Illustration :

Mr. X is a retail trader. He is 40 years old. He submits the following particulars of his income and investments during financial year 2015-16:-

  1. Net income from business 500000/=
  2. Interest from taxable bonds Rs.17000/=
  3. Interest from saving bank accounts Rs.15000/=
  4. Long term capital gain on sale of jewellery Rs. 14000/=
  5. Interest from PPF account Rs.10000/=
  6. Medical Insurance Premium Rs.26000/=
  7. Payment for preventive health check-up of his wife Rs.3000/=
  8. Deposit in PPF Rs.150000/=
  9. Deposit in National Pension Scheme Rs50000/=

Compute his taxable income and tax payable?

Solution:

COMPUTATION OF TAXABLE INCOME

Income from Business                                                                                               Rs.500000/=

Long Term Capital Gain                                                                                              Rs.14000/=

Income From Other Sources

Interest from saving bank account                Rs.15000/=

Interest from bonds                                       Rs.17000/=

Interest on PPF (Rs.10000/=)                                      0                                            Rs.32000/=

GROSS TOTAL INCOME                                                                                         Rs.546000/=

Less : Deduction under Chapter VI-A

Deposit with PPF U/S 80C                             Rs.150000/=

Deposit in NPS U/S 80CCD(1B)                    Rs.50000/=

Medical Insurance U/S 80D                            Rs.25000/=

Interest on Saving Bank A/c U/S 80TTA        Rs.10000/=                                      Rs.235000/=

Taxable Income                                                                                                       Rs.311000/=

Tax Payable on Long Term Capital Gain

(20% on Rs.14000/=)                                                                       Rs.2800/=

Tax Payable on Balance Income Rs.297000/=                                Rs.4700/=        Rs.7500/=

(Rs.311000 less Rs.14000)

Less: Rebate U/S 87A                                                                                                 Rs.2000/=

Net Tax Payable                                                                                                           Rs.5500/=

Add: Education Cess 2%                                                                                        Rs.110/=

Add: Secondary & Higher Education Cess %                                                        Rs.55/=

Total Tax Payable                                                                                                         Rs.5665/=

Notes:-

  • Interest on PPF is exempted.
  • 20% income tax is to be paid on Long Term Capital Gain.
  • Maximum deduction in respect of medical insurance premium is allowed Rs.25000/= under section 80D.
  • Rebate under section 87A is allowed for Rs.2000/= if the total taxable income is up to Rs.500000/=.
  • Deduction under section 80TTA is allowed in respect of interest from saving bank account for Rs.10000/= or actual amount of interest which ever is less.
  • Total deduction under section 80CC, 80CCC and 80CCD(1) shall be restricted to a maximum amount of Rs.150000/=. However, an additional deduction under section 80CCD(1B) shall be allowed in respect of contribution to notified pension scheme subject to a maximum limit of Rs.50000/=

Illustration:

Mr. X who is 40 years old, has given the following details relating to his income for financial year 2015-16:-

Income from proprietorship firm                                                              Rs.450000/=

Interest from taxable bonds                                                                      Rs.30000/=

Interest from tax free bonds                                                                      Rs.140000/=

Interest from PPF A/c                                                                               Rs.36000/=

Interest from Saving Bank Account                                                          Rs.15000/=

Interest from fix deposits                                                                           Rs.50000/=

Deposited in PPF                                                                                        Rs.150000/=

LIC Premium Paid                                                                                        Rs.10000/=

TDS deducted on interest on Fix Deposits                                                   Rs.5000/=

Compute the tax liability of Mr.?

Solution:

COMPUTATION OF TAXABLE INCOME

Income from business & profession

Income from  proprietorship firm                                                                             Rs.450000/=

Income from other sources

Interest from taxable bonds                                       Rs.30000/=

Interest from saving bank accounts                          Rs.15000/=

Interest from fix deposits                                            Rs.50000/=

Interest from tax free bonds            Rs.140000/=              0

Interest from PPF a/c                     Rs.36000/=                 0                                       Rs.95000/=

Gross Total Income                                                                                                                         Rs.545000/=

Deduction under chapter VI-A

Under Section 80C

Deposits with PPF A/c                                    Rs.150000/=

LIC Premium paid                                             Rs.10000/=

total                                       Rs.160000/=

Restricted to                                                                                                            Rs.150000/=

Deduction U/S 80TTA                                                                                               Rs.10000/=

Total Taxable Income                                                                                                Rs.385000/=

Tax payable on income                                                                                             Rs.13500/=

Less: Rebate U/S 87A                                                                                               Rs.2000/=

Rs.11500/=

Add: Education Cess 2%                                                                                      Rs.230/=

Add:  Secondary & Higher Education Cess 1%                                                    Rs.115/=

Rs.11845/=

Less : TDS                                                                                                                  Rs.5000/=

Net Tax Payable                                                                                                           Rs.6845/=

Notes:-

  1. Interest from PPF account is tax free. Therefore, it will not be added in income.
  2. Interest from Tax Free Bonds is also tax free. Therefore, it will not be added to income.
  3. Deduction under section 80C is allowed up to Rs.150000/=
  4. Deduction is allowed against interest from saving bank account up to Rs.10000/= under section 88TTA. If interest received from saving bank account is less than Rs.10000/= then actual amount of interest will be deducted.
  5. A rebate of Rs.2000/= is allowed under section 87A if the total income of the assessee is up to Rs.500000/=.
  6. Income tax rates for individual are:- Up to Rs.250000/= nil, Rs.250001/= to Rs.500000/= 10%.

