accounting and bookkeeping for business and management 13 october

05/03/23 AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

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INCOME TAX OF INDIA AFTERSCHO☺OL – DEVELOPING CHANGE MAKERS

CENTRE FOR SOCIAL ENTREPRENEURSHIP PGPSE PROGRAMME –

World’ Most Comprehensive programme in social entrepreneurship & spiritual entrepreneurship

OPEN FOR ALL FREE FOR ALL


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INCOME TAX OF INDIADr. T.K. Jain.

AFTERSCHO☺OLCentre for social entrepreneurship

Bikaner M: [email protected]

www.afterschool.tk, www.afterschoool.tk

http://www.afterschool.tk/

http://www.afterschoool.tk/


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CONDITIONS FOR CLAIMING EXEMPTIONS UNDER 10 BA

1. Manufacture of eligible articles2. Not a reconstructed establishment3. Not by transfer of an existing enterprise4. At least 20 employees5. Forex is brought in 6 months6. Prescribed format for returns


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Pankaj Baid ji gets advance salary for the month of April, May 2009 in March 2009 itself. When will it be

chargeable to tax? • F.Y = 2008-9


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Pankaj Baid ji gets salary of March 2008 in May 2008. When

will it be chargeable to tax?

• F.Y 2007-8


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Pankaj Baid ji gets profit in a business (although he is an employee), how will it be

chargeable to tax?

• Taxable as salary.


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• Baid ji retires from service on December 31, 2007, after 25 years of service. Following are hi particulars of his income/investments for the previous year 2007-08:

• Basic pay @ Rs.16,000 per month for 9 months1,44000

• Dearness pay (50% forms part of the retirement benefits) Rs.8,000 per month for 9 months72,000

• Lumpsum payment received from the Unrecognised Provident Fund 6 lakhs and deposits in PPF Ac 40000 Out of the amount received from the provident fund, the employers share was Rs.2 lakh and the interest thereon Rs.70,000. The employee’s share was Rs.2,70,000 and the lnterest thereon Rs.60,000.


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Solution

• Employer’s contribution is taxable. Interest on that is also taxable. Interest on the amount employee’s contribution is also taxable.

• Thus tax exempt amount is only Rs. 270,000(which is contribution by the employee)

• Amount taxable : (6 lakhs – 2.7 lakhs) = 3,30000 answer.


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• Mr. B is working in XYZ Ltd. and has given the details of his income for the P.Y. 2007-08. You

• are required to compute his gross salary from the details given below:

• Basic Salary Rs 10,000 p.m.• D.A. (50% is for retirement benefits) As

8,000 p.m.• Commission as a percentage of turnover1%• Turnover during the year 5 lakhs• Bonus 40000• Gratuity25000• His own contribution in the RPF 20000• Employer’s contribution to RPF 20% of basic• Interest accrued in the RPF @ 13% p.a. Rs

13,000


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Solution • Basic = 120000 + DA = 96000• Commission = 5000, + Bonus = 40000• Gratuity = 25000 (because he is still in service). • RPF (employee contribution) = tax free• RPF (employer contribution) = tax free 12% of

(basic, DA, commission – as per contract). 12% of ((120000+48000+5000) )=20760 is tax free. Actual amount is 24000. thus 3240 is taxable.

• Interest (actual 13%, allowed 9.5%), Thus 3.5 /13 *13000 = 3500 is taxable amount.


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Solve it : housing property ..• Bhugari ji is a Finance Manager in Global Financial

Services Ltd. The company has provided him with rent-free unfurnished accommodation in Mumbai. He gives you the following particulars:

• Basic salary Rs.6,000 p.m.• Advance salary for April 2008 Rs.5,000• Dearness Allowance Rs.2,000 p.m. (30% is for

retirement benefits)• Bonus Rs.500p.m.• Even though the company allotted the house to him

on 1.04.07 he occupied the same only from 1.9 .07. Calculate the taxable value of the perquisite for A.Y. 2008-09.


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Solution …

• House perquisite: • Salary = basic + DA (if retirement part) +

Bonus + contribution to PF (employer’s contribution) + other taxable allowances

• (72000) + (7200) + (6000) = 85200. this is for 12 months, but Bhugariji lived only for 7 months. So taxabe perqs 7/12 *85200 (20% of this amount)

• =49700 * 20% = 9940 answer.


