MODULE 2 – INCOME FROM SALARY

Definition of salary under section 17(1): salary is defined to include the following:
a. Wages
b. Any annuity or pension
c. Any gratuity
d. Any fees, commission, perquisites or profits in lieu of or in addition to any salary or
wages;
e. Any advance of salary;
f. Any payment received by an employee in respect of any period of leave not availed
by him;
g. The portion of the annual accretion in any previous year to the balance at the credit of
an employee participating in a recognised provident fund to the extent it is taxable;
h. Transferred balance in a recognised provident fund to the extent it is taxable;
i. The contribution made by the central government or any other employer to the
account of employee under a notified pension scheme referred to in section 80CCD

Basis of charge of Salary Income: As per section 15, salary consists of;
a. Any salary due from an employer (or a former employer) to an assessee in the
previous year, whether actually paid or not;
b. Any salary paid or allowed to him in the previous year by or on behalf of an employer
(or a former employer), though not due or before it became due; and
c. Any arrears of salary paid or allowed to him in the previous year by or on behalf of an
employer (or a former employer), if not charged to income-tax for any earlier
previous year.
Salary is taxable on “due” or “receipt” basis whichever is earlier
Accounting method of the employee not relevant.

Template for computing the salary:

Particulars Amount in Rs. Amount in Rs.
Income from Salary
Income by way of allowances
Taxable value of perquisites
Gross salary
Less: Deduction u/s16
Entertainment allowance
Professional tax
Income from Salaries

Different forms of Salary – How taxed

Different receipts Tax treatment

Basic Salary Taxable
Dearness Allowance Taxable
Advance Salary Taxable in the year of receipt
Taxable in the year of receipt, if not taxed on due basis
Arrears of salary
earlier
Leave encashment while in service Taxable
 Leave encashment at the time of
Exempt in the hands of a Govt. employee. In the case
retirement or at the time of leaving
of a non-govt employee, it is exempt in some cases
job
Salary in lieu of notice Taxable
Not chargeable under the head “salaries” but taxable
Salary to partner under the head “profits and gains of business or
profession”.
Fees and commission Taxable
Taxable on receipt basis if not taxed earlier on due
Bonus
basis
Exempt in the hands of Govt employee. In the case of
Gratuity
a non-govt. employee, it is exempt in some cases
Monthly pension (i.e.,
Taxable
uncommuted pension)
Lump sum payment of pension (ie. Exempt in the hands of Govt employee. In the case of
Commuted pension) a non-govt. employee, it is exempt in some cases
Pension under National Pension
At the time of receipt of pension it is chargeable to tax.
Scheme (NPS)
Annuity from employer Taxable as salary
1. excess of employer’s contribution over 12% of
Annual accretion to the credit
salary is taxable
balance in recognized provident
2. Excess of interest over notified interest is taxable
fund
(notified rate of interest is 9.5%)
Exempt from tax to the extent of least of the following
a. Amount calculated u/s 25F(b) of the Industrial
Retrenchment compensation Disputes Act; or
b. An amount specified by the Government (ie., Rs.
5,00,000).
Remuneration for extra duties Fully taxable
Compensation received under
Exempt in some cases
voluntary retirement scheme
Profits in lieu of salary taxable
Salary from UNO Not chargeable to tax

Treatment of Tax for Leave Salary:

Nature of leave
Status of employee Whether is it taxable
encashment
It is chargeable to tax.
Leave encashment during
Govt./Non-Govt employee However, relief can be taken
continuity of employment
under section 89
Leave encashment at the
It is fully exempt from tax
time of retirement/leaving Govt. Employee
under section 10(10AA)(i)
job
It is fully or partly exempt
Leave encashment at the
Non – Govt. employee from tax in some cases
time of retirement/leave job
under section 10(10AA)(ii)
Non Govt Employees getting leave encashment at the time of retirement – in the case of a
non – government employee (including an employee of a local authority or public sector
undertaking), leave salary is exempt from tax on the basis of least of the following –
1. Period of earned leave (in number of months) to the credit of the employee at the time
of his retirement or leaving the job X average monthly salary
2. 10 X average monthly salary
3. The amount specified by the govt. (i.e., Rs. 3,00,000 applicable from 1st April 1998;
for earlier period this amount was different)
4. Leave encashment actually received at the time of retirement.
How to find out leave standing to the credit of an employee at the time of retirement or
leaving the job
Step 1: find out duration of service in number of years (ignore any fraction of year)
Step 2: find out rate of earned leave entitlement from the service rules – how many days leave
is credited for each year of service (earned leave entitlements cannot exceed 30 days for every
year of actual service rendered for the employer from whose service he has retired).
Step 3: find out earned leave actually taken or encashed (in number of days) during the service
time.
= (step 1 X step 2 – step 3) / 30

Average Monthly Salary:

Meaning of Salary: Basic Salary + DA (if terms of employment so provide) + commission
based on fixed percentage of turnover achieved by an employee.
Average salary drawn during the period of 10 months immediately preceding the retirement.

If EL is received from two or more employers: The maximum amount of exemption u/s
10(10AA) during the lifetime of the concerned employee cannot exceed Rs. 3,00,000.

Problem 1: Mr. X, an employee of the Himachal Pradesh Govt., retires on 3 rd January 2020
and receives Rs. 11,60,000 as cash equivalent of EL to his credit. What will be the treatment
of tax?

Problem 2: Mrs. X was an employee by PQR Ltd., upto 15th March 1988. At the time of
leaving PQR Ltd., she was paid Rs. 3,50,000 as leave salary out of which Rs. 57,000 was
exempt from tax U/S 10(10AA). Thereafter he joined ABC(P.) Ltd., and received Rs. 4,12,200
as leave salary at the time of his retirement on December 31, 2019. Determine the amount of
taxable salary from the following information:

Salary at the time of retirement (per month) Rs. 22,900

Average salary received during 10 months ending on
December 31, 2019
- From march 1, 2019 to July 31, 2019 (per month) Rs. 22,600
- From August 1, 2019 to December 31, 2019(per
month) Rs. 22,900
Duration of service (a) 14 ¾ years
Leave entitlement for every year of service (b) 45 days
Leave availed while in service © 90 days
Leave at the credit of the employee at the time of
retirement [(14*45 – 90) / 30] 18 months
Leave salary paid at the time of retirement at the rate of
22900 per month (i.e., 22900* 18) 4,12,200
Problem 3: Mr. X a non-government employee, receives Rs. 375000 as leave salary at the time
of retirement on February 20, 2020. On the basis of the following information, determine the
amount of taxable leave salary:
Basic pay – Rs. 15000 per month since 2007; duration of service – 26 years; leave at the credit
of X at the time of retirement – 25 months; entitlement of leave salary – 60 days salary for
every year of service and leave availed while in service – 27 months.

