Income from salary problems (12 Marks)

1. Compute the taxable income from salary of Murugan a

government employee for AY 20____
a. Basic pay 1,44,000 p.a.
b. Dearness pay -50% of Basic pay.
c. Contribution to Statutory Provident Fund 2,000 p.m.\
d. Entertainment allowance 1,000 p.m.
e. He has been provided with a Rent Free unfurnished
accommodation. The value of accommodation as per
Government rates is 1,500 p.m. The cost of the furniture
provided is 20,000.
f. He has been sent for treatment in a Government hospital
for his wife the cost of treatment is 10,000, which is been
re-imbursed by the employer.
g. Diwali gift-7,000.
2. Mr. Rajesh (resident) a lecturer in the Delhi University,
submits the following particulars of Income for the year
ended 31/3/20__.
a) Basic pay 15,000 p.m.
b) DA 4,000 p.m.
c) He draws entertainment allowance of 2,000 p.m. out of which he
spends 1,500 p.m. on entertaining customers of the company.
d) He has been provided with a un furnished house by the company
for which a sum of 800 p.m. is deducted from salary. The
company pays a rent of 10,000 p.m. for the house directly to the
landlord.
e) During the year he received 3,000 medical reimbursement for the
medical treatment in a private nursing home.

K C Roopashree, Assistant professor, VIJAYA COLLEGE, Jayanagar pg. 1

 f) Mr. Rajesh had taken interest free loan of 16,000 to purchase
refrigerator from the company.
g) Professional tax and life insurance premium of employee were
paid by employer. Professional tax amounted to 200 p.m. and
premium on insurance policy was 8,000 p.a.
h) Services of cook, watchman and gardener were provided by the
employer. The salaries paid to the above amounted to 6,000 p.a.
3,000 p.a. and 4,500 p.a. respectively.
i) Mr. Rajesh and his family went to his home town on leave and
expenses of 5,600 being the cost of II CLASS ticket was
reimbursed by the employer.
Compute taxable income from salary for the assessment year
202----

3. Mr. Praveen (resident)is an employee in XY Ltd. at Mumbai gives the

following information for the A.Y.20____.
a) Basic salary ₹8,000 p.m.
b) Dearness allowance₹ 6,000 p.m. (1,000 pm enters into all retirement
benefits)
c) Education allowance for 2 children at₹ 350 p.m. per Child. Hostel
allowance for 2 children at 500 p.m. per child.
d) House Rent allowance₹ 1,600 p.m. but he pays ₹3,000 p.m. as
actual rent
e) He and the company contribute 14% of salary towards the RPF.
f) Interest on RPF was ₹15,000 at 15% Company has p.a.
g) Company has paid his income tax of ₹ 6,420 during the previous year
on his taxable income
h) Company has provided a telephone at his residence by meeting all
the expenses amounting to₹6,000 for the year.

K C Roopashree, Assistant professor, VIJAYA COLLEGE, Jayanagar pg. 2

i) City compensatory allowances 29,600.
j) Conveyance allowance of ₹8,000 for visiting the branches (fully spent)
k) Family allowance ₹600 p.m.
l) Entertainment allowances ₹750 p.m.
m) Company provides a small car for personal and official purpose. The
entire expenditure of ₹76,000 is met by the company and₹ 9,000 is
recovered in providing car.
n) The employer provided tea and snacks to all employees during the
tea break ₹5,000. Compute his taxable income from salary in the
assessment year 20____.

4) Mr. Akhil (resident), an employee of ABC (p) Ltd., and receives the
following salary and perquisites from his employer during the previous
year 20____. He holds 20% equity shares in the employer company.

a) Basic pay -₹96,000

b) Profit bonus-₹4,500
c) Commission on sale at 2% of turnover (turnover achieved by Mr.
Akhil for the year 2019-20 is ₹4,50,000)
d) Advance salary of April, May and June 2020-₹24,000
e) Employer’s contribution towards RPF-₹13,220
f) Interest credited in provident fund account at 14.5% is ₹8,700
g) Rent free furnished house in Mumbai is provided by employer.
Employer also pays hiring charge of furniture ₹23,500 and rent
paid for house ₹ 1,00,000.
h) Under the employee’s stock option scheme Mr. Akhil has been
allotted 600 equity shares ₹11 per share. (market rate ₹200 per
share).
i) Free services of cook-salary ₹ 7,200

K C Roopashree, Assistant professor, VIJAYA COLLEGE, Jayanagar pg. 3

 j) Mr. Akhil also took an interest free loan of t 75,000 from his
employer payable after three years .The loan is taken on 1st Nov.
2019to finance the purchase of gold for his wife (SBI rate 13%).
The employer has provided him a laptop with effect from 01-12-20
(cost to the employer₹ 65,000). Compute Mr. Akhil's taxable salary for
the assessment year 20____.