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In the previous question, compute the value of the perquisite if company has taken this accommodation on a lease rent of Rs.1,200 p.m. and bhugariji is

required to pay a rent of Rs.1,000 p.m. to the company, for the use of this

accommodation.

• Amount paid by employer 8400. Amt paid by bhugari ji 7000. 15% of salary : 7455 (thus lower of 7000 and 7455 is exempt). Thus taxable amount is 1400. Ans.


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Solve it

• In the previous question compute the value of the perquisite if the company has provided a television (WDV Rs.10,000; Cost Rs.25,000) and two air conditioners. The rent paid by the company for the air conditioners is Rs.400 p.m. each. The television was provided on 1.1.08. However, Mr. C is required to pay a rent of Rs.1,000 p.m. to the company, for the use of this furnished accommodation.


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Solution

• Here we will take 10% of value of furnishings : which is

• 25000*10% *3/12 = 625 (or rent paid witch ever is higer).

• AC = 800 *7 = 5600 (OR 10% OF COST – WHICH EVER IS HIGHER)

• This will be added to taxable amount as perquisite.


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If Bhugari ji were govt. employee, what would have been taxable?

• Value of house ( amount determined by the govt. ) ( 1000 *7) = 7000

• + value of furnishing = 6225• Total 13225• Payable by bhugari ji 7000• Taxable = 6225 ans


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Perquisites. • Compute the taxable value of the perquisite in respeèt of medical

facilities received by Mr. G from his employer during the PY 2007-08:

• Medical premium paid for insuring health of Mr. G• Treatment of Mr. G by his family doctor Rs.7000• Treatment of Mrs. G in a Government hospital RS.25,000• Treatment of Mr. G’s grandfat in a private clinic Rs. 12,000• Treatment of Mr. Goti’s mother (68 years and dependant) by family

doctor 8000• Treatment øf Mr. G’s sister (dependant) in a nursing home 3000• Treatment of Mr. G’s brother (independent) 6000• Treatment of Mr. G’s father (75 years and dependant) abroad• Expenses of staying abroad of the patient and attendant 100000• Limit specified by RBI RS.75,000


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Solution ..• Expenses abroad 100000• Allowed 75000• Taxable : 25000• Expenses in India in govt. hospitals or private

doctors : 16000 – tax free 15000 • = taxable 1000• Other expenses (not allowed) • Treatment inprivate clinic 12000• Treatment of brother 6000• Total taxable amount : 44000


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• Mr. Goyal receives the following emoluments during the previous year ending 31.03.08.

• Basic pay Rs.400000• Dearness Allowance Rs.150000• Commission As. 10,000• Entertainment allowance Rs.4,000• Medical expenses reimbursed Rs.25000• Professional tax paid in the PY Rs.3,000 (Rs.2,000

was paid by his employer)• Free car facility for Mr Goyal for which expenditure of the

employer was Rs.20,000.• Mr. Goyal contributes Rs,5000 towards provident fund.

He has no other income. Determine


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Solution …• Taxable amounts : 400000 + 150000 + 100000

+ 4000 + (taxable medical 10000) + 2000 (tax paid by employer)

• = 656000• Less : • Ent. Allowance 4000 • (least of the following : 5000, actual amt, 1/5 of

salary = 80000). • Prof. tax 3000. • Thus taxable amount = 649000 answer.


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Find what is taxable and why?

• Sarika Is employed with RIL Ltd. on a monthly salary of Rs.25,000 per month and an entertainment allowance and commission of Rs.1,000 p.m. each. The company provides him with the following benefits:

• A company owned accommodation is provided to him in Delhi. Furniture costing Rs 240000 was provided on 1.8.2007.


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Solution

• Housing = 20% of salary : 5000 *8 month = 40000 + 20% of (12000 + 12000) = 4800

• Entertainment allowance = 12000• Commission = 12000• Furnishing = 10% of cost for 8 months• 24000 * 8/12 = 16000


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Taxability …

• personal loan of Rs.5,00,000 on 1 .7.2007 on which it charges interest @ 6.75% p.a. The entire loan is still outstanding. (Assume SBI rate of interest to be 12.75% p.a.)

• solution :• Interest benefit : 6% of 500000 = 30000 *

9/12 = 22500.


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The company gave her a ring worth Rs.14,900 on his 22nd

birthday on 10.10.2007.• Tax free. • (it will be calculated in FBT).


