It

1. tember,
2021
March,
2022
August,
2021
31
days
February,
2022
July,
2021
28
days
l6
days
January,
2022
28
days
June,
2021
30
days
December,
2021
May,
2021
31
days
November,
2021
April,
2021
30
days
October,
2021
1.4.202l
to
31.3.2022
is
as
under:
For
this,
examine
if
he
satisties
first
condition
(stay
in
India
f
o
r
at
least
182
days).
Hi
s
stay
in
India
during
t
h
e
previous
year
St
e
p
1:
Fi
n
d
out
if
he
is
a
resident
Solution
returns
on
4.1.2022,
Determine
hi
s
residential
status
f
o
r
theprevious
year
2021-22.
Illustrahon
21:
A
citizen
of
USA
has
been
stay1ng
in
India
since
1991.
He
leaves
India
on
l6.7.202
1
on
a
visit
to
USA
and
Or
mOre,
f
o
r
an
overall
period
of
730
days
more
but
less
than
I
8
2
days.
pcriod
or
periods
amounting
in
al
l
to
120
days
or
t
h
e
preVIOUs
ycar,
and
who
has
bcen
in
India
f
o
r
a
from
foreign
sources,
exceeding
Rs
.
15
lakh
during
origin,
having
total
income,
other
than
t
h
e
income
(i1)
He
is
a
citizen
of
India,
or
a
person
of
Indian
or
ycar,
and
preccding
t
h
e
relevant
previous
previous
ycars
immediately
or
less,
year
been
in
India
f
o
r
an
overall
period
of
729
days
He
has
during
t
h
e
7
previous
years
preceding
that
(
i
)
previous
year,
or
previous
years
immediately
preceding
t
h
e
relevant
He
has
been
non-resident
in
9
out
of
t
h
e
10
satisfies
both
t
h
e
following
conditions:
Ordinarily
Resident
in
India
if
he
Not
Ordinarily
Resident
in
India
if
prcceding
that
year
been
in
India
he
has,
during
t
h
e
7
previous
years
Onc
prevIOus
ycars
out
of
t
e
n
he
has
becn
resident
in
more
than

2. 24
Step 2
.
As he is in India for more than I82
resident.
Thus his total stayinIndia duringthe previoous yearis of 194 days.
Find out ifhe is ordinarilyresident or not
In this case we need not examine the second conditionnasthe fistconditionis alreadysatisfied.
Solution
|Time and hour of leaving and arrival is relevant. However, in thiscaseit is not given. Here number ofFhours are otherwise not
| important as he was in India for mnore than 182 days. It would havebeenimportantifit was a marginal case of 182 days.
201920
SimplifiedApproachtoIncomneTax
days during the relevant previous year, he satisties the first condition
EAamne Ist condition (Residentfor at Jegst) out of l) nrevious vears prior to relevant previOus year)
1en previous years prior to thbe relevant previous vear are 2011-12to 2020-21.
During these years he has alwavs been in India He therefore. satisfics the first condition tor being a resident (1o
stay in India during the relevant previous year).
As he has been in India during the entire period. this condition is also satisficd.
(o NOW examine the second condition (730 davs stav in India during 7previous years prior to the relevantprevious vea)
vellyCars prior to previous year means the period L4 2014 to 31.3.2021. During this period he should be in Irnd:
least 730 days.
As both the conditions have been satisfed he is a resident and ordinarily resident in India.
Problenm 1: M Clinton, an American citizen comes to India for the first time in previous year 2016-l7 1or 120 days, Duries
previous years 2017-18, 20I8-19, 20|9-20. 2020-21 and 2021-22 she stayed in India for 150 days, T00 days, 120 days, 190 da
and 94 days respectively. Determine her residential status for the assessment year 2022-25
AnsResident butnot ordinarily resident in India, (See problem 2.4lofPractical Approach)
Previous Y'ears
.(a Determiee residential status of Shri RajGopal for the assessment year 2022-23.
Alustration 2.2: Indian citizen and businessman Shri Rai Gopal, who resides in Jaipur. went to Germany for employment
purposes on 15.8.202 1and c
(by will your answer be dift'erent if he had gone on a leisure trip?
(a) The previous year for the assessment year 2022-23 is 2021-22. During this period he was in lndia for 137 days (30 + 31
30 + 31 + 15). As he is not in India for I82 davs, he does not satisfy the first condition of category A. The second
condition of category 'A' is also not satisfied because he is a citizen of India and leaves India during the previous year for
employment outside India and is therefore, covered under exceptionNo. lwhere 60days will be substituted by l82 das
Therefore, he is anon-resident. Conditions of categoryBneed not to be examined.
NIstration 2.3: R, a German national, comes to India for the first time
2018-19; 2019-20 and 2020-21 he was in India for 156 davs 7) da
previous year 2021-22, he is in India far 84 days.
(b) Inthis case, although he does no satisfy he first conditiYnof category A, he satisfies the second condition as he was in
India for more than 60 days in the relevant previous year and was also here for more than 365 days during four preced1ng
previous years. He is therefore, resident in lndia. The exception will not be applicable to him because he did not leave
India for the purpose of employment. He satisties both the conditions of category B because he has alwavs been in India
before 1S.8.2021.
Tke status ofthe assessee for the previous year 2021-22 willin this case be resident and ordinarily resident in India.
Detemine the residential status of R for the assessment ycar 2022-23.