Problem 4: from the following information, find out the amount chargeable to tax for the
assessment year 2020-21:

Date of retirement of X from a private job 15th November 2019

Basic salary from January 1, 2019 to April
Rs. 10000 per month
30, 2019
Basic salary from May 1, 2019 onwards Rs. 12000 per month
Dearness Allowance Nil
Commission Nil
Leave standing to the credit at the time of
660 days
retirement (according to service rules)
Rate of leave entitlement according to the 60 days leave for each
service rule year of service
Duration of service 16 years
Amount of leave encashment given at the
retirement (leave encashment was not given Rs. 264000
earlier) (ie., 12000*660/30)

Gratuity: is a retirement benefit. It is generally payable at the time of cessation of employment

and on the basis of duration of service. Tax treatment of gratuity is given below:

Status of employee Tax liability

Government employee Fully exempt from tax u/s 10(10)(i)
Non – government employee covered by the Fully or partly exempt from tax u/s
payment of Gratuity Act, 1972 10(10)(i)
Non – government employee not covered by the Fully or partly exempt from tax u/s
payment of Gratuity Act, 1972 10(10)(i)

Any gratuity received by an employee, covered by the payment of Gratuity Act, 1972, is
exempt from tax on the following basis: least of the following is exempt from tax.
 15 days salary (7 days in the case of employees of a seasonal establishment) based on
salary last drawn for each year of service (15 days salary * length of service).
 Rs. 20,00,000
 Gratuity actually received
Length of service: if the period of service is 6 months or less than 6 months, it shall be ignored
for this purpose. Conversely, if the period of the service is more than 6 months, it shall be taken
as one full year.
Meaning of Salary: Salary + DA
Salary of 15 days: (Salary for the month/26)*15

Problem 1: X, an employee of PQ Co. Ltd., receives Rs. 78000 as gratuity. He is covered by

the payment of gratuity act. He retires on 12th December 2019 after rendering service of 38
years and 8 months. At the time of retirement his monthly basic salary and DA was Rs. 2400
and Rs. 800, respectively. What is the taxable amount of gratuity?

Problem 2: X, an employee of LMN Ltd., receives Rs. 45,000 as gratuity under the payment
of Gratuity Act, 1972. He retires on 10th November 2019 after rendering service of 30 years
and 4 months. At the time of retirement, monthly salary was Rs. 2340 (inclusive of DA of Rs.
200 per month). Calculate amount of gratuity chargeable to tax.

Any gratuity received by an employee, not covered by the payment of Gratuity Act, 1972, is
exempt from tax on the following basis: least of the following is exempt from tax.
 Rs. 20,00,000
 Half month’s average salary for each completed year of service
 Gratuity actually received
Completed year of service: for calculating length of service any fraction of the year shall be
ignored.
Average monthly salary: is calculated on the basis of average salary for the ten months
immediately preceding the month in which the employee has retired.
Meaning of Salary: basic salary + DA (if the terms of employment so provide) + commission
(if payable at fixed % of turnover achieved by an employee).

Problem 1: Mr. X who is not covered by the payment of gratuity act, 1972, retires on 20 th
November 2019 from ABC Ltd. And receives Rs. 1,86,000 as gratuity after service of 38 years
and 10 months. His salary is Rs. 8000 per month up to July 31st 2019 and Rs. 9000 per month
from 1st August 2019. Besides he gets Rs.500 per month as DA (69% of which is part of salary
for computing all retirement benefits but 100% of DA is considered for computing PF). What
amount of gratuity will be exempt from tax?

Pension: The tax treatment of pension in different cases is given below:

Different Situations Tax Treatment

Pension is received from UNO by the employee
Case 1 Not chargeable to tax
or his family members
Family pension received by the family Exempted u/s10(19) in some
Case 2
members of armed forces cases
It is taxable in the hands of
recipient’s u/s 56 under the
Family pension received by family members head “Income from other
Case 3 (not being covered by case 2) after the death of sources”. Standard deduction
an employee. is available u/s 57 which is
1/3rd of such pension or Rs.
15000 whichever is lower.

Chargeability of pension for tax purpose:

Pension Status of employee Chargeability to Tax
Uncommuted
Govt/Non-Govt employee It is chargeable to tax
pension
Commuted
Government employee It is fully exempt from tax u/s 10(10A)(i)
pension
Commuted It is fully or partly exempt from tax u/s
Non-Government Employee
pension 10(10A)(i)
Uncommuted pension: it is periodical payment of pension. It is taxable as salary u/s 15 in the
hands of a Govt employee as well as Non- Govt. employee.

Commuted pension: it is a lump sum payment in lieu of periodical payment. The tax treatment
of the same is as follows.
Exemption in respect of
Gratuity received/not
Status of the employee commuted pension u/s
received
10(10A)
Govt Employee (central,
Gratuity may (or may Entire commuted pension is
State, local authority and
not) be received exempted from tax
statutory authority)
1/3rd of the pension which he is
Non – Government employees Gratuity is received normally entitled to receive is
exempt from tax.
½ of the pension which he is
Non – Government employees Gratuity not received normally entitled to receive is
exempt from tax.

If payment in commutation of pension received by an employee exceeds the aforesaid limits,

such excess is liable to tax in the assessment year relevant to the previous year in which it is
due or paid. The assessee can claim relief in terms of section 89.

Problem 1: determine the amount of pension taxable for the AY 2020-21 in the following
cases on the assumption that it becomes due on the last day of each month.
1. X receives Rs. 18,250 per month as pension from the central Govt during the PY 2019-
20.
2. X receives Rs. 21,000 per month as pension from the Govt. of Punjab during the PY
2019 -20.
3. X receives Rs. 20000 per month as pension from ABC Ltd., public limited company in
the private sector, during the PY 2019-20.
4. X retires from the central Govt., service on 31st May 2019. He gets pension of Rs. 15000
per month up to 30th November 2019 (i.e., Rs. 15000*6). With effect from 1st December
2019, he gets 1/3rd of his pension commuted for Rs. 718000.
5. X retires from ABC Co. on 30th June 2019. He gets pension of Rs. 20000 per month up
to 31st January 2020. With effect from 1st February 2020, he gets 60% of pension
commuted for Rs. 1071000. Does it make any difference if he also gets gratuity of Rs.
40,000 at the time of retirement?

