Basics of Income Tax Solved Question Paper 2024 [Dibrugarh University BCOM 2nd SEM NEP Syllabus]

Basics of Income Tax Solved Question Paper 2024 (May/June)
[Dibrugarh University BCOM 2nd SEM NEP Syllabus]

COMMERCE (Generic Elective Course)

Paper: GECCOM2 (A)

(Basics of Income Tax)

Full Marks: 80 | Pass Marks: 24

Time: 3 Hours

1. (a) Fill in the blanks of the following: (1x4=4)

(i) ________ income is fully exempted from tax u/S 10(1) and such does not form part of total income.

Ans: Agricultural income

(ii) For the Assessment Year 2023-24, an assessee can avail deduction u/S 80 (C) to the extent of ________.

Ans: 1,50,000

(iii) Deduction for interest on loan taken for construction of self-occupied house after 01-04-1999 is allowed up to actual amount or ________ whichever is less.

Ans: Rs. 2,00,000

(iv) Capital gain arises from the transfer of ________ asset.

Ans: Capital Assets

(b) Write 'True' or 'False' of the following: (1x4=4)

(i) Total income of a person is determined on the basis of his citizenship in India.

Ans: False, Residential status

(ii) Municipal tax is a deduction from net annual value.

Ans: False, Municipal tax deducted from GAV.

(iii) House rent allowance is a fully taxable allowance.

Ans: False, it is partly taxable.

(iv) Income from subletting house will be chargeable under the head 'income from other sources'.

Ans: True

2. (a) Explain in brief any fourteen incomes which are exempt u/S 10 of the Income-tax Act, 1961. (14)

Ans: Income Exempted from tax under Sec. 10:

1. Agricultural Income: Income from agriculture is exempt. However, if the net agricultural income exceeds Rs.5, 000, it is taken into account for determining the rates of income-tax on incomes liable to tax. [Sec.10 (1)]

2. Receipt from Hindu Undivided Family: Any sum received by an individual as a member of Hindu Undivided Family where such sum has been paid out of the income of the family or in the case of any Impartible estate, where such sum has been paid out of the income of the estate belonging to the family, irrespective of whether tax is payable or not by the HUF on its total income. However, certain receipts from HUF are liable to be clubbed in the hands of an individual member u/s 64(2). [Sec.10 (2)]

3. Partner’s Share in the Firm’s Income: In the case of a person being a partner of a firm which is separately assessed as such, partner’s share in the total income of the firm is exempt. Share of a partner of the firm shall be computed by dividing the total income of the firm in the profit-sharing ratio mentioned in the Partnership Deed. [Sec.10 (2A)]

4. Value of Leave Travel Concession: Value of any leave travel concession or assistance received by or due from the employer to the employee (including noncitizens) and his family (spouse, children and dependent- father, mother, brother, sister dependent on him) in connection with his proceeding on leave or after retirement or termination of his service to any part of India. [Sec.10 (5)]

5. Leave Encashment: Any payment received by a Central/State Govt. employee, as cash equivalent of leave salary in respect of a period of earned leave at his credit at the time of his retirement whether on superannuation or otherwise is exempted from tax. However, in the case of other employees, the exemption is available upto Rs. 25 Lakhs. But it is to be remembered that if leave is encashed during service it is fully taxable for both government and non-government employees. [Sec.10 (10AA)]

6. Compensation to Employee: Any compensation received by a workman under Industrial Disputes Act or under any other Act or rules, order or notification issued there under or under any standing order or under any award, contract of service or otherwise at the time of his retrenchment is exempt to the extent such compensation is in accordance with Section 25F (b) of Industrial Disputes Act, subject to a maximum of Rs.5, 00,000.

7. Payment from Provident Fund: Any payment (including interest) from a provident fund under the Provident Fund Act, 1925 or Public Provident Fund Scheme, 1968. [Sec.10 (11)]

8. Accumulated Balance of Recognised Provident Fund: Any accumulated balance due and becoming payable to an employee from a recognised provident fund, on fulfillment of any of the following conditions:

(i) If he has rendered a continuous services of five years or more; or

(ii) If his service, though not as stated in (i) above, has been terminated due to his ill-health or by the contraction or discontinuation of his employer’s business or any other cause beyond his control; or

(iii) If on cessation of his employment, his accumulated balance is transferred to a recognised provident fund maintained by his new employer;

Note: If the employee's contribution to the RPF exceeds ₹2.5 lakh in a financial year, the interest earned on the excess contribution is taxable.