Stay in India during previous year 2021-22 -- 84 days
Stay in the four preceding previous years.
156 + 72 + 183 + 161=572 days
andis,
therefore. a
Solution: The residential status in this question is to be detemined for the previous year 2021-2which is relevant to
assess1nent year 2022-23.
He satisfies the 2nd basic condition, hence he isresident in India.
Previous lear 2020-21: Stay in India l61days.
Chap. 2
Stayin 4 preceding previous years.
To deternine whether he is ordinarilyresidentin India he should satisfy boththe additional conditions:
1
Tondition No. l resident inatleast 2poviesycars out of the 10 previousyears
immediately preceding previous year 202-22.
l. Durng the preViOUS years 2017-18,
and l61 ays respectively. Further during the
Days
183
72
Chap, 2
2017-18
2016-17
Total
Hence, he is resident for the previous year 2020-21 as he satisfies the second condition.
Previous year 2019-20: Stay in India 183 days.
Thus, he satisfies the first additional condition.
2020-2 1
2019-20
2018-19
Scope of Total lncome & Residential Status
He is resident in Indiafor previous vear 2019-20 as he satisfies the first condition. There is no need to see the 2nd condition.
Since, he has become resident in 2 previous years immediately preceding the previous year 2021-22, there is no need to see his
residential status for prior previous years.
2017-18
2016-17
2015-16
2014-15
Additional condition No. 2. He should be in India for atleast 730 days in 7 preceding previous years immediately preceding the
DEevious yeer 2621-22. His stay in India in past 7 years is as under:
Previous Years
Total
156
Nil
(by Willyour answer be different if he has been coming to India for 110 days instead of 100 days every year?
Sotution
411
Days
J61
183
72
|56
Ni
25
Ni
Ni
He does not satisfy the second additional condition.
Hexe, he is resident but not ordinarily resident in India.
Alystration 2.4: Rickey Ponting, an Australian cricketer has been coming to India for 100 days every year since 2008-09:
sá) Determine his residential status for the assessment year 2022-23.
572
(a) Rickey Ponting satisfies the second condition of category A because he is in India for more than 60 days during the
relevant previous year and for 400 days during four years preceding the relevant previous year. Therefore, he is a resident.
Further, in this case, although he satisfies the first condition of category of being resident for at least 2 out of 10
preceding previous years but he does not satisfy the second condition of category B as during 7 years preceding the
previous year, he is in India for only 700 days. He shall, therefore, be a resident but not ordinarily resident in India
(b) Yes. He will, in this case, be resident and ordinarily resident in India. He satisfies both conditions of category B' as he was
in India for 770 days in the last seven years and he was resident for at least 2 previous year out of 10 previous years
immediately preceding the relevant previous year.
Illustration 2.5: X came to India from America for the first time on 10. 10.2021.He returms to his home country after staying in
India upto 5.7.2022. Willhe be a resident in India for the assessment year 2022-23?
Solution: In this case although X has been in India for a continuous period of 271 days but it falls in two previous years i.e.
previous year 2021-22 and previous year 2022-23. the previous year 2021-22, his stay in India was only 173 days (22 +30 +
31 +31 + 28 + 31) (ie. 10.10.2021 to 31.3.2022). Therefore, he will be a non-resident in India in previous year 2021-22 as hedoes
not satisfy the first condition of 182 days stay in India during the previous year. Further. the second condition is also not satisfied as,
although, he was in India for more than 60 days in the relevant previous year, he was not here for 365 days or more in 4 preceding
previous years as he came to India for the first time on 10.10.2021. He would also be non-resident in previous year 2022-23, for the
same reasons, if he does n
not come to India thereafter, as the period of stay in India will be 97 days only (i.e. 1.4.2022 to 6.7.2022).
Illustration 2.6:X came to India from America for the first time on 3.10.2020. He retumed to his home country after staying in
India upto 28.9.2021. Will he be a resident in India for the assessment years 2021-22 and 2022-23?
Solution
Assessment year 2021-22: During the previous year 2020-21, he is in India from 3.10.2020 to 319.2021 ie for 181 davs.
Priorto the previous year he has neverbeen in India. He does not satisfy any ofthe conditions ofcategory Aandis therefore, anon
resident.
Assessment year 2022-23: During the previous year 2021-22, he is in India from 1.4.2021 to 28.9.2021 ie. for 181 days. He
does not satisfy the first condition. During 4 previous years immediately preceding the previous year 2021-22 he is in India fo onty
181days. He does not satisfy the second condition also. He is, therefore, anon-tesident.
Icame backto India on l0.J L2022. He has never been out of India in the past.
The second condition is also not satisfied as in the preceding 4 years he was here only for 174 days.

3. 7S
000
Gifts
received
from
his
parents
(ie.
relative).
(Not
taxed
earlier)
20,000
(
Profits
for
the
year
2020-21
of
a
business
in
USA
remitted
to
India
during
the
previous
year
2021-22
60,000
Interest
from
deposits
with
an
Indian
company
received
in
USA
1,80,000
(
Rent
from
a
property
in
USA
received
there
but
subsequently
remitted
to
India
1,20,000
Income
from
a
business
in
Bangalore
controlled
from
USA
80,000
(b
Income
from
a
business
in
USA
controlled
from
Delhi
Rent
from
a
property
in
Delhi
received
in
USA
IlHstration
2.14:
The
following
are
the
particulars
of
income
of
R
for
the
previous
year
2021-22:
or
profession
controlled
or
set
up
in
India.
