Technolgy
Technolgy
Year 2004
Q. No. 1
Mr. Ramlal the general manager of Y ltd. Retired on December 31,2003 after 30 years of service. The particulars of his income are as follows:
Salary Rs. 8,000 per month from January 1, 2003. House rent allowance Rs. 3,000 per month from January 1, 2003.
Medical expenses reimbursed by the employer Rs. 21,000 for the period from April 1, 2003 which includes Rs. 5,000 paid to a Government hospital.
The employer provides him a car of less than 1.6 litres capacity and driver for official and personal use.
Ramlal contributes 22% ( 12% regular and 10% additional voluntary contribution) to a recognized provident fund and the company matches his regular contribution of 12%
He lives in a rented house in Delhi and pays Rs. 4,000 per month as rent.
Ramlal received Rs. 1,50,000 as gratuity. He is not covered by the payment of Gratuity Act.1972.
He received Rs. 1,60,000 for encashment of leave, being 10 months leave not availed of.
In addition to the above he is provided with the other benefits and facilities such as
Free gas and water for his domestic use Rs. 4,000
A domestic servant ( Salary paid by the employer ) 3,500
(iii)
Free lunch outside office Rs.5,000.
Education allowance of Rs. 6,000.
Compute Mr. Ramlals Income for the assessment year 2004-2005.
Solution:
(Kindly beware of the dates in such questions. Given data pertains to Calendar Year, where as IT Act mandates accounting on only Financial Year basis ie
01 Apr to 31 Mar. Therefore all income/expenditure from 01 Jan to 31 Mar 2003 have to be disregarded in calculation).
Assessment Year
2004-05
Name
Mr Ramlal
Computation of Income
Salary (Apr 03-Dec 03) = Rs 8000 x 9 months
72000
House Rent Allowance = Rs 3000 x 9 months
27000
Less:
Exempted Amount (Refer Note 1 for calculations)
27000
Medical Expenses Reimbursement
21000
Less: Exempt amount as per IT Act
15000
6000
Car Perquisites = 1200 PM x 9 months
10800
Add: Drivers salary valuation 600 x 9 months
16200
Gratuity (Refer Note 3 for calculation)
30000
Leave Salary (Refer Note 4 for calculation)
80000
Other Perquisites
Free Gas and Water
4000
Domestic Servant
3500
Lunch Outside office premises
5000
Education Allowance
Less: Exempt = 2 (100 x 9) for 2 children
4200
Income From Salary
220900
NOTES:
Note 1: House Rent Allowance Calculation
50% of Salary
= ½ x 8000
4000
Actual HRA received
3000
Rent Paid minus 10% of Salary = 4000 – 800=
3200
Least of the above three amounts eligible for tax exemption. So, Rs 3000 PM is exempted.
Note 2: Recognised Provident Fund
Employer Contribution = 12% of Salary. This is the maximum Tax Free employers contribution permitted by the Act. So, it is fully exempted.
Note 3: Gratuity
Admissible gratuity by law
= ½ month salary x years of service = 4000 x 30=
120000
Specified Amount by Central Govt
350000
Actual Gratuity received
150000
Least of the above 3 amounts is the tax exempted gratuity amount = 120000
Balance amount = 150000 -120000