DCM3204 DIRECT TAXES

Description

SESSION	MaY 2024
PROGRAM	bacherlor of commerce (b.Com)
SEMESTER	06
course CODE & NAME	DCM3204 & DIRECT TAXES
CREDITS	04
nUMBER OF ASSIGNMENTS & Marks	02 30 MARKS EACH

 

Assignment Set – 1^ST

Questions

 

1. Explain the concept of Income Tax. As per Income Tax Act 1961, define the following terms:
2. Person
3. Assessee
4. Assessment Year
5. Previous Year
6. Income

 

Ans:

Concept of Income Tax:-

Income tax is a direct tax levied by the government on the income earned by individuals, corporations, and other entities. It is calculated based on the income earned during a specific period, typically a financial year, and is a primary source of revenue for the government. The income tax system is progressive in nature, meaning that individuals with higher incomes pay a higher tax rate.

Definitions as per

 

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2.

1. From the following details calculate the total income of Mr. Raja, if he is OR, NOR and NR
2. Dividend from Indian company Rs 1,00,000
3. Dividend from foreign company Rs 1,50,000, received in India

• Income from business in Kenya but controlled from India Rs, 2,00,000

1. Income accrued in Switzerland Rs, 2,50,000, 2/5th received in India
2. Income from business in Indonesia but controlled from Bangladesh Rs, 5, 00,000.

Ans:

To calculate the total income of Mr. Raja under different residential statuses (Ordinary Resident (OR), Not Ordinarily Resident (NOR), and Non-Resident (NR)), we need to consider the tax implications of each type of income based on his residential status.

Definitions:

• Ordinary

 

 

1. b) Brett Lee, an Australian cricket player visits India for 100 days in every financial year. This has been his practice for the past 10 financial years.
2. Find out his residential status for the assessment year 2024-25.
3. Would your answer change if the above facts relate to Srinath, an Indian citizen who resides in Australia and represents the Australian cricket team?

• What would be your answer if Srinath had visited India for 120 days instead of 100 days every year, including P.Y.2023-24?

Ans:

To determine the residential status of Brett Lee and Srinath for the assessment year 2024-25 based on the information provided, we need to apply the criteria laid out in the Income Tax Act, 1961.

Criteria for Residential Status:

1. Resident: A person is considered a resident in India if:
   • They are

 

 

3.

1. Calculate the amount of HRA exempt U/s 10(13A) in respect of an employee residing in Mumbai who was in receipt of basis salary of Rs. 65,000 Dearness allowance of Rs. 35,000 and HRA of Rs 25,000 and he paid the actual rent of Rs 15,000 per annum.

Ans: To calculate the amount of House Rent Allowance (HRA) exempt under Section 10(13A) for an employee residing in Mumbai, we will use the formula for HRA exemption. The exemption is the minimum of the following three amounts:

1. Actual HRA received.
2. Rent paid in excess of 10% of basic salary.
3. 50% of the

 

 

30000. R, a Chartered Accountant was appointed as Finance Manager with ABC Bank on 1/4/2020 in the Salary grade of Rs. 12000 — 500 — 20000 — 1000 — 30000.

• He was entitled to Leave Travel Concession for proceeding on leave of Rs. 4000. His actual expenditure on this account amounted to Rs. 5000.
• As the bank is situated at a place where home food is available, R was offered Tiffin Allowance Rs. 6000, His actual lunch expenses amounted to Rs.10,000
• Reimbursement of medical expenses for treatment of R and his family in private clinic was Rs. 50,000
• The Bank has provided free unfurnished flat at Mumbai (rent paid by Bank: Rs.80, 000). However the perquisite value of that Flat was Rs. 30000.
• The employer provided two watchmen (salary Rs .2000 per month each).
• Free use of Santro car for official use, car can be used for journey between office and residence.
• Free refreshments provided at place of work (Rs. 100 per day for 200 days).

Compute Taxable Salary Income for the assessment 2022-23.

Ans: To compute the taxable salary income of R, the Finance Manager at ABC Bank, we need to consider the various components of his salary and the applicable exemptions.

Let’s break it down step by step. 

Given

 

 

 

Assignment Set – 2^nd

Questions

4.

1. Find out the Gross Annual Value from the details given in respect of premises:

• Actual Rent: Rs 10,000 per month.
• Rent of similar premises in the area Rs. 15,000 per month.
• Municipal ratable value Rs. 8000 per month
• Standard Rent fixed under the Rent Control Act. Rs. 12,000 p.m.

Ans:

To calculate the Gross Annual Value (GAV) of the premises, we use the following method: 

Definitions:

Actual Rent: The rent received or receivable.

Rent of Similar Premises: The market rate for similar properties in the area.

Municipal Ratable Value: The value determined by municipal authorities for property tax purposes.

Standard

 

1. Explain the income Chargeable under Section 28 of the Act under the head of “Profits and Gains of Business or Profession”?

Ans: Under the Income Tax Act, Section 28 outlines the income chargeable under the head “Profits and Gains of Business or Profession.” This section specifies various sources of income that are taxable as profits and gains from a business or profession. Here’s an overview of the key components:

Income

 

5 a. Mention the steps followed in calculation of Total taxable income of an individual.

Ans: Calculating the total taxable income of an individual involves several steps.

Here’s a structured approach to the calculation:

Steps to Calculate Total Taxable Income of an Individual:

1. Determine the Residential Status:
   • Establish whether the individual is a Resident, Not Ordinarily Resident (NOR), or

 

 

1. Enlist some of the incomes that are taxed under the head ‘Income from other sources. Also, discuss the deductions allowed u/s 57, that can be used while computing income from other sources

Ans: Incomes Taxed Under the Head ‘Income from Other Sources’

The head ‘Income from Other Sources’ includes various types of income that do not fall under the other specific heads of income (Salary, House Property, Business/Profession, or Capital Gains).

Here are

 

 

6. a. Explain the meaning of Capital Assets and explain the significance of holding period while deciding nature of Capital Assets.

Ans: Meaning of Capital Assets

Capital Assets are defined as properties owned by an individual or entity that are not intended for sale in the ordinary course of business. They can be tangible or intangible and are typically used to generate income, provide utility, or serve a purpose in the long-term operation of a business or personal finances.

Examples of

 

 

1. Explain the provision related to Clubbing of Income.

Ans: Clubbing of Income: Overview

Clubbing of income is a provision under the Income Tax Act in many countries, including India, which allows for the aggregation of income from different sources for tax purposes. This provision is primarily designed to prevent tax avoidance strategies that individuals might use to evade taxes by transferring income to another person or entity.

Related to Clubbing