(e)
Føf
not
ordinarily
resident,
income
earned
and
received
outside
India
will
be
taxable,
only
when
it
is
from
a
business
(d)
Fora
non-resident,
an
income
is
taxable
only
if
it
is
either
earned
in
India
or
it
is
received
in
India.
earned/received
is
taxable
in
India.
(c)
For
a
Resident
in
India
(for
individual
&
HUF,
resident
and
ordinarily
resident
in
India)
all
global
income,
wherever
residential
status.
(b)
Any
income
which
is
either
earned
in
India
or
is
deemed
to
be
earned
India
is
taxable
in
India,
irespective
of
the
residential
status.
(a)
Any
income
which
is
either
received
in
India
or
deemned
to
be
received
in
India
is
taxable
in
India,
irespective
of
the
An
analysis
of
the
above
provisions
would
highlight
the
following:
Highlights
of
provisions
of
incidence
of
tax
the
previous
year.
during
the
years
No
No
No
in
the
previous
year
from
any
other
Yes
No
No
3
from
a
business
controlled
from
India.
Income
which
Yes
Yes
No
during
the
Yes
Yes
Yes
1
Indiaor
elsewhere.
Income
received
or
deemed
to
be
received
in
India
whether
earned
in
Yes
Yes
Yes
Particularsof
Income
2.9
The
provisions
regarding
incidence
of
tax
above
may
be
summarised
in
the
following
table:
Whether
taxable
resident
ordinarily
Resident
and
Not-ordinarily
Resident
Non
Resident
(2)
Ans.:
(a)
Taxable,
(6)
Taxable,
(c)
Not
taxable
(d)
Taxable.
[See
problem
2.42
of
Practical
Approach
manufacturing
business.
(d)
Z
Ltd.
a
non-resident
company
paid
24,00,000
for
acquiring
a
know-how
to
be
used
in
India
for
carrying
on
certai
(c)
YLtd.
an
Indian
company,
paid
40,00,000
for
know-how
acquired
in
Germany
to
be
used
in
China.
(6)
SLtd.,
an
Indian
company,
paid
30,00,000
for
the
know-how
to
be
used
in
India.
(1)
(a)
Government
of
India
paid
20,00,000
under
an
agreement,
to
be
used
for
a
project
in
India.
technical
services.
Advise
about
the
taxability
of
such
income
in
the
hands
of
R
Ltd.
in
India:
Problem
4:
R
Ltd.,
a
German
company,
which
is
non-resident
in
India
earned
the
tollowing
incomes
by
way
of
fee
(b)
has
rendered
services
in
India.
[Eyplanation
to
section
9]
(a)
hasa
residence
or
place
of
business
or
business
connection
in
India;
or
Solut
total
income
of
the
non-resident,
whether
or
not
the
non-resident:
Where
income
is
deemed
to
accrue
or
arise
in
India
under
clause
().
(g)
or
(h)
above,
such
income
shall
be
included
i
(ii (ii
32
Simplified
Approach
to
Income
Tax
Chap.
Chap.2
preceding
the
previous
year
and
remitted
to
India
during
Income
which
accrues
or
arises
outside
India
and
received
outside
India
source.
Income
which
accrues
or
arises
outside
India
and
received
outside
India
accrues
or
arises
outside
India
and
received
outside
India
previous
year,
whether
received
in
India
or
elsewhere.
Income
which
accrues
or
arises
or
is
deemed
to
accrue
or
arise
in
India

4. 50%
of
profits
of
business
in
Paris.
(2)
1,00,000
Income
received
in
India
1,00,000,
Gift
of
money
txceeding
50,000
received
by
X
outside
India
on
5.8.2021
Pension
from
employer
in
India.
1,20,000
1,20,000
1,80,00Q
Interest
from
Indian
Company.
1,80,000
1,20,000
1,20,000
(1)
Income
deemed
to
accrue/arise
in
India
Particulars
ordinarily
resident
Resident
and
Non
resident
Solution
Vin
Non-resident
in
India.
)
Resident
and
ordinarily
resident
in
India.
Compute
his
income
for
the
assessment
year
2022-23
ifX
is:
E)Gift
of
money
received
by
X,
outside
India
on
5.8.2021
from
Y,
a
resident
in
India
Past
foreign
income
brought
to
India.
1,20,000
10,000
e
Income
from
property
in
England
received
there.
4,00,000
J(Income
from
agriculture
in
Bhutan
and
remitted
to
India.
1,25,000
(cYProfits
earned
from
a
business
in
Paris
which
is
controlled
in
India,
half
of
the
profits
being
received
in
India.
2,00,000
|(by
Pension
from
former
employer
in
India
received
in
USA.
1,80,000
|()
Interest
from
an
Indian
company
received
in
London.
1,20,000
Particulars
a
Hlustration
2.15:
X
earns
the
following
income
during
the
financial
year
2021-22:
2.
GiftS
received
are
capital
receipts
and
are
not
regarded
as
income.
1.
year
2022-23.
Profits of
4,60,009
60,000
4,00,000
Rent
from
property
in
U.S.A.
_2,80,000
India
other
than
(2)
(3)
Income
earned
and
received
outside
Income
from
business
in
U.S.A.
