1. 1 . 2 . 3 . 4 5 .

1. 1 . 2 . 3 . 4 5 . 6 7 .

Following are the taxable income of Sri. Akash for the previous year 2008-09 Income from salary accrued in India and received in India

75,000

Dividend income declared in United States but received in India Income from long term capital gains in India

50,000

Interest on debentures of a company at Paris, received in India Royalty received in Paris for technical fee provided for a business carried on in London. Interest received from Vivek, a non-resident on the loan provided to him for the business carried on in India. Profit from cloth business in Malaysia

10,000

30,000

15,000 6,000 85,000

Compute Sri. Akash’s total income for the assessment year 2009-10 if he is (i) Resident, (ii) Not Ordinarily Resident (iii) Non Resident.

Ans: - Computation of Total Income of Sri Akash for the assessment year 2009-10:

Particulars

Resident (Rs.)

Not Ordinarily Resident (Rs.)

Non Resident (Rs.)

1.

Income from salary accrued in India and received in India

75000

75000

75000

2.

Dividend income declared in United States but received in India

50000

50000

50000

3.

Income from long term capital gains in India

30000

30000

30000

4.

Interest on debentures of a company at Paris, received in India

10000

10000

10000

5.

Royalty received in Paris for technical fee in London

15000

---

---

6.

Interest received from Vivek, a nonresident for the business in India

6000

6000

6000

7.

Profit from cloth business in Malaysia

85000

---

---

2,71,000

1,71,000

1,71,000

Total Income

2. Compute income from house property from the following particulars for the assessment year 2009-10 I 40,000 35,000 32,000 36,000 3 months 15,000

II 45,000 46,000 37,000 40,000 14,000

III 50,000 54,000 45,000 48,000 17,000

IV 52,500 65,000 55,000 57,000 19,000

Municipal Value Fair Rental Value Rent received Standard Rent Vacancy Period Repairs Municipal Tax: - Paid 6,000 3,500 1,800 2,400 - Due The assessee had borrowed on 1.10.2002 Rs.3, 50,000 at 14% for the construction of the second house which was completed on 31-12-2005. As on 14-2008 Rs.3, 00,000 was outstanding. In respect of the fourth house one month rent was unrealized. The claim was genuine and satisfied the conditions: and the recent received was for 10 months. Ans: - Working Note: Pre-construction period is from 1.10.2002 to 31.3.2005 i.e., (6+12+12) = 30 months, interest for PCP = 350000 * 14/100 * 30/12 = Rs. 122500 1/5 of Rs. 122500 = Rs. 24500 allowed for 5 years (2005-06 to 200910 previous years) Computation of income from House Property for the assessment year 2009-10:

House I

Rs.

Rs.

a) Expected Rent: i) Municipal value ii) Fair Rent iii) Standard Rent RER

40000 35000 36000 36000

b) Actual Rent received: G.A.V Less: Municipal Tax paid N.A.V. Less: Deduction u/s 24(1): (a) Standard deduction for repairs & collection @30% of NAV (b) Interest on loans Income from House property

32000

House II

32000 6000 26000

7800 NIL

Rs.

7800 18200

Rs.

a) Expected Rent: i) Municipal value ii)Fair Rent iii) Standard Rent RER b) Actual Rent received: G.A.V. Less: Municipal Tax paid N.A.V. Less: Deduction u/s 24(1): (a) Standard deduction for repairs & collection@30% of NAV (b) Interest on loans [(200000*14%)+24500] Loss from House Property

45000 46000 40000 40000 37000 40000 3500 36500

10950 66500 77450 40950

House III

Rs.

Rs.

a) Expected Rent: i)Municipal value ii) Fair Rent iii) Standard rent RER b) Actual Rent received: G.A.V. Less: Municipal Tax paid N.A.V. a) Standard deduction for repairs & collection@30% of NAV (b) Interest on loans Income from House Property

House IV

50000 54000 48000 48000 45000 48000 NIL 48000 14400 NIL

Rs.