9. Payment from Sukanya Samriddhi Account: Any payment from an account under the Sukanya Samriddhi Account Rules, 2014 [Sec.10 (11A)]

10. House Rent Allowance: House Rent allowance [Sec.10 (13A)]: House rent allowance (HRA) received by an employee from his employer is an exempted income. If the actual house rent allowance received by the employee is in excess of the lowest limit as prescribed, the excess sum will be taxable salary. HRA is exempt from tax to the lower of the following.

(a) 50% of Salary in Mumbai, Kolkata, Chennai, Delhi; 40% of salary in other cases.

(b) Actual amount of house rent allowance received; or

(c) The excess of rent paid over 10% of salary.

If the employee is living in his own house or in a house where he is not paying any rent, HRA is fully taxable.

Salary for this purpose means basic salary and dearness allowance if the terms of employment so provide. It also includes any commission based on a fixed percentage of turnover achieved by the employee, as per the terms of the service contract. However, it excludes all other allowances and perquisites.

Note: Under the new tax regime (as of April 1, 2026), House Rent Allowance (HRA) exemption is not available. The entire HRA component received from an employer is fully taxable as part of the salary. Unlike the old regime, employees cannot claim deductions for rent paid under Section 10(13A).

11. Allowances of MPS and MLAs:

(a) Any daily allowance received by Members of Parliament or any State Legislature.

(b) Any allowance received by any Member of Parliament under the Members of Parliament (Constituency Allowance) Rules, 1986.

(c) Any constituency allowance received by any member of any State Legislature under any Act or rules made by it. [Sec.10 (17)]

12. Income of a Professional Association set up for the control, supervision, regulation or encouragement of the professions of law, medicine, accountancy, engineering, architecture or other notified profession (i.e. Company Secretary, Chemistry, Materials Management and Town Planning), subject to specified conditions. [Sec.10 (23A)]

13. Income of a New Agency [i.e. Press Trust of India Ltd.] set up in India, which applies its income or accumulates it for application solely for collection and distribution of news and does not distribute its income in any manner to its members. [Sec.10 (22B)]

14. Income of a Minor Child liable to be included in the income of his parent u/s 64(1A) is exempted up to a maximum of Rs.1, 500 per minor child. [Sec.10 (32)]

15. Any Capital gain arising to an individual /HUF on compulsory acquisition of an agricultural and in urban areas (i.e. situated within the jurisdiction of a municipality or a cantonment board having a population of 10,000 or more or within a specified distance from the local limits of such municipality/board), provided the compensation/consideration is received on or after 1.4.2004 and the land was being used for agricultural purposes by the HUF/individual or his parent(s), during the period of two years immediately before acquisition. [Sec.10 (37)]

OR

(b) Write short notes on the following: (3.5x4=14)

(i) Previous year

Ans: Previous Year: [Sec. 3]: As the word, ‘Previous’ means ‘coming before’, hence it can be simply said that the Previous Year is the Financial Year preceding the Assessment Year e.g. for Assessment Year 2025-2026 the Previous Year should be the Financial Year ending 31st March 2025. The term previous year is very important because income earned in the previous year is to be assessed to tax in the assessment year. The simple rule is that the income of a previous year is taxed in its relevant assessment year. At present, the previous Year 2025-2026 (1-4-2025 to 31-3-2026) is going on.

Effective April 1, 2026, the Income Tax Act, 1961, is replaced by the Income-tax Act, 2025, which replaces the term "Previous Year" (and Assessment Year) with "Tax Year". This new "Tax Year" represents the 12-month financial year (April 1 to March 31) in which income is earned, simplifying the previous dual-year system.

(ii) Assessee

Ans: Assessee [Section 2 (7)]: Assessee means a person by whom any tax or any other sum of money payable under the Act and include:

i)      Every person in respect of whom any proceeding has been initiated under the act for the assessment of his income or the income of any other person. These assessee are also called ordinary assessee. It also includes that person to whom tax refund is due or by whom any amount of tax or interest or penalty is payable under this Act.

ii)    A person who is deemed to be an assessee under any provision of the Act. A person who is not only liable for his own income but also for the income of another person is called deemed assessee or representative assessee. E.g., Guardian of minor or a lunatic etc.

iii)  A person who is deemed to be an assessee in default in any of the provision of the Act. Assesses in default is a person who fails to fulfill his statutory obligations. E.g., in case of an employer paying salary, he has to deduct tax at source and deposit the same in the government treasury. If he fails, then he is called assessee in default.

