Illustration:

Mr. A who is 46 years old, has the following details for financial year 2017-18:-

  • Income from business                                               Rs.3,50,000/=
  • Deposited in PPF account                                         Rs.60000/=

Calculate the amount of income tax payable by him.

Solution:

Income from business                                                           Rs.350000/=

Less: Deduction under Chapter VI-A

Deposit in PPF Account                                                         Rs.60000/=

Net taxable Income                                                                 Rs.290000/=

Income Tax on above                                                              Rs.2000/=

Tax Rebate under section 87A                                                Rs.2000/=

Net tax payable                                                                            NIL

Note:-

  • Rate of income tax for resident individual is 5% in respect of income from Rs.250000/= to Rs.500000/= and income up to Rs.250000/= is exempted from income tax.
  • A tax rebate is available u/s 87A equal to amount of tax or Rs.2500/=, whichever is less, in case of resident individual having total income up to Rs.350000/=

Illustration:

Mr. X who is 35 years old and employed in M/s ABC Ltd., has the following details relating to his income and investment during financial year 2017-18:-

  • Basic pay                                                                                         Rs. 300000/=
  • Commission on sales                                                                      Rs.100000/=
  • House rent allowance                                                                       Rs.150000/=
  • Contribution by Mr. X to Provident Fund                                           Rs.36000/=
  • Amount deposited in PPF account                                                   Rs.50000/=
  • House rent paid for residence in Delhi                                             Rs.72000/=
  • LIC premium paid                                                                             Rs.10000/=
  • Medical insurance premium paid for self                                         Rs.16000/=
  • Interest received from Saving Bank Account                                   Rs.12000/=

Calculate income tax liability of Mr. X for assessment year 2018-19.

Solution:

COMPUTATION OF TAXABLE INCOME

Income from Salary

Basic Pay                                                   Rs.300000/=

Commission on sales                                Rs.100000/=

House Rent Allowance  Rs.150000/=

Less: Exempt (see notes)Rs.42000/=      Rs.108000/=                          Rs.508000/=

Income from other sources

Interest received from saving bank account                                              Rs.12000/=

Gross Total Income                                                                                    Rs.520000/=

Less:  Deduction under Chapter VI-A

Under Section 80C

Contribution to Provident Fund        Rs.36000/=

Deposit in PPF Account                  Rs.50000/=

LIC Premium paid                            Rs.10000/=          Rs.96000/=

Under Section 80D

Medical Insurance Premium Paid                                 Rs.16000/=

Under Section 80TTA

Interest from saving bank account                                Rs.10000/=          Rs.122000/=

Taxable Income                                                                                           Rs.398000/=

Income Tax payable on Rs.398000/=                                                          Rs.7400/=

Add: Education Cess 2%                                                                         Rs.148/=

Add: Secondary & Higher Education Cess 1%                                        Rs.74/=

Total Tax Liability                                                                                            Rs.7622/=

Notes:-

  1. Amount of HRA exempt is the least of following:-

(i) Actual HRA received                                  Rs.150000/=

(ii) Rent paid – 10% of salary i.e

(72000-30000)                                                  Rs.42000/=

(iii) 50% of salary                                              Rs.150000/=

  1. Medical Insurance Premium is allowed up to Rs.25000/= as deduction under section 80D.
  2. Deduction under section 80TTA is allowed up to Rs.10000/= in respect of interest received from saving bank accounts.
  3. A rebate of income tax is not allowed under section 87A since the taxable income in above case is more than Rs.350000/=. The amount of rebate will be Rs.2500/= or actual income tax payable, whichever is less if the taxable income is up to Rs.350000/=.

Illustration:

Mr. Y submits the following information in respect of his property for financial year 2017-18:-

Rent received                                                                                Rs.240000/=

Municipal taxes paid                                                                       Rs.20000/=

Expenditure on repair                                                                     Rs.15000/=

Insurance charges paid for building                                                Rs.6000/=

Ground rent paid                                                                              Rs.2000/=

Interest paid against loan taken to purchase above-

Property                                                                                          Rs.20000/=

Compute the income under the head ‘Income from House Property’ for assessment year 2018-19.

Solution:

Computation of Income from House Property

Rent received                                                                 Rs.240000/=

Less: Municipal Tax                                                       Rs.20000/=

Net Annual Value                                                            Rs.220000/=

Less: Standard Deduction 30% u/s 24                    Rs.66000/=

Less: Interest against loan                                            Rs.20000/=

Income from house property                                         Rs.134000/=

Notes:-

  1. No deduction is allowed in respect of repair, insurance and ground rent etc. while calculating the income from house property. Only standard deduction % is allowed from net annual value i.e. rent minus municipal tax.
  2. Deduction in respect of interest paid on loan taken for purchasing or construction of the building is allowed.

Illustration:

Mr. X who is 40 year old, submits following information for F.Y. 2017-18. Calculate his income tax liability:-

Income from business                                                                   Rs.400000/=

Rent from house property                                                              Rs.200000/=

Municipal Tax paid for above house                                               Rs.20000/=

Bank interest from fix deposits                                                       Rs.40000/=

Life Insurance Premium paid                                                         Rs.15000/=

Medical Insurance Premium paid for self                                      Rs.20000/=

Solution:

Computation of Taxable Income

Income from Business or Profession

Income from Business                                                                   Rs.400000/=

Income from House Property

Rent received                                                    Rs.200000/=

Less: Municipal Tax                                           Rs.20000/=

Net annual value                                                Rs.180000/=

Less: Standard Deduction 30%                   Rs.54000/=

Net Income from house property                                                  Rs.146000/=

Income from Other Sources

Interest from fix deposits                                                                 Rs.40000/=

Gross total income                                                                         Rs.586000/=

Less: Deduction under Chapter VI-A

Deduction u/s 80C

Life insurance premium paid                       Rs.15000/=

Deduction u/s 80D

Medical Insurance Premium paid               Rs.20000/=                 Rs.35000/=

Net taxable income                                                                        Rs.551000/=

Income tax on income                                                                   Rs.22700/=

Add: Education Cess 2%                                                           Rs.454/=

Add: Secondary & Higher Education Cess 1%                          Rs.227/=

Total tax liability                                                                                Rs.23381/=

Notes:- Income tax slabs for individual are:-

up to Rs.250000/= nil, Rs.250001/= to Rs.500000/= % and Rs.500001/= to Rs.1000000/= 20%.

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