14400 33600

Rs.

a) Expected Rent: i)Municipal value ii) Fair Rent iii) Standard rent RER b) Actual Rent received: G.A.V. Less: Municipal Tax paid N.A.V. a) Standard deduction for repairs & collection@30% of NAV (b) Interest on loans Income from House Property

52500 65000 57000 57000 55000 57000 NIL 57000 17100 NIL

17100 39900

3. What is a Provident fund? Explain briefly various types of Provident Funds. Ans:The word 'Provident' means to provide for the future. This fund is created by an amount deducted from the salary of the employee every month at a certain rate. The

employer also makes his own contribution to this fund. These contributions are invested to earn interest, which is also credited to the employee's provident fund account. When an employee retires from his service, he receives this amount in lump-sum along with interest on it and is a great help to him at that time. If unfortunately, the employee dies during the tenure of his service, the amount of this fund is received by his wife and children or legal heirs, which is of great help to them. Provident funds are of four kinds: 1. Statutory Provident Fund 2. Recognised Provident Fund 3. Unrecognised Provident Fund 4. Public Provident Fund.

Statutory Provident Fund It is that Provident Fund to which the Indian Provident Fund Act, 1925 applies. Generally, this Provident Fund is maintained by government and semi-government organizations, local authorities, universities, recognised educational institutions, railways, airlines etc. This is a blue-eyed baby. Everything is exempt from tax, without any ifs and buts, including the employer's contribution and the interest paid, even if it is over 12%.

Recognised Provident Fund It is covered by Employee's Provident Fund and Miscellaneous Provisions Act, 1952 applicable to establishment with 20 or more employees. Those with fewer employees are also welcome to opt for it. The PF Commissioner manages the funds. However if the establishment desire to manage the funds. However, if the establishment to manage its own funds, a trust offered by the IT Commissioner, has to be correct which will invest the funds in accordance with the PF rules. There have been significant changes in this regard.

Employee's contributions are covered by Section 88, and there is no ceiling on his voluntary contribution. Employee's contribution in excess of 12% of employer's salary as well as interest paid exceeding 9.5% per annum is charged to tax. Payment of accumulated balance in RPF is taxable under of rule 9(1) of ScheduleIV(A) to the ITA, unless the employee renders continuous service with his employer for 5 years or the discontinuance is due to cause beyond control of the employee. This balance is also exempt if it is transferred to the employee's individual account in any RPF maintained by his new employer or by the PF Commissioner. Service under his former employer or employers shall be included in computing the total period of continuous service.

Unrecognized Provident Fund It is that provident fund which is not recognized by the Commissioner of Income tax in accordance with the rules contained there in Act. Unlike a statutory provident fund, recognized provident fund or public provident fund.

Public Provident Fund Public Provident Fund Scheme was introduced by Government of India on 01.07.1968 and it provides the depositor the twin benefits of attractive return and tax benefit. The Scheme is operational in select branches of IOB. (List furnished separately) The salient features of the Scheme are as under: Eligibility: a. Individual or individual as guardian of a minor can open the account. b. Non Resident Indians are not eligible to open the account. c. Only one account can be opened by an individual in one name. d. Those persons who subscribe to General Provident Fund or Employees Provident Fund can also open the account. Deposit: Minimum remittance of Rs.500/- and maximum of Rs.70000/- in multiples of Rs.5/can be made in lump sum or in 12 installments per year. Duration: The account is of 15 years duration and the account can be continued for one or

more blocks of 5 years without loss of interest on written request within 1 year from the date of maturity. Interest: Interest at the rate of 8% is credited to the account on 31st March of every year on the minimum balance between 5th day and end of the month. Loans and Withdrawals: If the account is continued after maturity, a partial withdrawal up to 60% of the balance of credit at the commencement of the extended period is permitted. The depositor is eligible for a loan. The first loan can be taken in the third financial year from the financial year in which the account was opened up to 25% of the amount at the credit at the end of first financial year. Withdrawal is allowed every year from the end of the 5th year. The amount is limited to 50% of the balance at credit, at the end of 4th year immediately preceding the year in which the amount is withdrawn or at the end of the preceding year which ever is lower less the amount of loan if any drawn by him which remains unpaid. The account is transferable to and from permitted branches of Nationalized or Private sector Banks or Post Offices on a fee. Premature closure of the account after completion of 5 years from the end of the year in which the account was opened could be considered by the Ministry on genuine grounds of hardship.