Every person by whom any amount is payable under the Income Tax Act is called assessee. But all person mentioned above is not liable to pay taxes.

A. Following persons are liable to pay income tax if their taxable income’ in a year exceeds the basic exemption limit for the year:

1.    Individuals (including non-residents),

2.    Hindu Undivided Families (HUFs)

3.    Association of Persons (AOPs)/Bodies of Individuals (BOIs) (where the individual shares of the members are known)

4.    Artificial juridical persons, such as deities of temples

5.    Societies and charitable/religious trusts

B. Following persons are liable to pay income-tax irrespective of their income:

1.    All partnership firms (including limited liability partnership firms)

2.    Co-operative societies

3.    Companies

4.    Local authorities

5.    AOP/BOI where shares of the members are indeterminate or unknown.

(iii) Person

Ans: Person [Section 2(31)]: Person includes seven types of persons namely:

a.    An individual;

b.    A Hindu undivided family (HUF);

c.     A company;

d.    A firm;

e.    An association of persons (AOP) or a body of individuals (BOI);

f.      A local authority;

g.    Every artificial juridical person not falling within any of the preceding sub-clauses.

An association of person or body of individuals or a local authority or an artificial juridical person shall be deemed to be a person, whether or not such person was formed or established or incorporated with the object of deriving income, profits and gains. AOP and BOI are different terms. The 2 basic differences between AOP and BOI are:

a) In BOI there are only individuals but in AOP there can be any type of persons.

b) BOI is a creation of law whereas AOP can be created by different persons coming together for doing some income producing activity on a voluntary basis.

(iv) Residential status and incidence of income tax

Ans: Tax incidence on an assessee depends on his residential status. The residential status of a taxpayer is determined based on his physical presence in India or the location of effective management in the case of companies. It is assessed separately for each financial year and affects the scope of income taxable in India. If a person is resident in India for any source of income in a previous year, he is deemed resident for all sources of income.

Therefore, the determination of the residential status of a person is very significant to find out his tax liability. Residence and citizenship are two different things. A person who is not a citizen of India can be residence in India based on his physical presence in India or vice-versa. The incidence of tax has nothing to do with citizenship.

Incidence of Taxes (Scope of Total Income)

As per Section 5 of the Income Tax Act 1961, the incidence of tax on a taxpayer depends on his residential status and also on the place and time of accrual or receipt of income. To understand the relationship between residential status and tax liability, one must understand the meaning of “Indian income” and “Foreign income”. An Indian income is one which satisfies any of the following conditions:

1)    If income is received or deemed to be received in India during the previous year and at the same time it accrues or arises or is deemed to accrue or arise in India during the previous year, or

2)    If income is received or deemed to be received in India during the previous year but it accrues or arises outside India during the previous year, or

3)    If income is received outside India during the previous year but it accrues or arises or is deemed to accrue or arise in India during the previous year.

 Similarly, foreign income is one which satisfies both the following conditions:

1)    Income received or deemed to be received outside India; and

2)    Income accrued or deemed to be accrued outside India.

Indian income is always taxable in India irrespective of the residential status of the taxpayer. Foreign income of an individual and HUF from a business controlled or a profession set up in India will be taxable in the hands of resident and ordinarily resident and resident but not ordinarily resident but not in the hands of a non-resident. However, Foreign income from a business controlled or a profession set up outside India will be taxable only in the hands of resident and ordinarily resident and not in the hands of a resident but not ordinarily resident or a non-resident person.

Foreign income of any other taxpayer (Company, Firm, AOP, BOI etc.) will be taxable if the taxpayer is resident in India and will not be taxable in case the taxpayer is non-resident in India. 

Tax incidence of different taxpayers is as follows:

Particulars	ROR	RNOR	NR
Income received in India Income deemed to be received in India Income accruing or arising in India Income deemed to accrue or arise in India Income received/ accrued outside India from a business or profession controlled in India Income received/ accrued outside India from a business controlled outside India	Yes Yes Yes Yes   Yes   Yes	Yes Yes Yes Yes   Yes   No	Yes Yes Yes Yes   No   No

3. (a) Mr. A has the following income during the previous year, 2022-23: (14)

(i) Basic salary—2,60,000

(ii) Dearness allowance (forming part of salary)—40,000

(iii) Education allowance (for three children)—6,000

(iv) Rent paid for a residential house at Guwahati—60,000

(v) House rent allowance—48,000

(vi) He has been provided with a motor-car of 1.8 litres engine capacity for the official and personal use. All expenses of the motorcar are borne by the employer.

