Taxmann's Tax Laws (TAX) | MCQs

SOLVED PAPER : JUNE 2023 (SUGGESTED ANSWERS) P.1

4

COMPUTATION OF INCOME UNDER VARIOUS HEADS

PART 1 : INCOME UNDER THE HEAD “SALARIES”

BASICS

1. Which of the following Section enumerates the five “Heads of Income” under which the Income of the assessee may fall:

5. In which of the following cases, Employer-Employee relationship exists and therefore the income is taxable under the head “salaries”

2. The relevant sections for computation of Income under the head Salaries are:

3. As per Section 15 of the Income-tax Act, Salary is taxable on:

6. A professor of a college receives monthly salary from the college. He is appointed by the University as examiner during the final exams conducted by the university. In this case the remuneration received as an examiner is taxable under the head:

4. The most fundamental requisite for charging income under the head “Salaries” is :

7. Sargam is a qualified doctor. She joined Arpana hospital as an employee on monthly salary. Their contract of service contained a clause restraining her to pursue practice beyond employment and paid her ` 3,00,000 as compensation for the same. The income will be taxable as:

8. As per Section 9(1)(ii), salary is deemed to accrue or arise in India if services are rendered in India. Section 9(1)(iii) gives exception to the above provision. It states: a

c d 12. “Salary” under section 17(1) includes the following, except:

a b c d

13. Which one of the following is not a deduction under Section 16 of the Income-tax Act:

a b

c d

c d

9. Whose income is taxable under the head “Salaries” despite no employer- employee relationship.

14. Simar has received salary from her employer during the Previous Year (P.Y) 2022-23 net of deduction of ` 80,000 on account of Tax deducted at source and ` 84,000 as provident fund contribution of the employee. She has received ` 6,36,000 during the year. What is her Gross Salary for the year?

a

c

10. In relation to definition under Section 17 of the Income-tax Act, the following are defined, except a b c d

11. In which of the following situation, Salary will not be taxable: a

15. Suhani was employed in X Ltd. in the grade of ` 8,000-500-12,000-1000-20,000. She joined on 1.8.2018. What is her Gross salary income for P.Y 2022-23, if her salary is due on the last day of the month?

16. What will be the amount of gross salary which shall be required to be declared in the return of income to be filed for the previous year 2022-23 by Harun, who joined services as Manager Accounts on

the salary of ` 17,000 p.m. in XYZ Ltd. on 1st April, 2019 in the grade of 15,0002000 - 19,000 - 3000 - 28,000 ?

a `

b `

c `

d ` [CS. Executive Dec. 2019]

17. Mr. Anjan joins a service in the grade of ` 15,600-39,100 plus grade pay of ` 6,000 on 1.8.2022. He also gets dearness allowance @107% of salary. His tax liability for AY 2023-24 will be -

a b `

c `

d ` [CS. Executive Dec. 2014]

18. Pankaj joins service on 1st April, 2018 in the grade of 15,000-1,000-18,000-2,00026,000. His Gross salary for the year ended on 31st March, 2023 will bea

d ` [CS. Executive Dec. 2015]

19. Mr. Joseph joined government job in the grade of 18,000 -1500-22500-2000-28,500 on 15.7.2017. His salary is due on the first day of next month. What will be his basic salary for the P.Y. 2022-23?

21. The Salary of Mr. John is ` 60,000 p.m. He however took Advance Salary of 5 months from his employer on 10.1.2023. His salary is due on first day of next month. What is his gross salary for P.Y. 2022-23? a

22. Mr. Shravan is on a salary of ` 40,000 p.m. He also took advance of ` 2,00,000 against salary, on 1.3.2023. What will be his salary income for P.Y. 2022-23 after allowing standard deduction of ` 50,000?