1,20,000
1,20,000
India,
from
a
business
controlled
from
India
(2)
Income
earned
and
received
outside
Interest
from
Indian
company
20,000
20,000
20,000
Income
from
business
in
Bangalore
1,80,000
1,80,000
1,80,000
Rent
from
property
in
Delhi
80,000
80,000
80,000
(1)
Income
earned/deemed
to
accruelarise
in
India
resident
Particulars
ordinarily
Resident
and
Not
Ordinarily
Resident
Resident
Non
Solution
(iii)
Non-residentin
India.
(ii)
Not
ordinarily
resident
in
India,
Resident
and
ordinarily
resident
in
India,
Compute
his
income
for
the
assessment
year
2022-23
if
he
is:
()
totLs
Residetal
Chap. 2
Scope
of
Total
Income
&
Residential
Status
33
2020-21
are
not
income of
the
previous
year
2021-22
and
hence
cannot
be
included
in
the
income
for
assessment

5. (i)
Actual
HRA
received
(10,000
x
12)
1,20,0)
Ihe
minimum
of
the
Solution
taxable
HRA.
benefits.
He
is
also
entitled
to
HRA
of
Z10,000
p.m.
He
actually
pays
?10,000
p.m.
as
rent
for
a
house
in
Delhi.
lWustration
4.6
(Where
there
is
no
change
in
any
factor
during
the
previous
year)
next
change.
together
for
that
period.
Whenever
there
is
a
change
in
any
of
the
above
factors,
it
should
be
separately
calculated
till
the
(4)
HRA
received. (3)
Rent
paid (2)
Place
of
residence
(1)
Salary The
exemption
in
respect
of
HRA
is
based
upon
the
following
factors:
(ii)
50%
of
salary
(ii)
Rent
paid
in
excess
of
10%
of
salary
40%of
salary Rent
paidin
()
Allowance
actually
received
Allowance
actually
received
Mumbai/Kolkata/Delhi/Chennai
Other
Cities
Quantum
of
Exemption:
Minimum
of
following
three
limits:
The
above
provisions
may
be
summarised
as
under:
under
section
115BAC.
4.
Exemption
of
house
rent
allowance
under
section
10(13A)
shall
not
be
allowed
to
the
employee,
if
he
opts
to
be
taxed
3
exemption
of
H.R.A.
is
available.
Where
the
employee
has
not
actually
incurred
cxpenditure
on
payment
of
rent
or
stays
in
his
own
accommodation,
no
taxed
during
the
previous
year.
[Gestemer
Duplicators
Pvt.
Ltd
v
CIT
(1979)
|17
ITR
1
(SC).
commisstOn,
if
rceived
as
a
fixed
percentage
of
turnover
achieved
by
employce,
would
form
part
of
the
salary
emplovment.
All
other
allowances
and
perquisites
will
not
be
included.
However,
as
per
the
Suprcme
(Court
decision,
allowances
and
perquisites.
Thus
dearness
allowance
will
be
included
to
the
extent
it
is
part
of
salary
as
per
terms
of
.
Salary
tor
ths
purpose
includes
dearness
allowance
if
the
terms
of
employment
so
provide
but
cxclude
all
ofher
includedin
prous
Vear,
Relev
ant
penod
means
the
period
during
which
the
said
uccommodation
was
occupicd
by
thc
assessee
during
the
salarv
where
the
house
is
situated
at
any
other
place,
for
the
relevant
period.
(c)
ot
the
salary
where
the
residential
house
is
situated
at
Mumbai,
Kolkata,
Dellhi
or
Chennai
and
40%%
of
the
()
Excss
of
rnt
pad
tor
the
accommodation
oceupicd
by
him
over
|0%
of
the
salary
for
the
'relevant
period"?
a)
Actual
House
Rent
aNNunts:
xempt
under
svtion
T003A).
HRA
is
exempt
under
section
10(13A)
to
the
oxtent
of
the
ninimum
of
the
following
three
wmdation
whieh
the
employee
might
have
to
take.
HRA
0s
tuxable
under
the
hend
'Salaries'
to
thc
extent
it
is
not
House
Rent
Allowanee
is
given
by
the
employer
to
the
enployee
to
mect
the
expenses
in
connection
with
rent
shall
not
be
allowed,
if
the
employee
opts
to
be
taxed
under
section
11SBAC)
4.12
House
Rent
Allow
ance
|Section
10(13A)
and
Rule
2A|
(Exemnption
under
sectlon
Chap. 4
Inome
following
three
amounts
shall
be
exempt
under
section
10(13A):
Computcthe
A
is
entitled
to
a
basic
salary
of
25,000
p.m.
and
dearness
allowance
of
5,000
p.m.,
40%
of
which
forms
part
of
retirement
not
always
be
calculated
on
annual
basis.
As
long
as
there
is
no
change
in
any
of
the
above
factors
it
can
be
calculated
Since
there
is
a
possibility
of
change
in
any
of
the
above
factors
during
the
previous
ycar,
cxemption
for
HRA
should
excess
of
10%
of
salary
employee
in
the
previous
year.
The
salary
of
any
other
period
is
not
to
be
included
even
though
it
may
be
recejvcd
and
2.
Salary
is
to
be
taken
on
due'
basis
in
respect
of
the
period
during
which
the
rentcd
accommodation
is
occupicd
by
the
gross
salary
of
the
employee.
The
mnimum
ot
the
above
three
umounts
shall
be
cxempt
from
tax
and
thc
balunco
shall
bc
taxable
and
thus
Allowance
received
by
the
cmployee
in
respect
of
the
relevant
poriod.
of
the
10(03A)
under
the
Heud
"Salures"

6. 52
(ii) Rent paid in excess of 10% of salary(1,20,000 32,400)
(iü) 50% of salary
Therefore, 87,600 shall be exempt and the balance 732,400 shall be included in gross salary.