(vii) He contributes 14% of his salary to a recognized provident fund and his employer also contributes the same amount.

(viii) Interest credited to recognized provident fund @ 13% amounted to 13,000.

(ix) Medical expenses paid by his employer—25,000.

(x) Mr. A paid 2,500 for his professional tax. Compute the income from salary for the Assessment Year, 2023-24.

Solution:

OR

(b) Explain the provisions of the Income-tax Act, 1961 with regard to different kinds of provident funds. (14)

Ans: At present there are 4 types of provident funds:

a)    Statutory Provident Fund (SPF): Statutory Provident Fund (SPF) is a type of retirement savings scheme available to government employees. It is governed by the Provident Fund Act, which provides the framework for the operation and management of the fund. The SPF aims to provide financial security and retirement benefits to government employees. It helps employees accumulate a corpus over their working years, which they can access upon retirement or resignation.

b)    Recognized Provident Fund (RPF): This scheme is applicable to an organization which employs 20 or more employees. An organization can also voluntarily opt for this scheme. All RPF schemes must be approved by The Commissioner of Income Tax. Here the company can either opt for a government-approved scheme or the employer and employees can together start a PF scheme by forming a Trust. The Trust so created shall invest funds in a specified manner. The income of the trust shall also be exempt from income taxes.

c)    Unrecognized Provident Fund (URPF): Such schemes are those that are started by employer and employees in an establishment, but are not approved by The Commissioner of Income Tax. Since they are not recognized, URPF schemes have a different tax treatment as compared to RPFs.

d)    Public Provident Fund (PPF): This is a scheme under the Public Provident Fund Act 1968. In this scheme, even self-employed persons can contribute. The minimum contribution is Rs.500 per annum and the maximum contribution is Rs.1, 00,000 per annum. The contribution made along with interest earned is repayable after 15 years unless extended.

Taxability of Provident Funds

Particulars	SPF	RPF	URPF	PPF
1. Employee's/ assessee's contribution	Deduction u/s 80C is available from gross total income subject to the limit specified therein	Deduction u/s 80C is available from gross total income subject to the limit specified therein	No deduction u/s 80C is available	Deduction u/s 80C is available from gross total income subject to the limit specified therein
2.Employer's contribution	Fully exempt from tax	Exempt up to 12% of salary. Amount in excess of 12% is included in gross salary.	Not exempt but also not taxable every year. For taxability see point 4 below	Not applicable as there is only assessee's own contribution
3. Interest on Provident Fund	Fully exempt from tax	Exempt u/s 10 up to 9.5% p.a. Interest credited in excess of 9.5% p.a. is included in gross salary	Not exempt but also not taxable every year. For taxability see point 4 below	Fully exempt
4.Repayment of lump-sum amount on retirement / resignation /termination	Fully exempt u/s 10(11)	Exempt if the employee has rendered a minimum of 5 years of continuous service	Accumulated employee's contribution is not taxable Accumulated employer's contribution + interest on employer's contribution (till date) is taxable as profit in lieu of salary. Interest on employees contribution (till date) is taxable as income from other sources	Fully exempt. u/s 10(11)

Transferred Balance of Provident Fund: The balance of unrecognised fund which is transferred to recognised fund is called transferred balance. Points to remember in this case:

Ø  The fund will be treated as RPF from the date fund was instituted

Ø  The employer’s contribution to URPF shall qualify for exemption up to 12% of salary and excess shall be taxable.

Ø  Interest up to 9.5% is exempted, excess taxable

Ø  Salary means: basic + DP + DA (Which enters) + Commission on turnover

4. (a) Mr. X is the owner of a house property. From the following particulars, compute the Income from House Property for the Assessment Year, 2023-24: (14)

Particulars	Amount (Rs.)
Municipal Valuation	1,00,000
Fair Rent	1,20,000
Standard Rent fixed by the Court	1,10,000

The house was let out w.e.f. 01-04-2022 for 9,000 p.m. which was vacated by the tenant on 30-09-2022. Since then, it remained vacant for two months. From 01-12-2022 it was again given to rent @12,000 p.m.

Municipal tax paid for the house—20% of municipal valuation.

Repairs, electricity, etc., paid—5,000.

Interest on money borrowed for construction of house property—27,400.

