**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:-

- Net income from business 500000/=
- Interest from taxable bonds Rs.17000/=
- Interest from saving bank accounts Rs.15000/=
- Long term capital gain on sale of jewellery Rs. 14000/=
- Interest from PPF account Rs.10000/=
- Medical Insurance Premium Rs.26000/=
- Payment for preventive health check-up of his wife Rs.3000/=
- Deposit in PPF Rs.150000/=
- 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:-__

- Interest from PPF account is tax free. Therefore, it will not be added in income.
- Interest from Tax Free Bonds is also tax free. Therefore, it will not be added to income.
- Deduction under section 80C is allowed up to Rs.150000/=
- 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.
- A rebate of Rs.2000/= is allowed under section 87A if the total income of the assessee is up to Rs.500000/=.
- 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:**

- Interest from PPF account is tax free.
- Standard Deduction is allowed on annual value 30% under section 24
- Medical insurance premium is allowed up to Rs.30000/= under section 80D for senior citizens.
- 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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