Problem 2: Determine the amount of taxable pension for the AY 2020-21 in the following
cases on the assumption that pension becomes due on the last day of month:
1. X retires from the Indian economic service on 31st August 2019 and receives Rs. 10,000
per month pension.
2. X retires from the indian administrative service on May 31st, 2018. He gets pension of
Rs. 19000 per month up to June 30th, 2019. With effect from 1st July 2019 he gets 30%
of his pension commuted for Rs. 300000.
3. X retires from PQR (P.) Ltd., in December 2015 and receives Rs. 7000 per month upto
February 28th, 2020 when he dies.
4. X retires from PQR (P.) Ltd on 31st march 2019. PQR (P.) Ltd. Pays Rs. 14000 per
month as pension but does not pay any gratuity on the request of X, PQR (P.) Ltd pays
 Rs. 200000 in lieu of commutation of 20% of pension with effect from 1st February
2020.
5. What will be the amount of taxable pension if X, under the circumstances mentioned at
(4), receives Rs. 17800 as gratuity at the time of retirement?

National Pension Scheme: is applicable to new entrants to Govt. service or any other
employer. As per the scheme it is mandatory for persons entering the Govt service on or after
January 1, 2004, to contribute 10% of salary every month towards NPS. A matching
contribution is required to be made by the employer to the said account. The tax treatment
under the new scheme is as follows –
1. Contribution by the employer to NPS is first included under the head “salaries” in hands
of the employee.
2. Such contribution to NPS (to the extent of 10% of the salary of the employee u/s 80CCD
(2). However, this deduction has been increased to 14% if salary in the case of a central
Govt employee, with effect from AY 2020-21.
3. Employees’ contribution to NPS (to the extent of 10% of the salary of the employee) is
also deductible u/s 80CCD (1).
4. When pension is received out of the aforesaid amount, it will be chargeable to tax in
the hands of the recipient.
5. “Salary” for the purpose of points 1 and 2 includes DA if the terms of employment so
provide, but excludes all other allowances and perquisites. It also includes commission
if commission is payable at fixed % of turnover achieved by an employee.
6. The aggregate amount of deducton u/s 80C, 80CCC, and 80 CCD (1),cannot exceed
Rs. 150000.
7. From the AY 2016-17, the employee (or any other individual who has joined NPS) can
contribute an additional amount (up to Rs. 50000) towards NPS and claim the same as
deduction u/s 80CCD (1B). Contribution u/s 80CCD (1B) is not covered by cumulative
ceiling which is given in point No. 6 above.
MS: Basic + DA (if it enters into retirement benefits + Fixed % of commission on turnover
Tax treatment of pension:
1. partial withdrawal from NPS (to the extent it does not exceed 25% of
Exempt
an employee’s contribution)
2. Amount received by an employee (or non-employee) on closure of his
60% is exempt
account or on his opting out of the NPS.
3. In (2), amount is received by a nominee on the death of the assessee. Exempt
4. Pension received out of NPS Taxable
5. Amount received in (2), (3), (4) is utilized for purchasing plan in the
Exempt
same previous year
6. Pension received out of annuity plan purchased in (5) Taxable

Problem 1: Mr. Suresh is employed (since 2010) by the Punjab Central Government (or any
other non-govt. employer). During the previous year 2019-20, he gets Rs. 30,000 per month as
salary and Rs. 10,000 per month as DA (60% is considered for retirement benefits). Employer
annually contributes Rs. 45,000 towards NPS. Mr. Suresh annually contributes Rs. 1,05,000 .
Income from other sources of Mr. Suresh is Rs. 9,50,000. Mr. Suresh Deposits every year Rs.
90,000 in PPF, which is deductible u/s 80C. Further Mr. Suresh is eligible for a deduction of
Rs. 25000 u/s 80CCC. Compute taxable income of Mr. Suresh.

Problem 2: find out net income in the following cases for the AY 2020-21 (age of the taxpayer
in each case is 55 years) –
Situation 1: Mr. Shailesh is employed by the Central Govt. since 2009. For the PY 2019-20,
his basic salary is Rs. 500000 per annum. Besides, he gets DA of Rs. 50,000 per annum and
special allowance of Rs. 1,00,000 per annum. His income from other sources is Rs. 2,10,000.
The central Govt contributes 13% of salary (including DA) towards NPS. The contribution of
Mr. Shailesh towards NPS is Rs. 1,04,000. Besides, Mr. Shailesh deposited Rs. 96,000 in PPF,
Rs. 5,000 in notified (Sec. 80CCC) annuity plan of LIC, and pays mediclaim insurance
premium of Rs. 35,000 (policy covers medical benefits for Mr. and Mrs. Shailesh).
Situation 2: Mr. Shailesh in the aforesaid case is employed by a private sector company and
the employer has opted for NPS.
Situation 3: Mr. Shailesh in the aforesaid case is employed by a private sector company and
the employer has RPF. Contributions given in situation 1 are towards RPF. Besides Mr.
Shailesh contributes an additional sum of Rs. 40,000 towards NPS.
Situation 4: Mr. Shailesh is a self – employed person. His business income is Rs. 8,10,000 and
income from other sources is Rs. 2,10,000. He annually contributes Rs. 2,60,000 towards NPS.
Besides, Mr. Shailesh deposits Rs. 30,000 in PPF, deposits Rs. 5000 in notified (Sec. 80CCC)
annuity plan of LIC, and pays mediclaim insurance premium of Rs. 35,000 (policy covers
medical benefits for Mr. and Mrs. Shailesh).

Profits in lieu of salary: it includes the following –

1. The amount of any compensation due to or received by an assessee from his employer
or former employer at or in connection with the termination of his employment.
2. The amount of any compensation due to or received by an assessee from his employer
or former employer at or in connection with the modification of the terms and
conditions of employment.
3. Any payment due to or received by an assessee from his employer or former employer
except the following:
a. Payment of gratuity exempted u/s 10(10)
b. Payment of house rent allowance exempt u/s 10(13)
c. Payment of commuted pension exempted u/s 10(10A)
d. Payment of retrenchment compensation exempted u/s 10(10B)
e. Payment from an approved superannuation fund u/s 10(13)
f. Payment from statutory provident fund or PPF
g. Payment from recognised provident fund to the extent it is exempt u/s 10(12)
4. Any payment from unrecognised provident fund or such other fund to the extent to
which it does not consist of contribution by the assessee or interest on such contribution.
5. Any sum receive under a key man insurance policy including the sum allocated by way
of bonus on such policy.
6. Any amount received (in lump sum or otherwise) prior to employment or after cessation
of employment.