23. Which of the following allowance is fully taxable?

a

24. Which of the following allowances are fully exempt?

a b

20. Mr. X is employed in HCL Ltd. since 1.7.2012 in the pay scale of 10,000 -500 -14,000 - 1000 - 19,000. The employer paid him Dearness Allowance (D.A.) @ 10% of Basic salary up-to 31.8.2022 and thereafter @ 20% of basic salary. His gross salary for the P.Y 2022-23 is:

25. Which of the following allowance is fully taxable?

26. As per section 10(14)(ii) and [Rule 2BB(2)] of the Income-tax Rules, 1962 the extent to which Compensatory Field Area allowance is exempt is ` :

31. House rent Allowance (HRA) is exempt under Section ----- of the Income-tax Act. a

27. As per section 10(14)(ii) and [Rule 2BB(2)] of the Income-tax Rules, 1962 the extent to which Compensatory Modified Field Area allowance is exempt is ` :

32. The amount of exemption in respect of HRA received depends upon the following except:

28. As per section 10(14)(ii) and [Rule 2BB(2)] of the Income-tax Rules, 1962 the special allowance in the nature of Counter Insurgency Allowance granted to the members of armed forces operating in areas away from their permanent locations is exempt to the extent of ` :

33. The HRA is exempt under Rule 2A of the Income Tax Rules. The least of the three will be exempt, the word “three” includes the following except:

29. Which of the following allowance is available only to the members of armed forces?

34. For the purpose of calculation of HRA, salary means: a

b Basic salary + DA (forming part of salary for retirement benefits) + monthly commission c

35. For the purpose of calculation of HRA salary is taken on:

30. The assessee is a citizen of India and an employee of Central Government working in Canada. The government provides him certain allowances. These allowances will be exempt in the hands of assessee if he is:

36. Mr. X is employed with XY Ltd. on a basic salary of ` 10,000 p.m. He is also entitled to Dearness allowance @ 100% of

basic salary, 50% of which is included in salary as per terms of employment. The company gives him house rent allowance of ` 6,000 p.m. which was increased to ` 7,000 p.m. with effect from 01.01.2023. He also got an increment of ` 1,000 p.m. in his basic salary with effect from 01.02.2023. Rent paid by him during the previous year 2022-23 is as under:

April and May, 2022 Nil, as he stayed with his parents.

June to October, 2022 ` 6,000 p.m. for an accommodation in Ghaziabad.

November, 2022 to March, 2023 ` 8,000 p.m. for an accommodation in Delhi.

Compute the HRA exempt u/s 10(13A) for Assessment Year 2023-24.

d

[CS Executive June 2021]

39. Murali is employed in Megha Ltd., Delhi. He is paid house rent allowance of ` 9,000 per month in financial year 2021-22. His salary for the purpose of computation or house rent allowance relief may be taken as ` 20,000 per month. Murali pays actual rent of ` 10,000 per month. How much of the house rent allowance is tax-free -

b

c

d ` [CS. Executive June 2016]

37. Compute taxable amount of house rent allowance in the following cases:

40. Mr. A is employed in ABS transports as cabin driver. He is paid ` 15,000 every month in the whole of previous year as allowance for meeting his personal expenditure in the course of running the goods vehicle. Mr. A does not receive any other amount by way of daily allowance. The amount of allowance eligible for exemption is:

a

b

c

d [CS. Executive June 2017]

41. The following allowances are exempt u/s 10(14) to the extent the expenses are actually incurred or amount received whichever is less, except:

a

b

38. Chaturvedi is employed in a company at Delhi. He was paid monthly house rent allowance of ` 15,000 during the previous year 2021-22. His Basic pay + DA (eligible for retirement benefits) for the year ended 31st March, 2022 is ` 12 lakhs. Chaturvedi paid ` 20,000 as rent per month for the accommodation occupied by him throughout the year. Compute the amount of HRA exempt from tax.

42. Shubhra received academic and research allowance of ` 60,000 from her employer during the P.Y 2021-22. On 15.11.2021 she spent on research ` 42,000 and on 23.3.2021 she again spent ` 12,000. Another ` 8,000 were spent by her on 4.04.2021. The amount of exemption u/s 10(14) will be restricted to:

4.6

43. Mr. Murthy is employed in ABC Management Institute, Pune. He is eligible for ` 24,000 as allowance for the year towards academic and research work. The amount of academic and research allowance chargeable to tax, if he did not spend any money for the purpose, is:

48. Sonu received ` 240 per month as education allowance for his 3 children in the P.Y. 2021-22. What is the amount of exemption he is entitled to as per section 10(14)?