Working Note: Salary for the above purpose is calculated as under:
|() Salary 25,000 x 12
(ii) Dearness Allowance 40% of 60,000
Illustration 4.7 (Where there is change in the rent paid)
Basic Salary
(ii) Deamess Allowance (forming part of basic salary)
(iii) Conveyance Allowance for personal purpose
(i) Commission (@ 2% of the tumover achieved which was 22,50,000 during the previous year and the
same was evenly spread.
(v) House Rent Allowance
Solution
X is employed at Delhias the Finance Manager of R Company Ltd. The particulars of his salary for the previous year 2021.2
are as under:
Actual HRAreceived
SimplifiedApproach to Income Tax
|Less: Exemption under seetion 10(13A)
()Actual HRA received
(ii)Rent paid - 10% of salary of relevant period
(a) 90,000 - (10% of 3,93,750)
(b) 60,000 - (10o of 1,31,250)
The actual rent paid by him is /0,000 p.m, for an accommodation at Noida till 31.12.2021. From 1.1.2022. the rent wae
increased to 20,000 p.m. Compute the taxable HRA.
(iii) 40% of salary
I35,000
S0,625
(ompuichis gross salary for the assessment vear 2022-23. ifX
at des not optto be taxed under section |!SBAC
I,57,500
ots fo ho iaxcd undier section l1SBAC
Periodof
9 months
14.2021 to
31.12.2021
Taxable amount 84,375 + Nil 84,375
Exemptionamount <50,62S +45,000 =295,625
Meaning of salarytrom I.4.2021to 31.12.202I 2,70,000+90,000 +33,750 =3,93,750
Meaning of salary from 1.1.2022 to 3|3.2022 90,000+ 30,000 + |1,250=1,31,S0
1,35,000
S0,625
84,375
45,000
46,875
Chap. 4
$2,S00
Duringthe previoUs year 2021-22, he has received arrears of salary pertaining to carlier vears anounting to N0,000.
87,600
1,62,000
3,00,000
24,000
3,24,000
30,000 p.m.
10,000 p.m.
5,000 p.m.
45,000
15,000 p.m.
Period of
3 months
Mr. Nis employed with ABCLtd. on a basic salary of 60,000p.m. He is also entitled to adeamess allowance of 0°% of basN
salary. 70°% of the dearness allowance is included in salary for retirement benefits.The companvgives him HRA of30,000 p.m.
With efect from 1.1.2022, he reveives an increment of 10,000 in his baS0C salary.
1.12022)
to 31 3.2022
45,000
X was staying with his parents till 31.10.2021. From 1.I1.2021. he takes an avommodation on rent in Delhiand pays 2W
nm as rent tor the acconmodation,
45,000
Chap, 4
Solution
Basic Salary:
60,000 x 9
70,000 x 3
Dearness allowance: 20% of basic salary
Arrears of salary
Actual amount of house rent allowance received
Less: Exemption under section 10(13A)
Gross Salary
Working Notes
(2)
(3)
(4)
(i)
(iii)
L1.2021 to 31.12.2021
(a)
1.L2022 to 31.3.2022
(b
Income under the Head "Salaries"
(1) In the above question, there are two factors which have changed but calculation of HRA will be done in 3 parts, i.e.,
(i) L4.2021to 31.10.2021 when he did not pay any rent
(a)
For the period November and December 2021 exemption will be as under:
Actual HRA received (30,000 x2)
5,40,000
when he pays rent but no change in other factors
when the salary has increased
36,320 will be exempt.
2,10,000
Since no rent has been paid from 1.4.2021 to 31.10.2021, no exemption shall be available.
| Salary p.m.
H.R.A.p.m.
3.60,000
87.380
Therefore, 251,060 will be exempt.
Rent paid - 10% of salary [50,000 - 10% of (1,20,000 + 16,800)| i.e. (50,000 - 13,680]
(c) 50% of salary
The total exemption shall be Nil +36,320 +51,060 = 87,380.
Does not opt to be
taxed u/s 11SBAc
For the period 1.1.2022 to 31.3.2022, exemption will be minimum of the following 3amounts:
Actual HRA received (30,000 x 3)
(b) Rent paid - 10% of salary 75,000 -10%(2,10,000 +29,400) ie. 75,000 -23,940
(c)50%salary
7,50,000
Apriland May, 2021 Nil, as he stayed with his parents
1,50,000
Problem 1:Compute theexemption availableunder section 10(13A) in the following cases:
Name of Employee
Place of residence Delhi
(a) does not opt to be taxed under section I15BAC
4,000
(b) opts to be taxed under section 11SBAC
80,000
2.72.620
12,52,620
1,500
Nil
Compute his gross salary for the assessment year 2022-23. if R
B
Noida
6,000
June to October, 2021 3,000 per month for an accommodation in Ghaziabad
1,200
1,000
November. 2021 to March. 2022 - 24,000 per month for an accommodation in Delhi.
Opts to be taxed u/s
Mumbai
80,000
3,60,000
Exemption not alowed
13,40,000
8,000
Rent paid p.m.