Illustration:

Mrs. X, who is 63 years old, had the following details in respect of her income during the financial year 2015-16:-

Rental income from house property                                                                           Rs.600000/=

Interest from fix deposits                                                                                             Rs.300000/=

Interest from NCD                                                                                                        Rs.6000/=

Interest from PPF account                                                                                           Rs.30000/=

Amount deposited in PPF account                                                                             Rs.150000/=

Medical insurance premium paid                                                                                 Rs. 32000/=

House tax paid                                                                                                             Rs.40000/=

TDS deducted against FDR interest                                                                           Rs.30000/=

Calculate her tax liability?

Solution:

COMPUTATION OF TAXABLE INCOME

Income from House property

Rental Income from house property                                    Rs.600000/=

Less: House Tax                                                                  Rs.40000/=

Annual value                                                                         Rs.560000/=

Less: Standard deduction u/s 24 30%                             Rs.168000/=

Net income from rent                                                                                                  Rs.392000/=

Income from other sources

Interest from NCD                                                      Rs.6000/=

Interest from fix deposits                                            Rs.300000/=

Interest from PPF a/c                       Rs.30000/=                 0                                   Rs.306000/=

Gross total income                                                                                                     Rs.698000/=

 

Deduction under chapter VI-A

Under Section 80C

Deposits with PPF A/c                             Rs.150000/=

Under Section 80D

 Medical Insurance Premium paid             Rs.30000/=                                           Rs.180000/=

Total taxable income                                                                                                 Rs.518000/=

Tax payable on income                                                                                              Rs.23600/=

Add: Education Cess 2%                                                                                       Rs.472/=

Add:  Secondary & Higher Education Cess 1%                                                     Rs.236/=

Rs.24308/=

Less : TDS                                                                                                                  Rs.30000/=

Net Refund due                                                                                                            Rs.5692/=

Notes:

  1. Interest from PPF account is tax free.
  2. Standard Deduction is allowed on annual value 30% under section 24
  3. Medical insurance premium is allowed up to Rs.30000/= under section 80D for senior citizens.
  4. Income tax rates for senior citizens are:- up to Rs.300000/= nil, Rs.300001/= to Rs.500000/= 10%, Rs.500001/= to Rs.1000000/= 20%.

Illustration:

Mr. Y who is 30 years old had the following particulars in respect of his income during financial year 2015-16:-

Salary received from M/s ABC Ltd.                                                                          Rs.600000/=

Monthly income from post office                                                                               Rs.30000/=

Interest from fix deposits                                                                                           Rs.20000/=

Interest from saving bank accounts                                                                          Rs.22000/=

Dividend received from shares                                                                                  Rs.10000/=

Interest received from PPF account                                                                          Rs.30000/=

Amount deposited in PPF account                                                                            Rs.100000/=

Provident fund deducted by employer                                                                        Rs.50000/=

LIC premium paid                                                                                                        Rs.20000/=

Medical Insurance Premium paid for his parents

(his father is Senior citizen)                                                                                       Rs.25000/=

Medical insurance premium paid for himself and wife                                              Rs.18000/=

TDS deducted against interest on Fix Deposits                                                        Rs.2000/=

TDS deducted by employer against salary income                                                  Rs.20000/=

Calculate his tax liability?

Solution:

COMPUTATION OF TAXABLE INCOME

Income from Salary

Salary Received from M/s ABC Ltd.                                                                          Rs.600000/=

Income from other sources

Monthly income from Post Office                            Rs.30000/=

Interest from fix deposits                                         Rs.20000/=

Interest from saving bank account                           Rs.22000/=

Dividend received from shares    Rs.10000/=                 0

Interest from PPF a/c                   Rs.30000/=                 0                                        Rs.72000/=

Gross total income                                                                                                     Rs.672000/=

Deduction under chapter VI-A

Under Section 80C

Deposits with PPF A/c                                     Rs.100000/=

Employees cont. to provident fund                  Rs.50000/=

LIC Premium paid                                            Rs.20000/=

Rs.170000/=

Restricted to                                                                                   Rs.150000/=

Under Section 80D

 Medical Insurance Premium for self And wife  Rs.18000/=

Medical Insurance premium paid for Parents   Rs.25000/=          Rs.43000/=        Rs.193000/=

Total taxable income                                                                                                  Rs.479000/=

Tax payable on income                                                                                              Rs.22900/=

Less: Rebate Under section 87A                                                                               Rs.2000/=

Rs.20900/=

Add: Education Cess 2%                                                                                        Rs.418/=

Add:  Secondary & Higher Education Cess 1%                                                      Rs.209/=

Rs.21527/=

Less : TDS

TDS against interest on fix deposits                         Rs.2000/=

TDS by M/s ABC Ltd.                                                 Rs.20000/=                               Rs.22000/=

Net Refund due                                                                                                              Rs.473/=

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