Different forms of Allowances and tax treatment:

Different allowances Tax treatment

City compensatory allowance Taxable
House rent allowance Exempt in some cases
Entertainment allowance Deductible in some cases
Special allowances Notified special allowances are exempt
 Exempt from tax if paid outside India by the
Foreign allowance Govt to an Indian Citizen for rendering
service outside India.
Tiffin allowance, fixed medical allowance
Taxable
and servant allowance
Allowance to high court judges Not taxable
Allowance from UNO Not taxable
Compensatory allowance under article
Not taxable
222(2) of the constitution
Sumptuary allowance to serving Not chargeable to tax for the AY 2008-09 to
chairman/members of UPSC 2020-21.
An allowance (subject to a maximum of Rs.
14000 per month) for defraying the service
Allowances to retired chairman and retired of an orderly and for meeting expenses
members of UPSC incurred towards secretarial assistance on
contract basis, is not chargeable to tax for the
AY 2008-09 to 2020-21
Any other allowance Taxable

House Rent Allowance (Section 10(13A) and rule 2A):

The least of the following is exempt from tax:
1. 50% of salary (if house is situated at Bombay, Calcutta, Delhi and Chennai) or 40% of
salary (if house is situated in any other place).
2. HRA received by an employee in respect of the period during which rental
accommodation is occupied by the employee during the previous year.
3. The excess of rent paid over 10% of salary.
Meaning of Salary: Basic + DA (if it enters into retirement benefits) + Commission on fixed
percentage of turnover.

Problem 1: Ms. Reema resides in Chennai, gets Rs.300000 per annum as basic salary. She
receives Rs. 50,000 per annum as house rent allowance. Rent paid by her is Rs. 40,000 per
annum. Find out the amount of taxable HRA for the AY 2020-21.

Problem 2: Mrs. Seema resides in Poona and gets Rs. 2,00,000 per annum as basic salary. She
receives Rs. 55,000 per annum as HRA, though she pays Rs. 50,000 per annum as House Rent.
Determine the amount of HRA chargeable to tax for the AY 2020-21.

Problem 3: Mr. Sheyas is an employee of AB Insurance Co. Ltd. During the PY 2019-20. He
gets Rs. 80,000 per month as salary and Rs. 10,000 Pm as DA (40% is considered for PF but
30% is considered for gratuity). He gets Rs. 55,000 pm as HRA. He resides with his joint family
up to june 30, 2019 for which no rent is paid. From July 1, 2019, he takes a house on rent
(monthly rent being Rs. 10,000) at Noida. However, he shifts to Delhi with effect from January
1, 2020 (monthly rent being Rs. 53,000). Find out the HRA chargeable to tax for the AY 2020-
21.

Entertainment Allowance [section 16(ii)] – it is first included in salary income under the head
“Salaries” and thereafter a deduction is given (only to the government employee) on the basis
of the following:
1. Rs. 5000
2. 20% of basic salary or
 3. Amount of entertainment allowance granted during the PY.
In the case of non-government employee deduction is not available.

Problem 1: Mr. Singh an officer of Punjab Govt, gets Rs. 40,000 pm as salary and Rs. 600 pm
as entertainment allowance. Besides he gets DA and HRA as per the government’s rules.
During the relevant PY, he has utilised the entire EA for private purpose. The assessing officer
is of the view that the EA is fully taxable. Is he legally correct? If not, determine the amount
of EA deductible from salary.

Special allowances prescribed as exempt u/s 10(14):

The amount is exempted among the amount whichever is less:
1. Travelling allowance / transfer allowance
2. Conveyance allowance
3. Daily allowance
4. Helper allowance
5. Research allowance
6. uniform allowance
In the following cases the amount of exemption does not depend upon expenditure incurred by
the employee. The amount is exempted to the extent of;
1. the amount of allowance; or
2. The amount specified in rule 2BB whichever is lower.

Name of allowance Exemption as specified in rule 2BB

Amount exempt from tax varies from Rs. 300
Special compensatory allowance
per month to Rs. 700 per month
Border area allowance Varies from Rs. 200 to Rs. 1300 per month
Tribal areas/ scheduled areas allowances Rs. 200 per month
70% of such allowance or Rs. 10,000 per
Allowance for transport employees
month whichever is lower
Rs. 100 per month per child up to a maximum
Children education allowance
of two children
Rs. 300 per month per child up to a maximum
Hostel expenditure allowance
of two children
Compensatory field area allowance Rs. 2,600 per month in some cases.
Compensatory modified area allowance Rs. 1000 per month in some cases
Counter insurgency allowance Rs. 3,900 per month in some cases
In case of blind, deaf and dumb or
Transport allowance ( for the purpose of
orthopedically handicapped – Rs. 3,200 per
commuting between the place of residence
month
and the place of duty)
In any other case – Nil
Underground allowance (working in
uncongenial and unnatural climate in Rs. 800 per month
underground mines)
Rs. 1060 per month (for altitude of 9000 to
High altitude allowance 15000 feet) or Rs. 1600 per month (for
altitude above 15000 feet).
Highly active field area allowance Rs. 4,200 per month
Island duty allowance Exempt up to Rs. 3250 per month
Tax treatment of perquisites:

Perquisites Tax treatment

1. Not chargeable to tax if provided in a “remote area”
2. Hotel accommodation for 15 days can be provided
immediately after transfer at the new location as tax-
free perquisite.
3. If an employee is transferred and housing facility is
provided to him at the new location for a period of 90
Furnished / unfurnished house days immediately after transfer only one house is
without rent or at concessional rent chargeable to tax and the other one will be tax-free.
4. Rent free house is not taxable if it is provided to a
high court judge, supreme court judge, union
minister, chief election commissioner/other election
commissioners, leader of opposition in parliament, an
official in parliament and serving chairman and
member of UPSC.
Service of a sweeper, Gardner, Not taxable if the employee is a non-specified
watchman or personal attendant employee
Supply of gas, electricity or water Not taxable if the employee is a non-specified
for household purposes employee
Education facility to employee’s Not taxable if the employee is a non-specified
family members employee
1. Not taxable twice in a block of 4 years.
Leave travel concession 2. Not taxable if the employee is a non-specified
employee.
Amount paid by an employer in
respect of any obligation which Tax borne by employer on non-monetary perquisites
otherwise would have been payable of employee
by the employee
Amount payable by an employer
directly or indirectly to effect an
Contribution to recognized provident fund
assurance on the life of employee or
to effect a contract of an annuity
1. if aggregate amount of original loan does not
exceed Rs. 20,000 the perquisite is not taxable
Interest free / concessional loan
2. Loan for medical treatment is not taxable subject to
a few conditions
1. Medical facility provided in a hospital owned or
maintained by the employer is not chargeable to tax.
2. Medical facility provided by an employer in a Govt.
hospital, approved hospital or a private hospital is not
chargeable to tax.
3. Medical Insurance Premium paid or reimbursed by
Medical facility
the employer is not chargeable to tax.
4. Any other expenditure incurred or reimbursed by
the employer for providing medical facility in India is
chargeable to tax (exemption of Rs. 15,000 was
available for such reimbursement up to the AY 2018-
19).
 5. Expenditure on medical treatment outside India is
not chargeable to tax, if a few conditions are satisfied.
6. The perquisite in respect of medical facility is not
taxable if the employee is a non-specified employee.
1. Not taxable if the employee is a non-specified
employee.
2. Conveyance facility between office and residence
Car or any other automotive is not taxable.
conveyance 3. Conveyance facility to high court judges, supreme
court judges, chief election commissioner / other
election commissioners and serving chairman and
members of UPSC, is not chargeable.
1. Food and non-alcoholic beverages provided in
working hours in remote area or in an off-shore
installation are exempt from tax.
Free food and beverage
2. Tea, coffee or non-alcoholic beverages and snacks
in working hours are tax-free perquisites.
3. Meals (lunch and / or dinner)
Employer’s contribution towards
superannuation fund in excess of Rs.
Not chargeable to tax up to Rs. 1.5 lakhs
1.5 lakhs per year (applicable up to
the AY 2020-21)
Employer’s contribution towards
RPF, NPS and superannuation fund
in excess of Rs. 7.5 lakh per year Not chargeable to tax up to Rs. 7.5 lakh per year
(applicable from the AY 2021-22
onwards)

Specified employee: the following employees are known as specified employees –

1. A director employee
2. An employee who has substantial interest in the employer – company: A person has
substantial interest in the employer company, if he is a beneficial owner of equity shares
carrying 20% or more voting power in the employer company.
3. An employee drawing in excess of Rs. 50000. For computing the sum of Rs. 50000 the
following are excluded or deducted:
a. All non – monetary benefits;
b. Monetary benefits which are not taxable u/s10 and
c. Deduction on account of entertainment allowance and deduction on account of
professional tax.
Tax calculation of rent free accommodation:
1. In the case of Govt. Employees the taxable value is the
license fees of the house as per house allotment scheme of
the Govt.
2. in the case of the non-Govt employees:
- if he house is owned by employer: taxable value is 15% of
Rent free unfurnished house
salary of employee of the relevant period (7.5% if
population is 10 lakh or less or 10% if population is above
10 lakhs but not more than 25 Lakh)
- If house is taken on lease by employer: Taxable value is
either 15% of the salary or lease rent, whichever is lower.
 Value of furniture will be added to the value of rent – free
unfurnished house as computed above. Value of furniture is
Rent free furnished house 10% per annum of cost of furniture to the employer or rent
paid/payable of the furnishing by the employer, as the case
may be.
Value of the perquisite in respect of rent – free furnished /
unfurnished house will be calculated as given above. From
Concession in rent the amount so calculated, rent charged by employer shall be
deducted. The balance (if it is positive) is taxable value of
the perquisite in respect of concession in rent.

Meaning of Salary: Basic + DA (if it enters into retirement benefit) + bonus + commission +
fees + all other taxable allowances + any other monetary payment which is chargeable to tax.

Problem 1: Mr. Bhagath gives the following information for the previous year ending
31/3/2020 –
Basic salary 9,00,000
DA (85% is considered for calculating pension but 70% is
80,000
considered for calculating PF)
DP (not considered for retirement benefits) 50,000
Fixed commission and bonus 1,80,000
Advance salary (pertaining to next year) and arrears of
1,23,000
salary (for 2013-14) (not taxed earlier)
Income tax paid by the employer 20,000
Fixed lunch allowance 24,000
Children education allowance (for two) 9,600
Mr. Bhagath has been provided with a rent – free unfurnished house. Find out the taxable value
of perquisite in the following situations –
1. He is Govt. employee. And he has been allotted a rent – free accommodation by the
govt. license fee of the house according to the house allotment scheme of the govt. is
Rs. 6000 per annum.
2. He is an employee of LIC of India. He has been allotted a rent-free accommodation
which is owned by the employer.
3. He is an employee of a pvt. Sector Company. He has been allotted a rent – free
accommodation. House is owned by the employer.
4. He is a non govt employee. He has been allotted a rent free accommodation. House is
taken on rent by the employer (rent being Rs. 2,40,000 per annum).
5. He is a non govt employee. He has been allotted a rent free accommodation. House is
taken on rent by the employer (rent being Rs. 72,000 per annum).
Find out the taxable value of the perquisite in respect of rent-free accommodation on the
assumption that –
a. House is situated in Mumbai (population is more than 25 lakh) or
b. The house is situated in Prathapgarh (population is 12 lakh)
Problem 2: Mr. Sushanth is an employee of a Co. situated in Chennai. During the PY he is
posted at Vaniganj (population: 20 lakh). He gets Rs. 80,000 pm as salary and a fixed lunch
allowance (with effect from 1/11/2019) of Rs. 9000pm. His employer has provided him a rent-
free unfurnished house at Vaniganj with effect from 1/5/2019. The Co. pays Rs. 12500 pm as
rent (during 1/5/2019 and 30/11/2019). With effect from 1/12/2019 rent has been increased to
Rs. 14,000 pm. On 1/1/2020 the house is purchased by the employer-company from the
landlord. Find out the taxable value of perquisite in respect of rent-free house for the
Assessment Year 2020 – 21.