5. Mr. Vishwas (res) is a production manager of a Govt. industrial unit at

Kolkata. (he has substantial interest in the employer company).

Basic pay 15,000 p.m. DA (given under the terms of employment) 5,000
per month, EA 1,000 p.m. Medical allowance 500 per month (actual
medical expenses incurred 7,500) HRA 4,000 PM, rent paid for the
house 5,000 p.m. car of 1,400 cc provided by the employer for private
and official use. Employer meets expenses of car. Conference fees paid
by the employer 10,000. Mediclaim insurance paid by employer on the
life of Vishwas’s brother, who is not dependent on Vishwas 3,000. free
telephone at resident 3,000. He and his employer (each contributes
15% of salary of RPF).

Mr. Vishwas has taken interest free loan of 15,000 to purchase

refrigerator. Ration bill paid by the employer 6,000. He gets children
education allowance of 400 P.m. for his daughter and 80 p.m. for his
son. Compute his salary income for the AY 2021-22)

6) Smt. Rama is an employee of State bank of India, she furnishes the

following information for computation of her taxable salary for the
assessment year 2021-22.
a) Basic salary ₹12,500-500-18,000. p.m. from 1-1-2018.

K C Roopashree, Assistant professor, VIJAYA COLLEGE, Jayanagar pg. 4

b) Dearness allowance @ 15% of salary.
c) Entertainment allowance , ₹250 p.m. , bonus ₹ 4,000 , children
education allowance for her 3 children ₹200 p.m. per child and Travel
Allowance 15,000 (during the year she spent ₹ 14,000 on them travels)
d) She and her family members took medical treatment in a private.
hospital during the year. The Bank reimbursed medical expenses of₹
25,000.
e) The bank has provided her an accommodation by deducting 1,000 p.m.
from her salary, but the bank is paying a rent of 5,000 p.m. to the
owner of this house. Furniture costing ₹30,000 is also provided in this
house by the bank.
f) Employee and employer contributed 15% of her salary and DA towards
the SPF. The interest credited to the PF A/c is 3,300 @ 10% during the
year.
g) During the year the bank has paid her Employment Tax of 2,000 Income
Tax of Health 8,000, and Insurance Premium of₹ 1,500.
h) Interest free loan for purchasing a house given on 01-10-20 2,00,000
(SBI lending rate is 10.1%).

7. Mr. Gaja, a physically handicapped person working in ABC company

Ltd. Bangalore has furnished the following details of his income for the
year 20--------. Compute his income from salary for the AY 20-------
a) Basic salary 40,000 p.m.
b) Dearness allowance enters into retirement benefits 24,000.
c) Fixed percentage of commission on sales 15,000 p.m.
d) Bonus 65,000
e) HRA 12,500 p.m.( rent paid 10,600 p.m.)
f) Transport allowance 4,000.
g) Reimbursement of medical expenses 2,500 for treatment taken in
private hospital.
h) management contribution and own contribution to RPF is 15% of
salary.
i) Professional tax paid by employee is 400 p.m.

K C Roopashree, Assistant professor, VIJAYA COLLEGE, Jayanagar pg. 5

k) He is provided with more than 1.6liter capacity car by the company
for official use. All the expenses including salary of the driver are met by
the company,
l) Children education allowance 600 p.m. per child for two children and
children hostel allowance 1,000 p.m. for two children.

8) Mr. Vyasa Raj is the principal of a college in Bangalore. He

furnished the following details.
a) Basic salary 16,200 p.m.
b) DA (under terms of employment) 11,800 per month
c) He contributes 12.5% of his basic pay to RPF. The employer also
contributes the same amount.
d) Education allowance for 3 children 6,000.
e) Medical allowance 8,000 p.a. actual spent 3,000
f) Telephone bill 5,000 paid by the employer on behalf of Mr.
Vyasaraj is 6,000
g) Sweeper, servant, watchman at a salary o 350 per month per
person appointed by Mr. Vyasaraj and their salary paid by employer.
h) Surrender of earned leave and received an amount of 22,000
i) LIC premium paid by employer on the life policy of Mr. Vyasaraj is
6,000
k) He paid professional tax of 2,400.
l) He has been provided with rent free furnished house by the
college whose FRV is 5,000 p.m. and furniture facility of which cost
25,000 by the employer’
m) He went on tour for official purpose and received travelling
allowance 6,000.
n) warden allowance 500 p.m.
Compute his taxable salary for the AY 20______.