Solution:

OR

(b) What are the incomes which are chargeable to income tax under the head 'Profits and Gains of Business or Profession'? Discuss. (14)

Ans: The following income shall be chargeable to income-tax under the head “Profits and gains of business or profession” (Chargeability - Sec. 28):

a)       The profits and gains of any business or profession which was carried on by the assessee at any time during the previous year;

b)      Any compensation or other payment due to or received by, —any person, by whatever name called, managing the whole or substantially the whole of the affairs of an Indian company, at or in connection with the termination of his management or the modification of the terms and conditions relating thereto;

c)       Income derived by a trade, professional or similar association from specific services performed for its members;

d)      The value of any benefit or perquisite arising from business or the exercise of a profession, whether:

a. convertible into money or not; or

b. in cash or in kind or partly in cash and partly in kind;

e)      Any interest, commission, salary, remuneration, or bonus due to, or received by, a partner of a firm from such firm: 

f)        Any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy.

g)       Income from speculative transactions.

h)      Any sum, whether received or receivable, in cash or kind, under an agreement for:

a.       not carrying out any activity in relation to any business; or

b.       not sharing any know-how, patent, copyright, trade-mark, licence, franchise or any other business or commercial right of similar nature 

i)        Any profit on the transfer of the Duty Free Replenishment Certificate

j)        Any profit on the transfer of the Duty Entitlement Pass Book Scheme

k)       Profits on sale of a license granted under the Imports (Control) Order, 1955, made under the Imports and Exports (Control) Act, 1947 (18 of 1947) 

Business Income Not Taxable under the head “Profits and Gains of Business or Profession”

In the following cases, income from trading or business is not taxable under Sec. 28, under the head “Profits and Gains of Business or Professions”:

Nature of Income	Head under which it is chargeable to Tax
Rental income in the case of dealer in property	Rent of house property is taxable under Sec. 22 under the head “ Income from House Property” even if property constitutes Stock-in-trade of recipient of rent or the recipient of rent is engaged in the business of letting  properties on rent.
Dividend from an Indian company, agricultural income, life insurance maturity amount etc.	These incomes are exempted from tax.
Dividend on shares in the case of a dealer-in-shares.	Dividend on shares are taxable under section 56(2)(i), under the head “Income from other sources”, even if they are derived from shares held as stock in trade or the recipient of dividends is a dealer-in-shares. However, dividend received from an Indian company is not chargeable to tax in the hands of shareholders.
Income for investments, race course, Winning from Lotteries, part time salaries etc.	Winning form Lotteries, races, etc. are taxable under the head “Income from Other Sources” ( even if derived as a regular business activity)

5. (a) What is capital gain? Differentiate between short-term capital gain and long-term capital gain. Explain the procedure of computation of income capital gains. (2+4+8=14)

Ans: Capital Gain: Capital gain is the gain which arises from the transfer of a capital asset. Any profit or gain, which arises during a previous year, is chargeable under the head "capital gains" under Section 45. For a gain to be charged under the head "capital gain," it should arise due to a transfer of a capital asset. Such a profit or gain should not be exempt from tax under sections 54, 54B, 54D, 54EC, 54ED, 54FD, and 54G of Income Tax Act.

TYPE OF CAPITAL GAINS

a)       Long term capital gains:  When a capital asset is transferred by an assessee after having held it for 24months/12 months, as the case may be, the capital gains arising from this transfer is known as Long Term Capital Gains.

b)      Short term capital gain: If the period of holding of capital asset before transfer is less than 24months/12 months, as the case may be, the capital gains arising from such transfer are known as Short Term Capital Gains.

Differences between short-term and long-term capital gain:

Short term capital gains	Long term capital gains
STCG is included in the Gross total income of the assessee and taxed as per rate applicable to that assessee. Such short-term capital gains shall be taxed @ 20% + surcharge + Health and Education Cess.	LTCG is in Gross total income and is taxed on the flat rate of 12.5% on gain exceeding Rs. 1,25,000.
Deductions under sections 80C to 80U are available against STCG of capital assets other than Securities described under Sec.111A.	Deductions under sections 80C to 80U are not available.
Set-off of minimum exemption limit is available from all STCGs for resident as well as Non-resident.	Set-off of minimum exemption limit is available only for resident.
STCL can be set-off against STCG and LTCG.	LTCL can be set-off against only LTCG.
Indexation benefit is not available.	Indexation is abolished for almost all assets (except for specific cases of property bought before July 2024).