Problem on rent-free furnished accommodation:

Mr. Sampath received during the PY ending 31/3/2020 emoluments consisting of basic pay:
Rs. 1,62,000; special allowance: Rs. 17,000 and reimbursement of medical expenditure: Rs.
3,800. His employer has also provided a rent-free furnished flat in Bombay. Lease rent of the
unfurnished flat is Rs. 50,000. Some of the household appliances provided to Mr. Sampath
(with effect from 1/6/2019) are owned by the employer (cost price of which is Rs. 36,000 date
of purchase is 1/4/1960 and WDV as on 1/4/2020 is Rs. 620). Employer pays Rs. 10,000
annually as hire charges for 3 ACs installed throughout the PY in rent-free flat. Compute the
value of the perquisite if : (a) Mr. Sampath is a secretary in the ministry of law and Rs. 4,000
is the licence fee of unfurnished flat as per the Central Govt rules; (b) Mr. Sampath is the MD
of ABC(p) Ltd. Does it make any difference, if Mr. Sampath has been provided a hotel
accommodation throughout the year (tariff being Rs. 1,20,000 per annum)?

Problem on accommodation provided at concessional rent:

Mr. Nishanth an employee of Akash Ltd., gets the following emoluments during the PY 2019-
20.
Basic Salary: Rs. 60,000 (which has been increased to Rs. 70,000 per month from 1/1/2020);
DA Rs. 4000 per month (72% forms part of retirement benefits); Education allowance: Rs. 550
pm per child for 4 children; medical allowance: Rs. 400pm; transport allowance: Rs. 1950pm
(out of which Rs. 100 pm is used for covering the journey between office and residence and
Rs. 250 Pm is used for other purposes). Besides he gets Rs. 20,000pm as HRA up to 30/11/2019
(rent paid at Ghaziabad: Rs. 18,000 pm). With effect from 1/12/2019 he has been provided a
furnished flat by the employer at Delhi (rent paid by employer: Rs. 26,000pm; rent of furniture
provided: Rs. 12780; rent recovered from him: Rs. 900 pm). Find out the salary chargeable to
tax for the AY 2020-21 on the assumption that with effect from 1/1/2020, he joins a part-time
employment with B Ltd. (salary Rs. 18,000pm) with the permission of A Ltd. (without leaving
the job of A Ltd.)

Valuation of perquisite in respect of free education:

1. Expenditure relating to providing training to employees is not taxable.
2. If education facility is provided to the family members of employee, expenditure
incurred by the employer is the taxable value of perquisite. Payment of tuition fees or
reimbursement of tuition fees is chargeable to tax.
3. If education facility is provided to the children of employee in an educational institute
or owned or maintained by the employer, then reasonable cost of education in a similar
institute in or near the locality is taxable. Up to Rs. 1,000 per month per child is not
taxable, if the employer provides education facility to the children of an employee in
an educational institution owned or maintained by the employer or where such
educational facility is provided in any institute (having an arrangement with the
employer) by reason of employee’s employment with the employer. The benefit of
exemption of Rs. 1,000 pm is not available, if such education facility is provided to
other family members (not being children of the employee).
4. Amount of scholarship given by an employer-company to children of its employees
(solely at its discretion without reference to terms of employment) is not assessable as
perquisite in the hands of employees.
Problem 1: find out the taxable value of the perquisite for the AY 2020-21 in the following
cases.
a) X is an employee in the accounts department of A Ltd. On 27/11/2019 he attends a
seminar on “perquisite valuation”. Seminar fees of Rs. 7500 is paid by A Ltd.
b) Y’s son is a student of 9th class of DPS, Noida. Rs. 17,800 being tuition fees of Y’s son
is paid/reimbursed by B Ltd. Where Y is employed. There is no arrangement between
B Ltd. And DPS, Noida.
c) Star Public School, Ajmer is owned and maintained by C Ltd., a manufacturing Co.
books of account of the school and C Ltd. Are maintained separately. Z is an employee
of C Ltd. The following family members of Z are students in Star Public School –

Cost of education in a Amount charged

similar institution from Z
A, daughter of Z Rs. 5500 pm Rs. 800pm
B, dependent brother of Z Rs. 6000 pm Rs. 1600 pm
d) Suppose in c (above), Star Public School is not owned / maintained by C Ltd. As per
arrangement of C Ltd. With the school, family members of employees of C Ltd. Can
have educational facility in the school. 100 seats are reserved for this purpose for which
the Co. annually pays Rs. 10 lakhs to the school (no separate billing by the school to
the employees of C Ltd). Family members of Z are students of the school. Cost of
education in a similar institute and amount charged from Z by C Ltd. Are given in the
table in c.
 Valuation of Medical Facilities
1. Fixed medical allowance is always chargeable to tax.
2. For the purpose of valuation of the perquisite in respect of medical facilities “family
means – the spouse and children of the individual; and the parents, brothers and sisters
of the individual or any of them, wholly or mainly dependent on the individual.

Medical facilities in India:

1. Employer’s hospital/govt hospital/approved hospital – the perquisite in respect of
medical facility provided by an employer in the following hospitals/clinic is not
chargeable to tax –
a. Hospital owned/maintained by the employer,
b. Hospital of Central Govt/State Govt/ local authority,
c. Private hospital if it is also recommended by the govt., for the treatment of Govt.
employees
d. Specified medical facility (given in rule 3A) in a hospital approved by the chief
commissioner.
2. Health insurance premium – paid or reimbursed by the employer is not chargeable to
tax.
3. Any other facility in India – any other expenditure incurred or reimbursed by the
employer for providing medical facility in India is chargeable to tax.

Medical facilities outside India:

Perquisite not chargeable to tax Condition to be satisfied
Medical treatment of employee or any Expenditure shall be excluded from
member of family of such employee outside perquisite only to the extent permitted by the
India RBI
Expenditure shall be excluded from
Cost on travel of the employee/ any member
perquisite only in the case of an employee
of his family and one attendant who
whose gross total income, as computed
accompanies the patient in connection with
before including therein the expenditure on
treatment outside India
travelling, does not exceed Rs. 2,00,000
Cost of stay abroad of the employee or any
member of the family for medical treatment Expenditure shall be excluded from the
and cost of stay of one attendant who perquisite only to the extent permitted by the
accompanies the patient in connection with RBI.
such treatment.

Problem: Find out the taxable value of the perquisite in respect of medical facility in the
following cases –
1. X gets a fixed medical allowance of Rs. 600 per month from his employer.
2. Y, a director in the employer-company, gets medical treatment in dispensary
maintained by his employer. The expenditure on medical treatment provided to y and
his family members during the PY 2019-20 is as follows.

Y, Mrs. Y and minor child of Y 9100

Major son of Y (not dependent upon Y) 2700
Parents of Y (dependent upon Y) 3000
Parents of Mrs. Y (dependent upon Y) 12000
 Brother of Y (dependent on Y) 6000
Sister of Y (not dependent on Y) 17000
Besides, Y gets reimbursement of ordinary medical expenses (amount reimbursed by
the employer being Rs. 11000 for Y and Rs. 3000 for treatment of Mrs.Y).

