DCM3204 DIRECT TAXES

Description

SESSION	july-august 2024
PROGRAM	BACHELOR of COMMERCE (B.COM)
SEMESTER	VI
course CODE & NAME	DCM3204 & Direct Taxes
CREDITS	04
nUMBER OF ASSIGNMENTS & Marks	02 30 Marks each

 

 

Set – 1^st

Questions

 

1. A. Explain the concept of Income under the Income Tax Act,1961.

Ans: Concept of Income under the Income Tax Act, 1961

The concept of income under the Income Tax Act, 1961 is defined broadly to include various sources of earnings that are subject to taxation.

As per Section 2(24) of the Income Tax Act, income includes:

1. Salaries – The remuneration received by an individual from an employer in return for the services rendered is taxable under the head “Income from Salary.”
2. Income from House

 

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1. Differentiate between Direct Taxes and Indirect Taxes.

Ans: Differentiation between Direct Taxes and Indirect Taxes

Aspect	Direct Taxes	Indirect Taxes
Definition	Direct taxes are levied directly on the income or wealth of individuals or organizations.	Indirect taxes are levied on goods and services, which are passed on to the consumer.
Who Bears the Burden?	The burden of direct taxes is borne by the person on whom it is imposed.	The burden of indirect taxes is passed on to the end consumer.

 

 

2. A. The following are the incomes of Mr. Krishna for the previous year 2023-24:
3. Income from agriculture in Pakistan Rs.30,000
4. Salary received in India but the services were rendered in Iraq (Computed) Rs.12,000
5. Dividend from a Domestic Company (Gross) Rs.2,000
6. Income from a business in Sri Lanka but controlled from India and remitted to India Rs.14,000

Compute Mr. Krishna’s Gross Total Income for the Assessment Year 2024-25, if he is (i) Ordinarily resident  

(ii) Not-ordinarily resident 

(iii) Non-resident   

Ans: To compute Mr. Krishna’s Gross Total Income for the Assessment Year 2024-25, we need to apply the provisions of the Income Tax Act, 1961, concerning the residential status of Mr. Krishna.

We will compute the income under three different scenarios:-

1. Ordinarily

 

 

2023. After serving for 33 years and 9 months at Bharat Chemicals Ltd., Mr. R, who is covered under payment of the Gratuity Act, retires from services on 30th November 2023.

The employer pays him a gratuity of Rs.9,00,000.

His monthly basic salary at the time of retirement was Rs.30,000 p.m., D.A. Rs.9,000 p.m., and HRA Rs.4,500 p.m.

You are required to compute the amount of gratuity exempt under section 10(10)(ii) of the Income Tax Act.

Ans:

To compute the exempt gratuity under Section 10(10)(ii) of the Income Tax Act, 1961, we need to follow the specific provisions for gratuity paid to employees who are covered under the Payment of Gratuity Act.

Section 10(10)(ii) – Exemption on Gratuity

Under Section 10(10)(ii),

 

3. Mr. A is the owner of a house property in Delhi.

• Its Municipal Value is Rs.75,000, Fair Rent is Rs.1,00,000 and Standard Rent is Rs.90,000.
• It has been let out for Rs.90,000 p.a.
• The municipal tax payable by the owner comes to Rs.10,000 but the landlord has taken an agreement from the tenant stating that the tenant would pay the tax directly to the municipality.
• The landlord, however, bears the expenses on the tenant’s amenities under an agreement:
• Water charges Rs.1,000, lift maintenance Rs.1,000, lighting of stairs Rs.800
• The gardener’s salary is Rs.1,200.
• The landlord claims the following deductions:
• Repairs Rs.30,000, land revenue Rs.1,000, collection charges Rs.2,000, and legal expenses incurred in connection with the purchase of land on which the house is built Rs.24,000.

Compute the taxable income from house property for the assessment year 2024-25.

Ans:

To compute the taxable income from house property for Mr. A for the Assessment Year 2024-25, we will follow the steps under the provisions of the Income Tax Act, 1961 for determining the income from house property.

Step 1: Gross Annual Value (GAV)

The Gross Annual

 

 

 

 

Set – 2^nd

Questions

4. Mr. S, a resident of India submits the following particulars of his income for the assessment year 2024-25:
5. Income from house let out (Computed) Rs.9,500
6. Profit from radio business Rs.19,600
7. Income of interest from a firm Rs.1,800
8. Speculation income Rs.1,900
9. Short-term capital gains Rs.3,200
10. Long-term capital gains Rs1,400

The following items have been brought forward from the preceding assessment year 2023-24:

1. i) loss from radio business 4,600
2. ii) Unabsorbed depreciation 1,000

iii) Speculation loss                                                                                Rs.3,200

1. iv) Short-term capital loss for the year 2019-20 4,100
2. v) Long-term capital loss for the year 2020-21 3,950
3. vi) Brought forward loss from House property 3,000

vii)Current year’s depreciation amounted                                                Rs.500.

You are required to compute his total income and deal with the carry–forward of losses.

Ans: To compute the total income of Mr. S for the Assessment Year 2024-25 and deal with the carry-forward of losses, we need to first calculate his Gross Total Income (GTI) by summing up all the sources of income and then adjust for the carry-forward losses.

Step 1: Calculation of Gross Total Income (GTI)

The income from the following sources is given:

1. Income from House Property (Computed): ₹9,500
2. Profit from Radio Business: ₹19,600
3. Interest Income from Firm: ₹1,800
4. Speculation Income: ₹1,

 

 

5. A. The particulars of the income of Mrs. A (age 62 years) for the previous year ended 31^st March 2024 are as under:
6. Taxable income from the house property Rs.27,000
7. Profits and gains of business Rs.9,80,000
8. Capital gains in respect of short-term capital assets Rs.5,000
9. Capital loss in respect of Long-term capital assets being buildings Rs.20,000

Compute the tax liability for the assessment year 2024-25.

Ans: To compute the tax liability of Mrs A (age 62 years) for the Assessment Year 2024-25, we will follow the steps below:

Step 1: Determine Gross Total Income (GTI)

Mrs. A’s income consists of the following:

1. Taxable Income from House Property: ₹27,000
2. Profits and Gains of Business: ₹9,80,000
3. Capital Gains (Short-term): ₹5,000
4. Capital Loss (Long-term): ₹20,000

Now, we calculate the Gross Total Income (GTI):

Gross Total Income=27,000+9,80,000+5,000−20,000\text{Gross Total Income} = 27,000 + 9,80,000 + 5,000 – 20,000Gross Total Income=27,000+9,80,000+5,000−20,000 Gross Total Income=9,92,000\text{Gross Total Income} = 9,92,000Gross Total Income=9,92,000

Step 2: Set Off and Carry

 

1. Differentiate between Self–Assessment and Best Judgement Assessment.

Ans:

Key Differences between Self-Assessment and Best Judgement Assessment

Aspect	Self-Assessment	Best Judgement Assessment
Responsibility	The taxpayer calculates and declares their income and tax.	The assessing officer calculates and estimates the income and tax.

 

 

 

6. Explain the following deductions under section 80 in Income Tax Act,1961:
7. 80C

2.80CCD         

3.80D            

4.80E        

5. 80G

Ans: The Income Tax Act, 1961 provides several deductions under Section 80 to encourage savings, investments, and to provide relief for certain expenditures. These deductions reduce the taxable income of an individual or Hindu Undivided Family (HUF), leading to a reduction in the amount of tax payable.

Below are the explanations for the specified deductions:-

1. Section 80C – Deduction for Investments in Specified Financial Instruments

Section 80C offers deductions for investments in specified financial instruments, which promote long-term savings. The