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She made purchases of Rs.12,000 on her credit card. The amount aiong with the annual fees

of Rs.2,000 was paid by the company.

• Tax free.• It will be counted for FBT


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Ramesh’s son Is allowed to use a motor cycle belonging to the company. The company had purchased this motor cycie for Rs.60,000 on

1.5.2004. The motor cycle was finally sold to him on 1,08.2007 for Rs.30,000.

• Charges for bike : 10% = 6000 (* 4/12) for 4 months = 2000

• Taxable benefit for transfer of bike: • (60000*.9^3)= 43740 ( plus depreciation

for 5 month) - 30000 will give the taxable benefit.


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Ramesh is provided with a motor car which is used for both official

and personal purpose byths employee. The running and

maintenances charges fully paid by empioyer Rs.36,000

• Tax free• It will be counted in FBT


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The company pays the telephone bills of Rs.18,000 for the telephone

installed at Sarika’s residence

• Tax free• Counted for FBT.


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Baid ji’s accommodation in hotels while touring on official duties met by employer Rs.

20,00,000

• Tax freecounted for FBT.


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Value of lunch provided by the employer during office hours.

Cost to the employer Rs.I 2,000.

• Tax free• Counted for FBT


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free electricity. Cost to the employer is Rs.10,000

Professional Tax paid by Sarika is Rs.2,000.

• Electricity cost = is taxable for specified employees.

• 2000 can be claimed as deduction from gross salary (sec. 16 (iii).


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Housing Property…..

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Determination of housing value..

• Annual letting value is higher of fair rent and municipal value but upto only standard rent.

• Gross Annual Value is higher of ALV and Actual rent / recivable.

• 1 Higher of (mv and fr)• 2 Lower of (SR and 1)• 3. Higher of (Actual rentreceivable and 2)


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• Ramesh Jain , a British national, is a resident and ordinarily resident in India during the P.Y.2008. He owns a house in London, which he has let out at £ 10,000 p.m. The muncipal taxes paid to the Municipal Corporation of London is £ 8,000 during the P. Y.2007.08 The value of one £ in Indian rupee to be taken at Rs.90. Compute Rajesh’s taxable income for the A.Y. 2008-9


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Solution

• Ramesh is RoR, so taxable. • Income from house : 10000*12*90• =10800000• Less municipal taxes 8000*90 = 720000• Taxable amount = 10080000 answer.


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Solve it

• Prabhakar Singh had taken a loan of Rs.5,00,000 for construction of property on 1.4.2006. Interest was payable @ 10% pa. The construction was completed on 1-4-.2007. No principal repayment has been made up to 31.3.2008. Compute the interest allowable as deduction u/s 24 for the

• A.Y.2008-09.


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Solution

• Two deductions are allowed under sec. 24 = • 30% of NAV for self occupied property• Interest rate as deduction• (here we take interest paid + interest on

preconstruction period is allowed in 5 years in 5 equal instalments. ) (if annual value is nil - then maximum deduction allowed is 30000, please read rules in detail to understand it).


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Solution…

• Interest on this year : `allowed completely).

• Interest on preconstruction period – 50000• It will be allowed in 5 equal instalments • So total allowed deduction: 60000.


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Solve it

• Mr. Ramesh Jain. owns a house. The Municipal value of the house is Rs. 50,000. He paid Rs. 8,000 as local taxes during the year. He uses this house for his residential purposes but lets out half of the house @ Rs. 3,000 p.m. Compute the annual value of the house.


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Solution..

• Higher of municipal value or rent receivable: 50000 or 72000 (3000*2*12)

• GAV = 72000• Less taxes = 8000• AV = 64000• NAV = 64000 – 32000 (less amount for

self occupied property) = 32000m


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• Goti has a property whose municipal valuation is Rs.2,50,000 p.a. The fair rent Is

• Rs.2,00,000 p.a. and the standard rent fixed by the Rent Control Act is Rs.2,10,000 p.a. Thi

• property was let out for a rent of Rs.20,000 p.m. However, the tenant vacated the property on

• 31.1.08. Unrealised rent was Rs.20,000 and all conditions prescribed by Rule 4 are satlsftid

• He paid municipal taxes @8% of municipal valuation, Interest on borrowed capital was

• Rs.65,000 for the year. Compute the income from house property of Ganesh for A.Y.2008-09


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• 4, He I, S Ho Is.• , t*psndlture on Mr X is provided with the

Income from salary of Mr. X for the A.Y.2008-09.