3. Z (salary: Rs. 2,40,000) pays “mediclaim” health insurance premium (which is later on
reimbursed by his employer) as follows:

On Z’s life 800

On Mrs. Z’s life 600
On the life of Z’s father (not dependent upon Z) 1000
On the life of major son of Z’s father (not dependent upon Z) 2700
On the life of brother of Z (dependent upon Z) 400
On the life of father of Mrs. Z (dependent upon Z) 500
On the life of grandfather of Z (dependent upon Z) 1000

4. A (salary: Rs. 360000) gets the following reimbursement from his employer during the
PY 2019-20:
Reimbursement of expenses incurred for caesarean operation of
28600
Mrs. A in a hospital approved by the chief commissioner
Reimbursement expenses of eye’s treatment (including surgical
2700
operation) in a hospital approved by the chief commissioner
Reimbursement of ordinary medical expenses paid to a private
16200
nursing home

Valuation of perquisite in respect of Car/Conveyance:

Situation Tax Liability
1. car is owned or hired by an employer, all
expenses are incurred by employer and
Nothing is chargeable to tax
provided to an employee only for official
purpose
2. car is owned or hired by employer, Entire amount of expenditure incurred by the
expenses are incurred by employer and employer is taxable. If any amount is
provided to an employee wholly for personal recovered by employee then it will be
purposes deducted.
1800pm (1600cc or less)/ Rs. 2400pm (above
3. car is owned or hired by employer,
1600cc) for car is taxable. If driver is
expenses are incurred by employer and
provided Rs.900pm is taxable. Expenditure
provided to employee for partly official use
recovered from the employee is not
and partly personal purposes
deductible.
4. car is owned or hired by employer,
Rs.600pm (1600cc or less)/Rs.900pm (above
provided to an employee for partly official
160cc) for car is taxable. If driver is provided
and partly personal purposes, and expense
Rs. 900pm is taxable. Expenditure recovered
for private purposes are incurred by
from the employee is not deductible.
employee
 Actual expenditure incurred by the employer
– expenditure pertaining to official use –
anything recovered from employee, is
5. car is owned by employee, expenses are
taxable.
incurred by employer and car is used for
Expenditure pertaining to official use can be
partly official and partly personal purposes
calculated at the rate of Rs.1800pm (1600cc
or less)/Rs.2400pm(above 1600cc) for car
and Rs. 900 pm for driver.
Used only for official purposes – nothing is
taxable.
6. any automotive conveyance (other than Used partly for official and partly for
car) owned by employee and expenses are personal purposes: actual expenditure
incurred by employer incurred by employer – expenditure
pertaining to official use – anything
recovered from employee = taxable amount

Problem: find out the taxable value of the perquisite in respect of car in the following different
situations for the assessment year 2020-21 –
1. X is an employee by a company. He has been provided a car (1200cc) owned by the
employer, cost of the car is Rs. 4,26,000. The expenditure incurred by the company on
maintenance of the car are – petrol: Rs. 46,000, driver: Rs. 36,000 and maintenance:
Rs. 10,000. The car can be used by X partly for official purposes partly for private
purposes. A sum of Rs. 12,000 is recovered from X.
2. Assume situation 1 that the car is used only for private purposes.
3. A car (1800cc) is owned by the employer (cost of the car being Rs. 4,80,000). X an
employee, can use it partly for official purposes and partly for private purposes.
Expenses for private purposes are, however, incurred by X. during the PY the total
expenditure incurred by X is Rs. 50,000 on car and Rs. 20,000 on dirver.
4. Assume in situration 3 that the car can be used only for private purposes.
5. X owns a car (1400cc). he uses it partly for official purposes and partly for private
purposes. During the PY he incures a sum of Rs. 40,000 on running and maintaining of
car. Besides, he has engaged a driver (salary Rs. 24000). The employer reimburses the
entire expenditure of Rs. 64,000.
6. Assume that in situation 5 that the logbook of the car is maintained and 70% of the
expenditure is attributable towards the official use of the car. The employer to this effect
gives a certificate.
7. A car (1700cc) is owned by the employer. All expenses (Rs. 56000) are incurred by the
employer. The employer maintains logbook of the car. X an employee uses the car only
for official purposes. The employer gives a certificate that the car is used only for
official purposes.

Tax treatment of Provident Fund:

Statutory
Provident RPF URPF PPF
Fund
Exempt up to
Employer’s Exempt from 12% of salary Exempt from Employer does
contribution tax (basic + DA + tax not contribute
DP if it enters
 into retirement
benefit)
Deduction u/s
80C on
Available Available Not available Available
employee’s
contribution
Interest credited Exempt from Exempted up to Exempt from
Exempt
to PF tax 9.5% tax
1. payment
received in
respect of
employer’s
contribution and
interest thereon
is taxable under
the head
“salaries”
2. payment
received in
Lump sum
respect of
payment at the
Exempt from interest on
time of Exempt from Exempt from
tax in some employee’s
retirement or tax tax
cases contribution and
termination of
interest thereon
service
is taxable under
the head
“Income from
other sources”
3. Payment
received in
respect of
employee’s
contribution is
not chargeable
to tax.

Problem 1: Mr. Sukesh retires on 30/6/2019. He submits the following information –