9) Mrs. Pushpa Mitra (resident) a director officer in a multinational

company having its Head office in Hong Kong. She looks after the

K C Roopashree, Assistant professor, VIJAYA COLLEGE, Jayanagar pg. 6

Bangalore branch of the company. She gives you the following
particulars.

a) Basic pay ₹12,500 per month.

b) DA 30% of basic which is treated as part of salary for all
retirement benefits.
c) Children hostel allowance of 500 per month per child for two
children.
d) Tax on employment paid by her 250 per month.
e) Services of sweeper, watchman and cook were provided by the
employer on a monthly salary of 750,950 and 1,050 respectively.
f) The company provides her a car (1800cc). A driver is also provided
with, all expenses met by employer. Car is used for official and
personal purpose.
g) The company during the year requisitioned her for a refresher
course in Hong-Kong and the cost of travel, stay expenses
amounting to R 56,500 were met by the company.
h) She is provided with fully furnished accommodation. The FRV of
accommodation is10,000 per month. The rental charges paid by
the company for use of furniture Amounts to 9,800.
i) She contributes 14% of her salary to a recognised provident fund
maintained by the company
j) free refreshments during of office hours4,000
k) Medical Insurance on life of Mrs. Pushpa Mitra paid by the
company 5,000.
l) Payment of accidental insurance premium by company 5,000
m)Holiday home facility at Kulu 26,000
n) Diwali Gift 7,000
o) She has been provided health club facility in a hostel by the
employer. This facility is available to all employees. Actual
expenditure for providing this facility 5,000 p.a.

K C Roopashree, Assistant professor, VIJAYA COLLEGE, Jayanagar pg. 7

The employer makes matching contribution to RPF. The interest
credited to RPF during the year 6,875 @ 12.5% p.a. compute her
income from salary for the AY 20____.

10) Mr. Prabakar (resident)is a central Government employee posted

at Bangalore. He furnished following particulars of his salary income
for the P.Y. 20_____:
a) Salary₹30,000 p.m.
b) Dearness allowance 30% of salary
c) Entertainment allowance₹ 1,000p. m.
d) School fees of his son, ₹ 800 p. m. is directly paid by the
Government to the school. The Government has made arrangement
with the school to admit their employee’s children.
e) Free meals in office (cost₹ 60 for 290 days= 17,400), and free
holiday home facility at Simla (cost ₹8,000)
f) An accommodation is provided by the employer in a Blue star
hotel from 18.3.2023 to 30.3.2023
g) Employer gifts a music system to Mr. Prabakar on his completing
10 years of service (cost of music system ₹22,470)
h) He is provided with more than 1.6liter capacity car by the
company for official use. All the expenses including salary of the
driver are met by the company.
i) The employer sells an air conditioning system for ₹ 2,000. It was
purchased by the company on 10-04-2018 for ₹50,000
j) On 01-03-21 he received an advance of 3 months salary.
Compute his income from salary for the A.Y. 2021-22.

K C Roopashree, Assistant professor, VIJAYA COLLEGE, Jayanagar pg. 8

 11) Mr. Govinda (res) was an employee in a company which is not
covered by the payment of gratuity act. He submits the following
particulars of his income for the year 20_____.
1) salary 12,000 p.m.
2) DA 4,500 p.m. under the terms of employment .
3) he retired from services on 1/1/2023 after 34 years of
completed services and received a pension of 6,000 p.m. and a
gratuity of 2,50,000 ( his average monthly basic pay for the last 10
months was 12,000)
4) he also received 9,00,000 from URPF 3,80,000 as employer’s
contribution, 53,000 as interest there on 4,00,000 as employee’s
contribution and 57,000 as interest thereon.
Compute his GTI for the AY 20-____. Assuming that salary and
pension are due on the last day of the month.

K C Roopashree, Assistant professor, VIJAYA COLLEGE, Jayanagar pg. 9