Ans. Nil; B-4,800;C-48,000; D-6,000; E-Nil. (See Problem No. 4.13 of"Practical Approach to IncomeTax")
5,000
6,000
$3
11SBAC
7,50.000
1,50,000
Ans. (a)132,650: (b) Z1,59.,500. [See Problem No.4.14 of"Practical Approach to Income Tax"]
60.000
36.320
Problem 2: R is employed with XY Limited on a basic salary of 5,000 per month. He is also entitled to deamess allowance (a
100% of basic salary. 50% of which is included in salary for as per terms of employment. The company gives him HRA of 23,000
per month which was increased to 3.500 w.e.f. 1.1.2022. He also got an increment of 500in his basic salary w.e.f. 1.2.2022. Rent
paid by him during the previous year 2021-22 is as under:
68,400
90,000|
S1,060
1,19,700
E
Patna Bangalore
3,000 S.000
1,000 1.500
800
Illustration 4.8 (VWhere there is a change in 2 factors e.g. salary and rent paid)
400

7. ()10
months
average
salary
(
1
0
x
33,950)
above
t
h
e
calculation
wi
l
i
be
done
on
bhe
basis
of
maximum
30
days
leave
f
o
r
every
completed
vear
of
service.
Theretol
()
Actual
amount
received
3,39,500
2.80,000
ithough
he
is
eniitled
to
|2
months
leave
f
o
r
cvery
completed
year
of
servicc,
f
o
r
t
h
e
purpose
of
calculating
limit
f
o
r
clauss
Hence
i
05,600
would
be
exempt
and
t
h
e
balance
ol
1,82,400
would
f
o
m
part
of
gross
salary.
(
<
)
Leave
encashment
shall
be
exempt
to
t
h
e
extent
of
minimum
of
following
limits:
(
d
)
Amount
specificd
by
t
h
e
Govemment,
ie.,
23,00,000
()
Leave
encashmnent
f
o
r
6
nmonths
(@
I7,600
p.
m
.
=|,05,600.
AMS
42500
+
97000
10
(
b
)
10
months'
average
salary,
L.
e
,
17,600
x
10
=1,76,000
(iii)
Specified
amount
20,00,000
(a)
Leave
encashment
actually
received
=
22,88,000
Selution:
The
minimum
of
t
h
e
following
four
amounts
will
be
exenpt:
33950
x
24
Compute
t
h
e
amount
of
taxable
lcave
encashment.
year
of
service
(ii)
Half
112
month
f
o
r
every
completed
()
Actual
amount
received
26,00,000
(
7
)
Leave
entitlement
17,600
(
1
)
Gratuity
shall
be
exempt
to
t
h
e
extent
of
minimum
of
following
limits:
(6
Average
salary
f
o
r
t
h
e
months
of
February,
2021
to
November,
2021
16
months
Working
Notes
(5)
Balance
unavailed
leave
at
t
h
e
time
of
retirement
14
months
Gross
Salary
(
4
)
Leave
availed
while
in
service
Less:
Exempt
(See
note
No.
2)
Ni
?2,88,000
146,767
2,80,000
(
3
)
Leave
encashment
2,80,000
(
2
)
Amount
received
Period
of
Service
20
ycars
&
8
months
Salary
at
t
h
e
time
of
R18,000
Leave
Encashment
4,07,400
I.92.600
received
2,88,000
as
leave
salary
from
hi
s
employer.
The
following
infomation
is
provided
by
t
h
e
employee:
llustration
4.41:
E,
an
emplovee
of
XYZ
Pvt
.
Li
d
.
retired
from
t
h
e
company
on
30.11.2021.
At
t
h
e
time
of
hi
s
retirement,
he
Less:
Exempt
(See
note
No.
1)
6,00,000
Amount
5.
The
assessee
can
claim
relief
from
t
a
x
under
section
89
in
respect
of
leave
encashment.
Gratuity:
payment
IS
not
in
t
h
e
nature
of
salary.
[Letter
No
.
35/l/65,
dated
5.|1.1965].
4.
Leave
saBary
pai
d
to
legal
heirs
of
a
deccased
employee
in
respect
of
privilege
leave
standing
to
t
h
e
eredit
of
such
employee
at
t
h
e
t
i
m
e
of
hi
s
he
r
death
is
an
er-gratia
payment
on
compassionate
grounds
in
t
h
e
nature
of
gifts.
Thus
t
h
e
3,33,333
1,66,667
Les
s
Exempt
(5,00,000
x
x)
S,00,000
recipient.
[Circular
No.
309,
dated
3.7.198IL.
Leave
salary
Amount
Received
Commuted
Pension
Cnployer.
2.
WhCre
t
h
e
leave
encashment
is
received
by
t
h
e
cmployce
r
o
m
more
than
22
500
Uncommuted
Pension
(15,000
x
I
+
7,500
x
|)
Deamess
Allowance
(100%)
2,42.500
2,42.500
amount
of
exemption(s)
availed
earher
exempion
in
respect
of
such
amount,
t
h
en
t
h
e
limit
given
in
clause
(d),
speccitied
above,
shall
be
reduced
by
h
If
t
h
e
emplovee
had
received
leave
Basic
Salary
(22,500
x
3
+
25,000
x
7)
15.1.2022
divided
by
10.
he
retieS
On
15J.2022
t
h
e
average
salary
shull
be
taken
as
aggregate
of
salary
drawn
by
hn
f
o
r
t
h
e
period
i6
4
02
diided
by
i0#e
salary
dr
a
w
during
t
h
e
period
of
l0
months
inedately
precedng
hi
s
reliremen).