44. The following are the allowances which are exempt u/s 10(14) to the extent of amount received or the limits specified as per income tax, whichever is less, except:

49. Children education allowance received by an employee from his employer is ` 80 per month per child for 3 children. Taxable education allowance will bea

b

c

d

[CS. Executive Dec. 2014]

50. Mr. X has two sons. He is in receipt of children education allowance of ` 150 p.m. for his elder son and ` 70 p.m. for his younger son. Compute his taxable allowance.

45. The tribal area allowance is exempt up-to a maximum ceiling limit of:

46. Shiv Ram was posted to Madhya Pradesh for 4 months and was given tribal area allowance of ` 2000. Find the taxable amount in the hands of Mr. Shiv Ram:

51. Mr. Vivek is entitled to ` 5,000 pm. as Medical Allowance. He spends ` 4,000 per month on his medical treatment and ` 500 on the medical treatment of his major son not dependent on him. The medical allowance exempt will be:

47. The children education allowance is exempt up-to a maximum ceiling limit of:

52. Mr. Amit is entitled to a transport allowance of ` 1,000 per month for commuting from his residence to office and back. He spends ` 800 per month. The amount of exemption will be:

53. Where there is a decision to increase the D.A. in March, 2021 with retrospective effect from 1/4/2019, and the increased D.A. is received in April, 2021 the increase is taxable -

57. A Central Government Officer received during the year 2021-22 salary excluding all allowances of ` 9,00,000 and amount of entertainment allowance of ` 12,000 @ ` 1,000 p.m. The maximum amount of entertainment allowance so received by him being exempt under section 16(ii) of the Act is ………………………………..

54. Salary for the purpose of computation of exemption of entertainment allowance in the hands of Government employee means:

[CS. Executive Dec. 2019]

58. Ravi is receiving ` 10,000 as medical allowance from his employer. Out of this, he spends ` 5,000 on his own medical treatment ` 2,000 on the medical treatment of his dependent wife and another ` 3,000 for the medical treatment of his major son who is not a dependent on him. The amount of medical allowance taxable in his hand is -

b `

55. Geetesh is a Central Government employee and has received ` 20,000 as entertainment allowance. He spent ` 15,000 for entertaining the business clients. His basic salary for the Previous Year 2021-22 is ` 80,000 and he also gets 20% dearness allowance as part of salary. The amount of Entertainment allowance deductible u/s 16(ii) will be:

c `

d [CS. Executive June 2016]

56. For the purpose of Entertainment allowance, Government employee means:

59. Paresh, a Company Secretary working in Roly Poly Ltd. Chennai besides Salary, HRA, DA and Bonus was also getting fixed medical allowance of ` 10,000 from the employer. He spent out of the medical allowance so received an amount of ` 6,000 on his treatment, ` 2,000 on the treatment of his wife and ` 1,000 on the treatment of his major son not dependent on him. The amount of medical allowance received and to be exempt for Assessment Year 2022-23 shall be................

b

d ` [CS Executive Dec. 2020]

60. Pawan, employed in Magic Ltd. was eligible for transport allowance of ` 2,000 per month to meet his travel expenses from residence to office. He actually incurred ` 1,200 per month towards travel. The amount of travel allowance chargeable to tax would be-

d [CS. Executive Dec. 2016]

61. Zeba gets ` 1000 per month as transport allowance for commuting between office and residence. The amount that will be taxable in her hands will be: a

66. Mr. Amit employed in X Co. Ltd., in Salem, received ` 10,000 per month as house rent allowance in the year 2021-22. His total salary is ` 4 lakhs consisting of Basic pay + DA. He paid rent of ` 8,000 per month. How much of HRA is exempt from tax? a

[CS. Executive Dec. 2017]

RETIREMENT BENEFITS

62. Sushil is a handicapped employee who receives ` 3,500 p.m. as transport allowance. The amount of exemption that Mr. Sushil will get in the P.Y. 2020-21 is:

67. The maximum ceiling limit of exemption for the purpose of exemption under section 10(10)(ii) i.e. Employee covered under the Payment of Gratuity Act, 1972 is:

63. Mr. Y is a visually impaired person. He is employed in a public sector undertaking since 1-6-2019. He was paid 30,000 for the financial year ended 2021-22 by way of transport allowance. How much of transport allowance is exempt from income-tax ? a

d [CS Executive June 2021]

64. Island duty allowance is exempt up to a maximum ceiling of : a

68. The maximum ceiling limit of exemption for the purpose of exemption under section 10(10)(iii) i.e. an employee not covered under the Payment of Gratuity Act, 1972 is:

a

b

c

69. The maximum amount of any death-cum-retirement gratuity received by an employee not covered under the Payment of Gratuity Act, 1972 on Superannuation from the employer, exempt from tax is of ……………………….