Mode of Computation of Capital Gain (LTCG/STCG) [Sec. 48]

Computation of Short-term Capital Gains A. Full value of consideration Less:(a) Expenditure incurred in such a transfer (b)Cost of acquisition (c) Cost of improvement B. Gross short-term capital gains (A – (a) – (b) – (c)) C. Less: Exemption, if available, u/s 54B/54D/54G/54GA D. Taxable Short-term capital gains (B – C)

Note: No deduction shall be allowed on account of securities transaction tax. (Sec. 48)

Basis of Charge of Capital Gains

Any profits or gains arising from the transfer of a capital asset effected in the previous year, shall be chargeable to income-tax under the head 'Capital Gains' and shall be deemed to be the income of the previous year in which the transfer took place unless such capital gain is exempt u/s 54, 54B, 54D, 54EC, 54F, 54G or 54GA. The following are the essential conditions for taxing capital gains:

a)       there must be a capital asset;

b)      the capital asset must have been transferred;

c)       there must be profits or gains on such transfer, which will be known as capital gain;

d)      such capital gain should not be exempt u/s 54, 54B, 54D, 54EC, 54F, 54G or 54GA.

OR

(b) Discuss in detail the provisions of the Income-tax Act, 1961 for determination of income from other sources. (14)

Ans: Income from other sources (Basis of Charge – Sec.56)

 Income from other sources is the last and residual head of income. A source of income that does not specifically fall under any one of the other four heads of income (viz., “Salaries”, income from house property”, profits and gain of business or profession’’, Capital gain’’) is to be computed and brought to charge under section 56 under the head’ ’Income from other source’’.

To put the aforesaid matter differently, the residuary heads of income can be invoked only if all the following conditions are satisfied:

1. Income –There is an income.

2. Income shall not be exempt – That income is not exempt from tax under section 10 to 13 A.

3. Not covered by other heads -That income is neither salary income, nor income from house property, nor income from business /profession, and neither capital gains. These four categories of income are not chargeable to tax under head ‘‘Income from other sources’’.

 If the above three condition are satisfied, the income is taxable under the head ‘‘Income from other sources’’. All incomes chargeable to tax under this head are divided into 2 categories:

A. General Incomes [Sec. 56(1)]

B. Specific Incomes [Sec. 56(2)]

Sec. 56(1): General Incomes: Following are the popular and general incomes that are offered for tax under the head “income from other sources”:

a)       Income from subletting;

b)      Interest on bank deposits and loans;

c)       Income from royalty (if it is not an income from business/profession);

d)      Director’s fee;

e)      Ground rent;

f)        Agriculture income from a place outside India;

g)       Directors ‘s commission for standing as guarantor to bankers;

h)      Director’s commission underwriting shares of new company;

i)        Examination fees received by a teacher from a person other than his employer

j)        Rent of plot of land

k)       Insurance commission;

l)        Mining rent and royalties

m)    Casual income;

n)      Annuity payable a will, contact trust deed (excluding annuity payable by employer which is chargeable under the head ‘’

o)      Salary to payable to member of parliament;

p)      Interest on securities issued by a foreign Government;

q)      Family pension received by family members of a deceased employee;

r)       In case of retirement, interest on employee’s contribution if provident fund is unrecognized;

s)       Income from undisclosed sources;

t)        Gratuity paid to a director who is not an employee of the company;

u)      Income from racing establishments;

v)       Compensation received for use of business assets;

w)     Annuity payable to the lender of a trademark.

[Sec. 56(2)]: Specific Incomes: Following incomes are the specific incomes which are chargeable to tax under the head “Income from other sources”

a)         Dividend: if such income is not chargeable to income-tax under the head "Profits and gains of business of profession.

b)        Winning from Lotteries, etc.: it includes any winning from lotteries, crossword puzzle, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever.

c)         Interest on securities: Interest on Debentures, Government securities / bonds is taxable under the head “Income from other sources”

d)        Rental income of machinery, plant or furniture: Rental income from machinery, plant, or furniture let on hire is taxable as income from other sources.

e)    Rental income of letting out of plant, machinery or furniture along with letting out of building and the two meetings are not separable.

f)     Sum received under Keyman Insurance Policy

g)    Any sum received by a unit holder from a business trust which

- is not in the nature of income referred to in clause (23FC) or clause (23FCA) of section 10; and

- is not chargeable to tax under sub-section (2) of section 115UA:

h) where any sum is received, including the amount allocated by way of bonus, at any time during a previous year, under a life insurance policy, other than the sum received under a unit linked insurance policy;

i) Gift: if any sum of money is received during a previous year without consideration by an individual or a HUF from any person or persons exceeds Rs. 50,000 the whole of such amount is taxable in the hands of the recipient as income from other sources.

