Meaning – Definition – Basis of Charge – Advance Salary – Arrears of Salary – Allowances – Perquisites – Provident Fund – Profits in Lieu of Salary – Gratuity – Computation of Pension – Encashment of Earned leave – Compensation for Voluntary Retirement – Deductions from Salary u/s 16 – Problems on Income from Salary.

7. Income Tax-1
UNIT-4 (Income from Salary)
Format for computing Taxable Income from Salaries

8. Problem – 1 (Calculation of Basic Pay)
Solution:-

10. Mr.Chethan.S
Assistant Professor, Dept. of Management, AIGS
6
Problem – 3 (Calculation of Leave Encashment / Leave Salary)
Solution:-

11. Mr.Chethan.S
Assistant Professor, Dept. of Management, AIGS
7

12. Mr.Chethan.S
Assistant Professor, Dept. of Management, AIGS
8
Problem – 4 (Calculation of Leave Encashment / Leave Salary)
Solution:-

13. Mr.Chethan.S
Assistant Professor, Dept. of Management, AIGS
9

14. Mr.Chethan.S
Assistant Professor, Dept. of Management, AIGS
10
Problem – 5 (Calculation of Leave Encashment / Leave Salary)
Solution:-

15. Mr.Chethan.S
Assistant Professor, Dept. of Management, AIGS
11

16. Mr.Chethan.S
Assistant Professor, Dept. of Management, AIGS
12
Gratuity

17. Mr.Chethan.S
Assistant Professor, Dept. of Management, AIGS
13
Problem – 6 (Problem on Gratuity)
Solution:-

18. Mr.Chethan.S
Assistant Professor, Dept. of Management, AIGS
14

19. Mr.Chethan.S
Assistant Professor, Dept. of Management, AIGS
15
Problem – 7 (Problem on Gratuity)
Mr. Harish (Resident) is employed at a salary of Rs.18,200 per month. He is also getting D.A of
Rs.14,800 per month. He Received Rs.1,80,000 as bonus. On 30-08-2019 he retired from his
service. He had service of 29 years and 5 months. He received Rs.14,00,000 as gratuity under the
payment of Gratuity Act 1972. Compute his taxable gratuity for the Assessmet year 2021-2022.
Solution:-

20. Mr.Chethan.S
Assistant Professor, Dept. of Management, AIGS
16
Problem – 8 (Problem on Gratuity)
Solution:-

21. Mr.Chethan.S
Assistant Professor, Dept. of Management, AIGS
17
Problem – 9 (Problem on Gratuity)
Solution:-

22. Assistant Professor, Dept. of Management, AIGS
Allowances
Mr.Chethan.S
Assistant Professor, Dept. of Management, AIGS
18

23. House Rent Allowance (HRA)
Assistant Professor, Dept. of Management, AIGS
House Rent Allowance (HRA)
Mr.Chethan.S
Assistant Professor, Dept. of Management, AIGS
19

24. Mr.Chethan.S
Assistant Professor, Dept. of Management, AIGS
20
Problem –18 (Problem on HRA)
Solution:-

25. Problem –19 (Problem on HRA)
Assistant Professor, Dept. of Management, AIGS
(Problem on HRA)
Mr.Chethan.S
Assistant Professor, Dept. of Management, AIGS
21

26. Mr.Chethan.S
Assistant Professor, Dept. of Management, AIGS
22
Solution:-

27. Mr.Chethan.S
Assistant Professor, Dept. of Management, AIGS
23

28. Assistant Professor, Dept. of Management, AIGS
PERQUISITES
Mr.Chethan.S
Assistant Professor, Dept. of Management, AIGS
25

29. Rent Free Accommodation (RFA)
Assistant Professor, Dept. of Management, AIGS
Rent Free Accommodation (RFA)
Mr.Chethan.S
Assistant Professor, Dept. of Management, AIGS
26

30. Mr.Chethan.S
Assistant Professor, Dept. of Management, AIGS
27
Problem –21 (Problem on RFA)
Solution:-

31. Mr.Chethan.S
Assistant Professor, Dept. of Management, AIGS
28

32. Mr.Chethan.S
Assistant Professor, Dept. of Management, AIGS
29
Problem –21 (Problem on RFA)
Sri Pramod an Employee of PQR Ltd., draws Rs.2,00,000 as basic salary, dearness allowance
Rs.15,000, bonus Rs.20,000, education allowance to a son Rs.300 per month. Besides company
provides a Rent-free unfurnished house in chennai. Determine the taxable value of rent-free
accomodation for the Assessment year 2021-2022 if the house is:
a) Owned by the company.
b) Leased by the company on lease amount Rs.20,000 per anum (as rent).
The house is allotted on 15-09-2020, though it is occupied by him from 01-10-2020. (Ignore
Alternative Tax Regime under section 115BAC)
Solution:-

33. Problem –23 (Problem on RFA)
Solution:-
Assistant Professor, Dept. of Management, AIGS
23 (Problem on RFA)
Mr.Chethan.S
Management, AIGS
30

34. Mr.Chethan.S
Assistant Professor, Dept. of Management, AIGS
31

35. Problem –24 (Problem on RFA)
Solution:-
Assistant Professor, Dept. of Management, AIGS
(Problem on RFA)
Mr.Chethan.S
Management, AIGS
32

36. Mr.Chethan.S
Assistant Professor, Dept. of Management, AIGS
33

37. Mr.Chethan.S
Assistant Professor, Dept. of Management, AIGS
34
COMBINED PROLEMS (14 Marks)
Problem –25 (Calculation of Taxable Salary)
Mr.Lakshmikanth, a Resident submits the following for the year 2020-2021.
Compute the Taxable Salary for the A.Y 2021-2022.
Sl.No PARTICULARS
1 Salary (Per month) Rs.10,000
2 Dearness Allowance (Rs.1,000 P.M taken for all Retirement Benefit) Rs.2,000
3 Entertainment Allowance (Per month) (Prior to 01-04-2020 he was getting Rs.300 per month)
Rs.500
4 Bonus Rs.4,000
5 LTC Facility (No Journey is undertaken) Rs.12,000
6 Own contribution to RPF Rs.8,000
7 Education Allowance for his grand children Rs.4,000
8 Employers contribution to RPF Rs.8,000
9 He is Provided with a furnished house at Bangalore, Municipal value is Rs.2,000 P.m
10 Employer provided him a motor car (1800 CC) with driver and met all the expenses for official
as well as private purpose
11 Interest earned on RPF balance amounted to Rs.15,000 at the rate of 15% P.a
12 Employer provided him the services of a watchman and sweeper paying Rs.500 p.m for each
13 He was also provided with furniture worth of Rs.20,000 for the accomodation
14 Mr.Lakshmikanth paid Rs.2,000 as professional Tax
15 Free lunch is provided during the working hours in a remote area Rs.9,000
16 He gets hostel expenditure allowance for his daughter Rs.500 p.m (But daughter does not stay
in Hostel)