On
t
h
e
other
hand
11022,
t
h
e
average
salary
shall
be
taken
as
t
h
e
aggregate
of
salary
drawn
by
hi
m
t
o
r
he
period
I+.2021
to
31.J0
employee
during
t
h
e
period
of
10
months
inmediately
prceding
hi
s
relirement.
For
example,
if
an
employee
retira
Average
Salary:
vcrage
salary
is
to
be
caleulated
on
t
h
e
basis
of
he
average
salary
(
a
s
caleuBated
above)
drawn
h
Computation
of
Gross
Salary
for
t
h
e
assessment
year
2022-23
Solution
by
t
h
e
cmplovee
as
per
Supeme
Court
case
discussed
caulier.
al
l
other
allowances
and
eyuisites.
Further
it
al
s
o
includes
commisson
based
upen
lixed
percentage
of
turnover
achi
Mcaning
of
Salary:
Salary,
ineludes
dearness
atlowance
to
t
h
e
extent
t
h
e
termis
of
cmployment
so
provide
but
vol,
Compute
hi
s
GroSs
Salary
t
o
r
assessment
year
2022-23
assuming
that
he
is
not
covered
under
Payment
of
Gratuity
Act
.
9)
S0.000
on
account
of
accumulated
leave
of
240
days,
He
was
entitled
to
40
days
leave
f
o
r
every
year
of
service
s
00.000
as
conmuted
pension.
in
addition
to
this,
he
received
a
gratuity
of
t6,00,000
and
leave
cncashmcnt
amounting
to
Iis
pension
was
determincd
at
15,000
p.
m
.
He
got
S0%
of
t
h
e
pension
commutcd
wef.
L3.2022
und
receivcd
a
sum
of
Last
inIement
()
Amount
speciied
by
t
h
e
Govemnient
ie
3,00,000:
Basie
Salary
DearneSs
Allowance
2,500
w.ef
1.7.2021
100%
of
Basic
Salary
(40%
of
which
forms
part
of
salary
f
o
r
retiremcnt
benetits).
{25,000
p.
m
.
(
a
t
t
h
e
t
i
m
e
of
retirement)
t
h
e
basis
ol
t
h
e
avrge
salar:
NCIVC
endercd
to
t
h
e
emplover
fi
o
nn
whose
serVice
he
has
teired.
The
eash
equivalent
is
lo
be
caleul.
(
6
)
l0loaths
aage
salay;
()
Ca
h
yuinalent
of
unavaalat
leave
calculatvd
on
t
h
e
basis
of
naxmum
ycar
months.
He
submits
t
h
e
following
information:
llustration
4.42:
X
was
Cmployed
with
ABC
LId.
He
retired
wef
L22022
afler
copleting
a
service
of
24
yearS
and
4
as
22.400.
(See
P'
r
oblem
No,
4.1|
of"Practical
Approach
to
Income
Tax'
"
.
()
leae
ccashment
actuall
ceind,
Compule
t
h
e
amount
of
leuve
cncashment
exempt
from
t
a
x.
Ieirecnt
MVM
undert
a
ki
n
gN)
iN
CNCOpt
lo
t
h
e
eieH
of
t
h
e
munum
ot
he
ollowing
four
aounts:
iCICHICal
of
500
w.e.f.
snaR
olhevise
Inene
hy
ot
h
er
emploves
(incudng
cyk0yces
of
local
and
autherity
tNludet
u
grus
sal
a
ry,
v
fo
ceh
ycar
ot
compietea
NCTVICC.
le
was
getting
a
salary
of25.000
ner
month
at
t
h
e
time
of
t
h
c
retirement.
ie
receiveu
He
is
O
months
(
2
0
-
14).
tull
leuve
clashuwnt
(Cnpl,
notny
iN
20
e
Income
under
t
h
e
Head
"Salurie"
=4,07,400
month'
s
average
salary
f
o
r
each
completed
year
of
service
retirement
(p.m.)
received
received
by
t
h
e
family
of
a
govenment
servant,
who
dicd
in
lharness,
Is
not
taxable
in
t
h
e
hands
of
t
h
e
one
employer
m
t
h
e
same
previous
year.
t
h
e
speciied
Iimit
givcn
m
clause
()
abote
would
apply
lo
t
l
h
e
aggregute
of
leave
encashient
received
trom
one
or
mora
encashment
in
any
one
or
more
carlier
previous
year(s)
also
and
had
availed
of
t
h
e
of
uctual
30
days
leave
t
o
r
every
()
Chr
Nkvw
(Sion
O0A0
Le
cmanhment
of
avcumulald
leave
at
t
h
e
(ie
ot
whether
I7.2021
pubtic
line
u
of
eweent
he
received
sum
of
250,000
as
leave
encashment
for
unavailed
lcave
of
300
days,
was
entitled
to
40
days
A
7
l6
Problen
0:
R
an
empBoyee
of
XYZ
Ld,
retired
from
service
w.e.f.
LL2022
aler
serving
f
o
r
ycars
and
months,
t
h
e
t
h
e
maxinm
leave
allowable
for
purpose
of
clause
(e),
Le.
,
30
days
x
20600
days,
ie.,
months,
Lenve
already
avniled
by
of
empl
o
yce
is
14
months.