65. Allowances and perquisites allowed to an employee for services rendered outside India are tax free in case ofa

[CS. Executive Dec. 2016]

d

[CS. Executive Dec. 2019]

70. After serving for 28 years and 7 months in M Steels Ltd., Nitin retired on 30th September, 2022. He is covered by the Payment of Gratuity Act, 1972.

The company has paid him a gratuity of ` 14,21,500. At the time of retirement, he was getting basic salary ` 37,800, dearness allowance ` 3,800 mid house rent allowance ` 5,200 per month. However his average salary for last 10 months is ` 36,400. Determine the amount of gratuity exempt under section 10(10) of Income Tax Act, 1961.

`

` [CS. Executive Dec. 2022]

71. The maximum ceiling limit of exemption for the purpose of exemption under section 10(10AA), Leave encashment at the time of retirement is:

[CS. Executive Dec. 2017]

72. The maximum ceiling limit of exemption for the purpose of exemption for voluntary retirement compensation under section 10(10C) a

75. For the purpose of Encashment of earned leave, Government employee means:

73. The maximum ceiling limit of exemption for the purpose of exemption of retrenchment compensation under section 10(10B)

76. For the purpose of Pension, Government employee means:

74. For the purpose of Gratuity, Government employee means:

77. For the purpose of Rent free accommodation, Government employee means:

78. Mr. Vijay employed in ABC Ltd. opted for voluntary retirement and received ` 22

4.10

lakhs by way of gratuity. The payment of Gratuity Act, 1972 is applicable in his case. The monetary limit for exemption under section 10(10) is:

a

b

c

d

[CS. Executive Dec. 2017]

79. Salary for the purpose of computation of exemption of Gratuity for an employee covered under the Payment of Gratuity Act,1972 is:

82. If an employee has completed 11 years & 6 months of service, the number of completed years for the purpose of computing exemption of a non-government employee covered under Payment of Gratuity Act, 1972 will be:

a b c d

83. If an employee has completed 11 years & 6 months and 5 days of service, the number of completed years for the purpose of computing exemption of a non-government employee covered under Payment of Gratuity Act, 1972 will be: a

80. Salary for the purpose of computation of exemption of Gratuity for an employee not covered under the Payment of Gratuity Act, 1972 is:

84. If an employee has completed 11 years & 6 months and 5 days of service, the number of completed years for the purpose of computing exemption of a non-government employee not covered under Payment of Gratuity Act, 1972 will be: a

81. Mr. X was employed in ABC Ltd. getting basic pay ` 18,000 p.m. but it was increased to ` 24,000 p.m. w.e.f. 01-07-2022, dearness allowance ` 6,000 p.m. but it was increased to ` 9,000 p.m. w.e.f. 01-07-2022 (50% of DA forms part of salary). The employee was retired on 10.01.2023 after serving the employer for 20 years and 10 months. The employer has paid him gratuity of ` 9,10,000 and the employee was covered under Payment of Gratuity Act, 1972. The taxable portion of gratuity will be:

85. Shivani has already availed exemption of gratuity under section 10(10) (ii) to the extent of ` 1,80,000, and thereafter she gets gratuity of ` 3,25,000 from her new employer at the time of retirement. The maximum ceiling limit of exemption for her would be:

TAX LAWS (TAX) MCQS

AUTHOR : K.M. BANSAL , ANJALI AGARWAL

PUBLISHER : TAXMANN

DATE OF PUBLICATION : JULY 2023

EDITION : 8th Edition

ISBN NO : 9789357781473

NO. OF PAGES : 512

BINDING TYPE : PAPERBACK

DESCRIPTION

This book is prepared exclusively for the Executive Level of Company Secretary Examination requirement.

The Present Publication is the 8th Edition for CS-Executive | Old Syllabus | Dec. 2023 Exam. This book is authored by CA (Dr) K.M. Bansal & CA Anjali Agarwal, with the following noteworthy features:

• [Coverage] of this book includes

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