Travelling allowance 30000. The entire amount was spent by him for official purpose
f)       He was given cloth worth 1000 by his employer free of cost
g)      He resides in the flat of the company at Jaipur (26 Lacs population)
h)      A cook and a watchman have been provided by the company at the bunglow who are paid @ 400 each p.m.
i)        He has been provided with a motor car of 1.8 ltrs engine capacity for his official and personal use. All expenses are borne by employer of the car.
j)        Emplyer’s contribution to RPF is 40000 and interest credited to RPF @ 13% amounted to 16250.
k)      His own contribution to RPF 40000
l)        Rent of house recovered from his salary 1500 p.m.
Compute the income from salary for the assessment year 2011 – 2012.
Q.N.10. Mr. Pratap Singh is a production Manager of an Industrial unit at Mumbai. The particulars of his salary income areas under:
Particulars
Amount
Basic salary
Dearness allowance(given under the terms of employment)
Entertainment allowance
Medical  allowance
House   Rent allowance
Rent  paid  for the house  
15,000 p.m
5000p.m
1000 p.m
500 p.m.
4000 p.m.
5000 p.m.
Car of 1.2 Lt. capacities provided by employer meets expenses of car. He and his employer (each) contribute 15% of salary to R.P.F. Mr. Singh had taken interest free loan of Rs. 15,000 to purchase Washing Machine. Compute income under the head salary for the assessment year 2008—2009.
Q.N. 11. Mr. Pranjal working as a Manager (sales) with HL Ltd. provides the following information for the year ending March 31, 2009:
Basic Salary—Rs 1, 44,000
DA (50% of it is meant for retirement benefit Rs 1, 44,000)
Commission as a percentage of turnover of the employer company—0.5%
Turnover of the company—Rs 50, 00,000
Bonus—Rs 30,000
Gratuity (received in service)—Rs 30,000
Own contribution towards RPF—Rs 25,000
Employers contribution towards RPF—20% of basic
Interest contribution in the RPF @ 15%--Rs 15,000
Gold ring worth Rs 10,000 was given by employer on his 20th wedding anniversary
He received interest Rs 5,860 on bank fixed deposit, dividend of Rs 1,260 from shares of Indian companies and interest of Rs 7,540 from the debenture of Indian companies. Made payment by cheques of Rs 15,370 towards premium on LIP and Rs 12,500 for Mediclaim insurance policy. He invested in 6 years NSC Rs 30,000, FDR of SBI for 7 years Rs 50,000. He has donated Rs 11,000 to an institution approved under section 80G and of Rs 5,100 to Prime Minister’s national relief fund during the year.
Compute his total income and tax payable thereon for the assessment year 2009-10.
Q.N.12. Mr. Robin is appointed as a Manager of  power grid  Ltd., Guwahati, on 1st  february,2007 in the scale of Rs. 23,600—800—47,600.His annual Increment of Rs 800 falls due on 1st  February of every year. Dearness allowance is 20% of salary. Salary falls due on the 1st day of every month. Bonus during the year is Rs.10, 000 and CCA is Rs 800 p.m. Robin’s contribution to RPF is at 12% of the basic pay and DA equal to his contribution is made by his employer.
He is in possession of a company car for his official duties and personal use with 1.4 lt. capacity. All expenses including the driver’s salary are met by the company.
A free accommodation has been provided Rent paid by the company is Rs 4,800 p.m. cost of furnishing the home is Rs 48,000. He receives Rs 500 p.m as entertainment allowance. The company has reimbursed Rs 24,000 being the actual air fare to and from Guwahati and Delhi to attend the company’s meeting.
He has insured his life for Rs1, 00,000 and his wife’s life for Rs 40,000 for which the monthly premium are Rs 500 and Rs 600 respectively.
He paid Rs 19,200 p.p. as installment of his flat purchased. He received Rs 680 as interest on fixed deposit.
Compute his taxable income under the head ‘salaries’ for the assessment year 2010—11
Q.N.13.Following are the particulars of salary of Mr. Borkakoty who is physically handicapped, an employee of ONGCL of Ahmedabad (Population exceeding 25 lakhs):
a.       Basic salary 60000 p.m.
b.      Transport allowance 2000 p.m.
c.       Domestic servant allowance 5000.
d.      DA 10000 p.m. (50% forms part of salary)
e.      Transport allowance 4000 p.m.
f.        Free refreshment in office Rs. 500 (fully Exempted)
g.       Bonus 20000
h.      Commission 80000 on turnover
i.         Telephone bill of his residence paid by employer 20000
j.        Amount paid by employee for free supply of gas and electricity at residence 36000
k.       He got a loan of 1000000 from his employer at a nominal rate of interest of 3.25% for the construction of his house. SBI lending rate as on 1-4-2010 at 8%.
l.         He is paid house rent allowance of 10000 p.m. till 31st July, 2010 and thereafter he is given a rent-free house got by his company on a monthly rent of 20000. Cost of furniture 100000. Before shifting to rent free house he was paying a rent of 8000 p.m.
m.    Leave travel concession 40000
n.      He is given a free lunch worth 100 per day
o.      Both he and his employer are contributing 10000 p.m. each towards recognised provident fund (RPF)

Find out Mr. Borkakoty’s salary income for the assessment year 2011 – 2012.

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