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ACC 204

Taxation and Auditing

TU BBM · Semester 4 · BBM curriculum effective from 2021

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required
Credits
3
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12 questions

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12 past questions across 6 units

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Unit 1: Unit 3: Income from Employment

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  1. Asked on 2023 Exam[2 marks]2023 paper

    Briefly describe the provision related to quantification of accommodation facility.

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    Provision for Quantification of Accommodation Facility (Section 27):

    When an employer provides free or subsidized residential accommodation to an employee, the non-monetary perquisite is quantified and added to employment income as follows:

    1. Quantification Rule:
      • 2% of the basic salary / remuneration of the employee for the period during which the facility is enjoyed.
    2. Concessional Accommodation:
      • If the employee contributes any monthly rent toward the accommodation, the quantified perquisite is reduced by the actual rent paid by the employee.
  2. Asked on 2023 Exam[6 marks]2023 paper

    ➢ In year 2, interest expenses of Rs 20,000 was not deducted. ➢ In year 3, PCC Rs 25,000 was omitted to deduct. ➢ In year 4, dividend from resident company Rs 50,000 was included in the P/L account. Required: Taxable income with explanation, whenever is necessary. Mr. Aayyan retired from 31st Ashad current income year. He submitted following details with respect to his remuneration for the previous income year: ➢ Net salary received Rs 197,000 after deduction his contribution to provident fund Rs 24,000 and tax at source Rs 39,000 including Dashain Bonus equal to one month salary. ➢ Employer contribution to P.F. was 10% of his salary. ➢ Dearness allowance Rs 1,200 p.m. ➢ Bonus Rs 80,000 p.a. ➢ LIP paid by office Rs 22,000 ➢ Saving from TADA Rs 12,000 ➢ Donation to Local Club (tax exempt entity) Rs 20,000 ➢ He claimed Medical expenses Rs 50,000 Required: (a) Assessable income from employment (b) Taxable Income (c) Tax Liability

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    Computation of Assessable Income, Taxable Income, and Tax Liability of Mr. Aayyan:

    1. Working Notes on Remuneration:

    • Net salary received = Rs 197,000
    • Add deductions: Own PF deduction (Rs 24,000) + TDS (Rs 39,000) = Rs 260,000
    • Since this total includes Dashain bonus equal to 1 month salary, the Rs 260,000 covers 13 months:
      Monthly Basic Salary=Rs 260,00013=Rs 20,000 per month\text{Monthly Basic Salary} = \frac{\text{Rs } 260,000}{13} = \mathbf{\text{Rs } 20,000\text{ per month}}
      Annual Basic Salary (12 months)=20,000×12=Rs 240,000\text{Annual Basic Salary (12 months)} = 20,000 \times 12 = \mathbf{\text{Rs } 240,000}
      Dashain Bonus=Rs 20,000\text{Dashain Bonus} = \mathbf{\text{Rs } 20,000}
    • Employer’s PF contribution = 10%×240,000=Rs 24,00010\% \times 240,000 = \mathbf{\text{Rs } 24,000}
    • Dearness Allowance = 1,200×12=Rs 14,4001,200 \times 12 = \mathbf{\text{Rs } 14,400}
    • Annual Bonus = Rs 80,000
    • Life Insurance Premium (LIP) paid by office = Rs 22,000 (fully taxable perquisite)
    • Saving from TADA = Exempt (actual reimbursement).

    Part (a): Assessable Income from Employment

    Income Components Amount (Rs)
    Annual Basic Salary 240,000240,000
    Dashain Bonus 20,00020,000
    Employer’s PF Contribution 24,00024,000
    Dearness Allowance 14,40014,400
    Performance Bonus 80,00080,000
    Life Insurance Premium paid by employer 22,00022,000
    Gross Assessable Income from Employment 400,400\mathbf{400,400}

    Part (b): Statement of Total Taxable Income

    Particulars Details (Rs) Amount (Rs)
    Assessable Income from Employment 400,400400,400
    Less: Allowable Reductions:
    1. Retirement Contribution (PF):
    - Actual (24,000+24,000=48,00024,000 + 24,000 = 48,000)
    - 1/3 of Assessable Income (400,400/3=133,467400,400 / 3 = 133,467)
    - Statutory Max: Rs 300,000 (Whichever is least) 48,00048,000 (48,000)(48,000)
    Adjusted Taxable Income (ATI) 352,400352,400
    2. Life Insurance Premium (LIP) under Sec 12:
    - Actual paid: Rs 22,000; Statutory Max: Rs 40,000 22,00022,000 (22,000)(22,000)
    3. Donation to Local Club (Tax-exempt):
    - 5% of ATI (5%×352,400=17,6205\% \times 352,400 = 17,620), Max Rs 100,000, Actual Rs 20,000 17,62017,620 (17,620)(17,620)
    Total Taxable Income 264,780\mathbf{264,780}

    Part (c): Tax Liability (Individual Status)

    Since taxable income (Rs 264,780) is below the first slab limit of Rs 500,000:

    • Social Security Tax (1% on first Rs 500,000):
      Gross Tax=1%×264,780=Rs 2,647.80\text{Gross Tax} = 1\% \times 264,780 = \text{Rs } 2,647.80
    • Less: Medical Tax Credit (Section 51):
      • Allowable medical credit = 15% of approved medical expense (Rs 50,000) = Rs 7,500, subject to maximum statutory ceiling of Rs 750.
        Medical Tax Credit=Rs 750.00\text{Medical Tax Credit} = \mathbf{\text{Rs } 750.00}
        Net Tax Liability=2,647.80−750.00=Rs 1,897.80\mathbf{\text{Net Tax Liability}} = 2,647.80 - 750.00 = \mathbf{\text{Rs } 1,897.80}
        (TDS already paid was Rs 39,000, resulting in an eligible tax refund).