Taxation Management (Planning) : I:Some Model Questions
Taxation Management (Planning) : I:Some Model Questions
Taxation Management (Planning) : I:Some Model Questions
(1) The period of 12 months commencing from 1st of April, every year is called
---------(financial year/assessment year)
(2) Under the IT Act, exemptions are allowed, only in respect of Sec80C and 80D
----(true/false) (3) A bank is started by a partnership firm, the
maximum partners allowed are: (a) 2(b)7(c)10(d)20
(4) an assessee’s residential status is determined based on (a) calendar year (b)
previous year (c) assessment year (d) any one of the above
(5) Rajendran wins a lottery, this income should not be charged to tax under
--------------(capital gains/income from other sources)
(6) 80 C deduction is applicable to (i) individuals (ii) HUF (iii) Companies (iv)
Societies (a) i (b) i,iii(c) ii( d) i,ii
(7)Copy rights is an intangible asset. It is also known as ----------------------capital
assets (corporeal/non corporeal)
(8) Jayesh is an investor in stock market. He is holding 20 shares of State Bank of
India for the past 18 months. This will be treated as ------------ capital asset (short-
term/long-term) (9) Altaf Ahmed is owning
a car for personal use . This can be classified as capital asset (correct/incorrect)
(10)Service tax is a tax on -----------(Service/Service provider)
(11) Service tax is governed by-------------- (a) The Excise Act(b) The Finance
Act,1994 (c) The CENVAT Credit Rules,2004 (d) The Income Tax Act,1961
(12) As per IT Act,Manipal Univesity is ---------------(a) an undertaking (b) a local
authority (c) an educational institution (d) an artificial judicial person
(13) Which is not taxable -----------------(black money/pin money)
(14) Foreign income is taxable in case of a non resident ----------(true/false)
(15) The maximum period of tax holiday which can be enjoyed by a computer
software company of a Free Trade Zone -------------- (a) 3 years (b) 5 years (c) 10
years (d) no limit
Solution:
These exemptions mentioned above are allowed, only when the political parties
comply with the following conditions:
Maintains all the relevant books and records, to enable the Assessing Officer
to decide about the income
In case, the report mentioned above is not submitted, the political party is
not entitled for the exemption for such financial year
III: Free Trade Zones: (Sec 10A) Subject to provisions of this section, certain
deduction is allowed to all categories of assesses (i) individuals (ii) firms (iii)
companies and others who derive any profit or gain from an undertaking
engaged in the export of goods or articles or computer software
Other conditions:
(a) It has started production or begins production of goods or articles or
computer software in any Free Trade Zone, Electronic Hardware Technology
Park or Software Technology Park (b) It should not be
formed by splitting up or reconstruction of an existing business (however
exemptions is provided for certain categories)
(c)It should not be formed by the transfer of machinery or plant, previously used
for any purpose, to a new business, with some exceptions.
(d) The Indian assessee, should ensure that the export proceeds of goods or
articles or computer exports out of India: (i) is received (ii) in convertible foreign
currency (iii) with in a period six months from the end of the previous year or
within any further period which RBI may allow in this behalf. (e) The
assessee should also furnish a Chartered Accountant’s certificate in Form No
56F. with the income tax return. The certificate should indicate that the
deduction has been correctly accounted as per the provisions of this section.
any ten consecutive assessment years beginning with the assessment year,
relevant to the previous year ,in which the undertaking begins to
manufacture or produce goods or articles or computer software.
No deductions, under this section shall be allowed to any undertaking for the
assessment for the assessment year 2012-13 and thereafter.
For ease of reference, let us understand that, if an undertaking has set up (in
a Free Trade Zone) on or before 31st March,2002 shall be entitled to a
deduction of a period of 10 years.
In case of an undertaking ,which was set up (in a Free Trade Zone) during the
period for 2004-05 shall get a deduction for a period of only 7 years
In the case, of demerger both the companies (demerged and resulting) can
claim deductions as both would continue to exist.
Please note that (a) The period of holding of the shares in the resulting
company, shall be counted from the date of acquit ion of shares in the demerged
company, in order to find out whether or not they are long term capital asset (b)
The indexing will start from the date of allotment in the resulting company
+ such capital gain should not be exempt u/d different relevant section of the
IT Act
Capital gains, arises only out of transfer of a capital asset, in the previous year
Salient features: Any kind of property, barring the exceptions, include both
tangible as well as intangible rights. Also it may be either corporeal or incorporeal in
nature.
Capital assets
Like short-term capital asset and long-term capital asset, the gains arising out these
types of asset/s are classified as short-term capital gain {Sec 2(42B)} and long-
term capital gain {Sec 2(29B)}
While the important requirement, for the applicability of the capital gain, the capital
asset must have been transferred. One exception is in respect of profits or gains
from insurance claim due to damage or destruction of an asset (property), there will
be capital gain although no asset has been transferred in such case/s.
Identify some of the items, which are included under the term ‘transfer’ in relation
to capital asset: (a) the sale, exchange or relinquishment of the
asset; (b) the extinguishment of any rights thereon; (c) the compulsory
acquisition thereof under any law;(d) maturity or redemption of a Zero Coupon
Bonds/s(e) any transaction involving the allowing of the possession any immovable
property (as per the provisions of Transfer of Property Act,1882)
You are a tax consultant and your client Mr.Sanjay Gupta, wants you to compute the
total income and income tax payable by him for the assessment year 2011-12.
The details furnished by your client Sanjay Gupta, working in a KPO, are as under:
Other details furnishes by Sanjay Gupta for the previous year are: (a) Contribution
to PPF Rs 20,000 (b) Payment of insurance premium (self) Rs 22,500 (c) PF
and VPF contribution Rs 66,000 (d) Professional tax
Rs 2,500 (e) Mediclaim policy Rs 18,600 (family floater policy) (f) TDS Rs 28,300
The tax rate for the assessment year 2011-12 are: Tax Rate (%)
Upto Rs 1,60,000 Nil
Above Rs.1,60,000 – Rs.5,00,000 10%
Above Rs.5,00,000 - Rs. 8,00,000 20%
Above Rs.8,00,000 30%
Compute the total income for the assessment year 2011-12 and tax payable by
Sanjay Gupta
Solution:
Computation of the total income for the assessment year 2011-12 ( Rs )
Deductions:
Tax on employment (professional tax) (2,500)
Income chargeable under Head Salaries 6,15,000
Add Other income 17,500
Gross Total Income
6,23,500
Upto 1,60,000 - 0
Above 1,60,000 – 5,00,000 34,000 ( 10% on 3,40,000)
Above Rs.5,00,000 - Rs. 8,00,000 1,600 (20% on 8,000)
Tax on total income 35,600
Education Cess and SHE Cess (3%) 1,068
Tax payable 36,668
Less TDS (28,300)
Tax payable 8,368
Since TDS has already been deducted, the tax payable for AY 2011-12 by Sanjay
Gupta would be Rs. 8,368