Income chargeable under this head is computed in accordance with the method of accounting regularly employed by the taxpayer. For instance, if book of accounts is kept on basis of mercantile system, income is taxable and expenditure is deductible on ‘‘due basis, whereas if books of account are kept on the basis of cash system, income is taxable on ‘‘receipt’ ’basis and expenditure is deductible on ‘‘payment’ ’basis.

6. (a) Mr. Y has the following income and investment during the previous year, 2022-23: (12)

Particulars	Amount
Basic Salary	50,000 p.m.
House Rent Allowance	40,000
Exempted House Rent Allowance	10,000
Uniform Allowance	25,000
Official Expenses on Uniform	25,000
Leave Travel Concession	90,000
Exempted Leave Travel Concession	75,000

Income from Let Out House Property:

House I: 80,000

House II: 1,20,000

Income from other sources:

Interest on Savings Account: 40,000

Deduction under Section 80C: 1,50,000

Deduction under Section 80D: 20,000

From the information, compute his taxable income for the Assessment Year, 2023-24.

OR

(b) Explain the following: (7x2=14)

(i) Income Tax Authorities

Ans: Section 116 of the Income Tax Act, 1961 provides for the administrative and judicial authorities for the administration of this Act. The Direct Tax Laws Act, 1987 has brought far-reaching changes in the organizational structure. The implementation of the Act lies in the hands of these authorities. The change in designation of certain authorities and the creation of certain new posts in the structure are the main features of amendments made by The Direct Tax Laws Act, 1987. The new feature of authorities has been properly depicted in a chart on the facing page. These authorities have been grouped into two main wings:

(i)  Administrative [Income Tax Authorities] [Sec. 116]

a)    the Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963 (54 of 1963),

b)    Directors-General of Income-tax or Chief Commissioners of Income-tax,

c)    Directors of Income-tax or Commissioners of Income-tax or Commissioners of Income-tax (Appeals),

d)    Additional Directors of Income-tax or Additional Commissioners of Income-tax or Additional Commissioners of Income-tax (Appeals),

e)    Joint Directors of Income-tax or Joint Commissioners of Income-tax.

f)     Deputy Directors of Income-tax or Deputy Commissioners of Income-tax or Deputy Commissioners of Income-tax (Appeals),

g)    Assistant Directors of Income-tax or Assistant Commissioners of Income-tax,

h)    Income-tax Officers,

i)      Tax Recovery Officers,

j)      Inspectors of Income-tax.

(ii) Assessing Officer [Sec. 2(7A)]

"Assessing Officer" means the Assistant Commissioner or Deputy Commissioner or Assistant Director or Deputy Director or the Income-tax Officer who is vested with the relevant jurisdiction by directions or orders issued under sub-section (1) or sub-section (2) of section 120 or any other provision of this Act, and the Joint Commissioner or Joint Director who is directed under clause (b) of sub-section (4) of that section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act;

(ii) Deduction under Sections 80C and 80D

Ans: Deduction under Sec. 80C

This deduction is in respect of amounts paid as Life Insurance premiums, ULIP, CTD, Contribution to Provident Fund, Superannuation Fund, Public Provident Fund, etc., amounts invested in N.S.C. VI, VII and VIII Issues, repayment of loan taken for purchase or construction of residential house, etc. Deduction under Sec.80C is to be given only to Individuals and Hindu Undivided Families. The following are the investments eligible for qualifying amount under this section. The following amounts are qualified getting deduction under Sec.80C.

(i) Life Insurance Premium: Actual amount paid towards Life Insurance policy premium subjects to a maximum of 10% of capital sum assured (20% for policy is taken before 1-4-2012) to himself, spouse or children (minor or major, married or unmarried). It also includes step or adopted children. Sum assured shall not include bonus or any premium agreed to be returned. In case of HUF actual amount of premium paid in the name of any or all the co-parceners of the HUF also eligible for deduction.

(ii) Annuity: Amount contributed towards a contract for a deferred annuity; not being an annuity plan.

(iii) Statutory Provident Fund: Any contributions by an individual to any provident fund to which Provident Funds Act, 1925 applies;

(iv) Other Provident Funds: Contribution to public provident fund to himself, spouse or children.

(a) Contribution by an employee to a recognized provident fund;

(b) Contribution by an employee to an approved superannuation fund;

(v) As subscriptions to any notified security of the Central Government;

(vi) Investments in National Savings Certificates VI, VII and VIII Series;

(vii) Any amount invested by a person with UTI or LIC under unit linked insurance plan.