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ABOUT AFTERSCHO☺OL

Afterschoool conducts three year integrated PGPSE (after class 12th along with IAS / CA / CS) and 18 month PGPSE (Post Graduate Programme in Social Entrepreneurship) along with preparation for CS / CFP / CFA /CMA / FRM. This course is also available online also. It also conducts workshops on social entrepreneurship in schools and colleges all over India – start social entrepreneurship club in your institution today with the help from afterschoool and help us in developing society.


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Why such a programme?

• To promote people to take up entrepreneurship and help develop the society

• To enable people to take up franchising and other such options to start a business / social development project

• To enable people to take up social development as their mission

• To enable people to promote spirituality and positive thinking in the world


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Who are our supporters?

• Afterschoolians, our past beneficiaries, entrepreneurs and social entrepreneurs are supporting us.

• You can also support us – not necessarily by money – but by being promotor of our concept and our ideas.


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About AFTERSCHO☺OL PGPSE – the best programme for developing great

entrepreneurs• Most flexible, adaptive but rigorous programme• Available in distance learning mode• Case study focused- latest cases • Industry oriented practical curriculum• Designed to make you entrepreneurs – not just

an employee• Option to take up part time job – so earn while

you learn • The only absolutely free course on internet


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Workshops from AFTERSCHO☺OL

• IIF, Delhi• CIPS, Jaipur• ICSI Hyderabad Branch• Gyan Vihar, Jaipur• Apex Institute of Management, Jaipur• Aravali Institute of Management, Jodhpur• Xavier Institute of Management, Bhubaneshwar • Pacific Institute, Udaipur• Engineering College, Hyderabad


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Flexible Specialisations:• Spiritualising business and society• Rural development and transformation• HRD and Education, Social Development• NGO and voluntary work• Investment analysis,microfinance and inclusion • Retail sector, BPO, KPO• Accounting & Information system (with CA / CS /CMA)• Hospital management and Health care• Hospitality sector and culture and heritage• Other sectors of high growth, high technology and social

relevance


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Salient features:• The only programme of its kind (in the whole world)• No publicity and low profile course• For those who want to achieve success in life – not just a

degree• Flexible – you may stay for a month and continue the rest of

the education by distance mode. / you may attend weekend classes

• Scholarships for those from poor economic background• Latest and constantly changing curriculum – keeping pace

with the time• Placement for those who are interested• Admissions open throughout the year • Latest and most advanced technologies, books and study

material


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Components • Pedagogy curriculum and approach based on IIM Ahmedabad and ISB

Hyderabad (the founder is alumnus from IIMA & ISB Hyderabad)• Meditation, spiritualisation, and self development • EsGotitial softwares for business• Business plan, Research projects• Participation in conferences / seminars• Workshops on leadership, team building etc. • Written submissions of research projects/articles / papers• Interview of entrepreneurs, writing biographies of entrepreneurs• Editing of journals / newsletters• Consultancy / research projects • Assignments, communication skill workshops• Participation in conferences and seminars• Group discussions, mock interviews, self development diaryng • Mind Power Training & writing workshop (by Dr. T.K.Jain)


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Pedagogy • Case analysis,• Articles from Harvard Business Review • Quiz, seminars, workshops, games, • Visits to entrepreneurs and industrial visits• PreGotitations, Latest audio-visuals• Group discussions and group projects• Periodic self assessment• Mentoring and counselling• Study exchange programme (with institutions out of

India)• Rural development / Social welfare projects


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Branches

• AFTERSCHO☺OL will shortly open its branches in important cities in India including Delhi, Kota, Mumbai, Gurgaon and other important cities. Afterschooolians will be responsible for managing and developing these branches – and for promoting social entrepreneurs.


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Case Studies

• We want to write case studies on social entrepreneurs, first generation entrepreneurs, ethical entrepreneurs. Please help us in this process. Help us to be in touch with entrepreneurs, so that we may develop entrepreneurs.


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Basic values at AFTERSCHO☺OL

• Share to learn more• Interact to develop yourself• Fear is your worst enemy• Make mistakes to learn • Study & discuss in a group• Criticism is the healthy route to mutual support

and help • Ask fundamental questions : why, when, how &

where?• Embrace change – and compete with yourself

only


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www.afterschoool.tk social entrepreneurship for better

society

http://www.afterschoool.tk/