Basic salary (since January 2005): Rs.20,000 pm, DA: Rs.6000pm (1/3 is part of salary for
retirement benefits), employer’s contribution towards PF: Rs.3000pm (Mr. Sukesh makes a
matching contribution); interest credited at the rate of 15% on 30/4/2019: Rs.7500; pension
after retirement: Rs.10000pm; and payment of PFat the time of retirement: Rs.760000 (out of
which employer’s contribution: Rs.3,30,000 interest thereon: Rs.44,000, Mr. Sukesh’s
contribution: Rs.3,40,000, interest thereon: Rs.46,000). Salary and pension become due on last
day of each month. Mr. Sukesh has deposited the entire PF payment with a company (rate of
interest: 9% pa). Income of Mr. Sukesh from other sources is Rs.1,50,000.
Find out the income of Mr. Sukesh for the AY 2020-21 on the assumption that the PF is (a)
SPF, (b) RPF and (c) URPF.
 Problems on computation of Salary Income
Problem 1: during PY, Mr. Varun (45 years) is employed by a pharmaceutical company
situated at Kanpur. He gets the following from the employer –
HRA (rent paid Rs.17000pm up
to 30/6/2019 and after that he
Basic salary 34000pm 15,000pm
shifts in his own house but HRA
is given throughout the PY)
DA: 30% of Basic (40% is considered Employer’s contribution
5400pm
for retirement benefit) towards RPF
Interest credited in PF account
Dearness Pay 5000pm 56000
(rate of interest 11%)
Commission (as incentive) 5% of turnover
Fixed commission 4000pm (extra commission of 2% if annual turnover
exceeds Rs.15,00,000)
Mr. Varun has been provided health club facility at a 4 star hotel in Kanpur by the employer-
Co. this facility is available to all employees of the company. Annual expenditure for providing
this facility is Rs.7000 pm (which is borne by the employer). The employer Co. also provides
tea and light snacks to all employees during tea break (expenditure incurred by the Co. is
approximately Rs. 60 per day for 310 working days).
Mr. Varun contributes annually Rs. 5500pm towards RPF (an additional sum of Rs.70,000 is
contributed on 11/3/2020). Income from other sources is Rs. 125000. Determine the net income
of Mr. Varun for the AY 2020-21 on the assumption that monthly turnover achieved by Mr.
Varun is Rs. 100000.

Problem 2: Mrs. Veda (48 years) is a deputy manager in a Mumbai based company. She gets
Rs.54000Pm as salary. Besides, she gets children education allowance of Rs.450pm (for
daughter) and Rs.80pm (for son). Cost of education is approximately Rs.180000 for the two
children (out of which Rs.136000 is tuition fees paid by Mrs.Veda). She also gets hostel
expenditure allowance for her daughter at the rate of R.300Pm (but the daughter is a post
graduate student in Mumbai College and does not stay in any hostel).
The employer-company provides 1800cc car for official and private purpose and incurs the
entire expenditure on running and maintenance of the car. Personal use of the car as per log
book is approximately 65%. With effect from 1/11/2019 she gets driver (to whom the company
pays Rs. 6000pm).

The employer has provided an unfurnished flat at Andheri (East). It is owned by the company
(however, Co. pays Rs.900pm as maintenance charges to the society). The Co. maintains URPF
and contributes 18% of salary towards it for each employee. Mrs. Veda contributes Rs.
8000pm. Her income from other sources is Rs.3,58,000. Find out the net income and tax
liability of Mrs. Veda for the AY 2020-21.

Problem 3: Mr. Subhash is in the Central Govt., service till his retirement on 31/5/2014 when
he joins A Ltd. During the PY 2019-20, he gets the following from A Ltd. –

Basic salary 20000 pm

DA (1/2 forms part for retirement benefit) 2000 pm
Overtime allowance (up to 31/5/2019) 2000 pm
Helper allowance for office use (expenditure Rs.800pm) 1000 pm
 Medical bills reimbursement (out of which Rs. 12000 is in respect of
44000
treatment in a Govt Hospital)
Free gas & electricity only for personal use 24000
Free telephone at residence 9000
Free lunch in office (amount paid directly to canteen @ Rs.50 per day for
15000
300 days)
Interest free loan for purchasing a house (repayable in 3 years) given on
1/10/2019 (employer’s cost of capital is 14%, SBI lending rate on 200000
1/4/2019 is 10.10%)
Earned leave encashment (as per service rules he is entitled for 2 days
leave for each month of service and during PY he has encashed 24 days 16000
EL)
Mediclaim insurance on life of Mr. Subhash 5060
Reimbursement of mediclaim insurance premium on the life of Mr.
4100
Subhash’s brother who is not dependent on him
LTC for Mr. Subhash and his family (no journey is undertaken) 12300
Up to 1/5/2019 he has been provided with HRA (rent paid at Delhi:
Rs.4000pm). WEF1/6/2019 he has been provided with RFA furnished
house at Saket, New Delhi, whose lease rent is Rs.15000pm.
4000pm
Cost of furniture provided w.e.f. 15/9/12019: Rs. 1,40,000). Further, A
Ltd bears the following expenses in respect of the house – repairs of
house: Rs.6000 and rent of AC system: Rs.9000 (for the summer of 2019).
Income of Mr. Subhash from other sources is Rs.2,71,483 (which includes Govt.
monthly pension of Rs. 9167 it comes to Rs.1,10,000 for the whole year).
Find out the taxable income and tax liability of Mr. Subhash for the AY 2020-21 on the
assumption that Mr. Subhash annually contributes Rs. 30,000 towards RPF and Rs. 1,10,000
towards PPF.

Problem 4: Mr. Akhilesh (48 years) is in the service of AMS Ltd., since 1980. He dies on
31/1/2020. The following information is available –

Basic salary 20000pm

DA (40% forms part for retirement benefit) 6000pm
Transport allowance (600 is used for the journey between office &
4600pm
Residence; the remaining amount is not spent)
Entertainment allowance 1000pm
Contribution towards PPF by him on 5/1/2020 100000
He contributes 15% of basic salary towards RPF and the Co. equally contributes
Interest is credited on RPF at the rate of 8%
After the death of Mr. Akhilesh his legal heirs (dependents) get the following payments from
AMS Ltd. –
 Salary for the month of January 2020
 Family pension Rs.10000pm
 Encashment of EL standing to the credit of Mr. Akhilesh on 31/1/2020: Rs. 2,40,000
(as per service rules Mr. Akhilesh is entitled for 45 days leave for each year of service).
 PF Balance: Rs.41,90,000
 Gratuity: Rs. 12,60,000 (Mr. Akhilesh was not covered by the payment of Gratuity Act
nor is there any agreement with the employer to get gratuity).
  Mr. Akhilesh was a doctor. He runs a small clinic near his residence which is
discontinued after the death of Mr. Akhilesh. His income (computed on receipt basis)
from the clinic for the period 1/4/2019 to 31/1/2020 is Rs.9,83,000.
 After the discontinuation of the clinic, Mrs. Akhilesh recovers some of the outstanding
bills issued by Mr. Akhilesh (amount recovered during 1/2/2020 to 31/3/2020:
Rs.293000). Mrs. Akhilesh does not have any other income. On 30/3/2020 Mrs.
Akhilesh withdraws Rs.940000 being the balance in account of Mr. Akhilesh in
National Saving Scheme, 1987.
Assuming that salary, allowances and pension become “due” on the last day of the month, find
out –
a) Who will be chargeable to tax in respect of the aforesaid receipts?
b) Net income and tax liability for the AY 2020-21.