(viii) Contribution to Unit linked Insurance Plan of the LIC, Mutual Fund notified under section 10(23D).

 (ix) Deposit Scheme of National Housing Bank and Others: Subscription to any deposit scheme or as a contribution to any such fund set up by the National Housing Bank;

(x) Tuition fee to children: Any sum paid by an individual as tuition fees to any university, college or school or other educational institution situated in India for the purpose of full time education in respect of any two children of the assessee.

(xi) Subscription to equity or debentures: Any subscription by an individual or HUF to equity shares or debentures forming part of any eligible issue of capital approved by the Board of wholly public company any public financial institution where such proceeds are utilized for infrastructure company.

(xii) House Loan principal amount repayment

(xii) Fixed Deposit in Banks and post offices: Fixed deposits for not less than 5 years in scheduled banks is eligible for deduction under this section.

(xv) NABARD Bonds: Subscriptions to bonds of NABARD are also eligible for deduction under section 80 C.

Amount of Deduction: The amount of deduction to be given is as follows:

(i) Qualifying amount; or

(ii) 1,50,000 - whichever is less.

Qualifying Amount: The amount of deduction shall be actual amount paid or deposited during the previous year in prescribed savings schemes stated above. This amount is called as qualifying amount. According to Section 80 CCE the amount of deduction under section 80 C, 80 CCC, and 80 CCD should not exceed 1,50,000.

Deduction under Section 80D

Deduction under section 80D is allowed to individuals and HUF against payment Health insurance premium and medical expenses of family including parents. Details of deduction under the section 80D are listed below:

Situation	Self, Spouse and Children	Parents	Preventive health checkup	Maximum Deduction us 80D
All family member (Self, Spouse and Children)	25,000		5,000	25,000
All person in the family including parents are less than 60 years	25,000	25,000	5,000	50,000
All family members are below 60 years but parents are above 60 years	25,000	50,000	5,000	75,000
The eldest member of the family and parents are above 60 years	50,000	50,000	5,000	1,00,000

7. Explain the provisions of the Income-tax Act, 1961 with regard to the following briefly: (3x2=6)

(a) Advance payment of tax

Ans: Generally, tax on the income earned in the previous year is paid in the respective assessment year, but in certain cases, an assessee may be required to pay tax during the previous year itself, as Advance tax. The scheme of advance tax is based on the concept “Pay as you earn”. Under this scheme assessee needs to estimate its income and tax liability of the previous year and pay tax on basis of such estimation in the previous year itself. For instance, an assessee is required to pay tax on income earned, during the previous year 2025-26, in the assessment year 2026-27, however under the scheme of Advance tax, assessee is required to pay tax on the estimated income of the previous year 2025-26 in the previous year itself. Advance payment of tax rules applicable to all assessee irrespective of his residential status and citizenship. Where the advance tax liability of the assessee is 10,000 or more, the assessee should pay such tax in the previous year itself within the due date.

(b) Capital Assets

Ans: Capital asset means property of any kind held by an assessee, whether or not connected with his business or profession. It includes plant and machinery, building – whether business premises or residential, all assets of a business, goodwill, patent rights etc. This definition of a capital asset is very wide and includes all types of properties, whether movable or immovable, tangible or intangible, fixed or floating but does not include the following.

1. Stock-in-trade, consumable stores or raw materials held for business or profession.

2. Personal movable properties viz. furniture, motor vehicles, refrigerators, musical instruments etc. held for the personal use of the assessee or his family. But personal property does not include the following:

Ø Jewellery

Ø Residential house property

Ø Archaeological collections, drawings, paintings, sculptures, or any work of art.

3. Rural Agricultural land:

Ø Land within the jurisdiction of a municipality or cantonment board having a population of 10,000 or more or

Ø Land situated within 8 kilometers from the local limits.

4. 6½ per cent Gold Bonds, 1977 or 7 per cent Gold Bonds, 1980 or National Defence Gold Bonds, 1980 issued by the Central Government.

5. Gold Bonds issued by Government of India including gold deposit bonds issued under the gold deposit scheme, 1999 notified by the central Government.

6. Special Bearer Bonds, 1991 issued by the Government of India.

7. Deposit Certificates issued under the Gold Monetization Scheme, 2016 w.e.f. The assessment year 2017-18

It must be noted that “Property” also includes any rights in or in relation to an Indian company, including rights of management or control or any other rights whatsoever.

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