Therefore,
t
h
e
unavailed
leave
calculated
on
basis
of
30
days
leave
f
o
r
every
completed
year
servio

8. Chap.4
4.42 Interest credited to recognised provident fund
Income under the Head "Salaries"
Anyinterest credited to employees' recognised provident fund in excess of 9.5% per annum is taxable in the nands o u
employeeand hence included inthe gross salary of the employee.
A3 Amountcomprised in thetransferred balance
The aggregate o all sum that are comprised in the transferred balance of unrecognised provident
fund. when itisconverted into recognised provident fund, is also taxablein he handsofthe employee
and hence included in gross salary.
Fordetailed discussion of Provident Fund, etc. see under treatment of provident fund later inthis Chapter.
So far, we have diScussed what are the various incomes, allowances and perquisites which are exempt and wic
Deductions from Salaries (Section 16]
i) Standard deduction (Section 16(ia)]
be included in gross salary. From the gross salary so computed, the followingthreedeductions are allowed under section l6
orovided the employee does not opt to be taxed under section 11SBAC:
(i) Entertainment allowance (Section 16i)]
(ui) Tax on employment (Section 16(u))
4,44 Standard deduction (Section 16(ia)|
The standard deduction from gross salary shallbe t50,000 or the amount ofthe salary, whichever is less.
4.45 Entertainment Allowance (Section 16(ii))
As alrcady discusscd in para 4.14, entertainment allowance is first included in computation of the gross salary. A
deduction is then allowed under scction 161) if cond1tionsprescribed have been satisfied.
4.46 Taxon Employment (Professional Tax) |Section 16(ii)|I
Asper the onstituttonof Ind1a, the State (rovernmentsLocalAuthorities are empowered to make law and collect taxes
on professions,trades, call1ngs and employment
As per section 16), adeduction ofany sumpaud by the assesec, on account ofatax on emnployment, shall be allowed.
The deductionwill beallowed in the ycar in which the tax Is actually paid by the employee.
Note The deductions under section 16(1a), section 16{1) of scction l6(1) shall not be allowed to the cmployce if he
optsto bclaxcd under section I|SBAC
|L Where professional tax is paid by the employer on behalf of the employee, it will first be included in his gross salary
as aperquisite, being amonetary obligationof thc cmployee discharged by the employer. Thercafter, a deduction on
accountof such professional tax will be allowed to the employee from his gross salary.
Professional tax due butnot paid shall not be allowed as deduction.
the following particulars
Illustration fum1shes
4.43
2021-22 from RCompany LId where he is employcd as an Accountant:
Basic salarv
Dearness allowance (forming part of salary for retirement benefits)
EntertainmentAllowance
Children Education Allow ance (lor one child)
He is entitled to use of acar (below l.6 Itrs.) for official and personal work.
He has paid |,200towards professional tax to State Government.
Computec his income from salary for the assessment year 2022-23 if X:
(a) does notopt tobe taxedunder section 115BAC
Solution
97
(b) opts to be taxed under section 11SBAC
his for the
Does not opt to be
taxed u/s 115BAC
2,12,400
24.000
previous year
17,700 p.m.
12,000 p.m.
2250 p.m.
250 p.m.
Opts to be taxed
u/s 115BAC
2,12,400
24,000.
of remuneration

9. y
0
(iii)
al-tax
under
section
l6(iii)
1,200
51,200
Not
owed
(ii)
Ni
l
Not
allowed
Less:(i)
Standard
deduction
under
section
16(ia)
50,000
Gross
salary
2,64,000
Not
allowed
2,65,200|
Professional
t
a
x
paid
by
employer
1,200
1,200
x
12)
21,600
21,600
Perquisite
value
of
c
a
r
fringe
benefit
in
t
h
e
hands
of
t
h
e
employer
(R1,800
Entertainment
allowance
3,000
3,000|
Education
allowance
(?3,000
-
1,200)
1,800
3,000!
Dearness
allowance
24,000
24.000
Basic
salary
2,12,400
2,12,400
115BAC
be
taxed
u/sOpts
to
be
taxed
u/
s
115BAC
Does
not
opt
to
Solution
employee.
Compute
t
h
e
income
from
salary.
IIlustration
4,44:
In
illustration
No.
4.43,
assume
that
t
h
e
professional
t
a
x
of
21,200
is
paid
by
t
h
e
cmployer
on
behalf
of
t
h
e
Income
from
salary
2,11,600
2,64,000
(iii)
Professional-tax
under
section
16(iii)
1,200
S1,200
Not
allowed
(ii)
Entertainment
allowance
Ni
l
Not
allowed
Less:(i)
Standard
deduction
under
section
l6(ia)
50,000
Not
allowed
Gross
salary
2,62,800
2,64,000
cmployer
(?1,800
x
12)
Perquisite
21,600
21,609
Entertainment
allowance
3.000
3,000
Education
allowance
(?3,000
21,200)
1,
8
00
98
Simplified
Approach
to
Income
Ta
x
3,04)
Chap.
4
tertainment
allowance
valuc
of
car
fringe
benefit
in
t
h
e
hands
of
t
h
e

10. Note.--1f
De
taxed
under
section
5BAC.
d
income
account
|Income
from
house
property
5,400
72,000 =
)66,600.
|
Income
from
self
occupied
portion
()72,000
Less:
Dcduction
40%
of
interest
of
1,80,000
72,000
Annual
value
Nil
(B)
Self-occupied
portion
|Income
from
portion
let
5,400
Interest
on
money
borrowcd
(60%
of
R1,80,000)
1,08,000
1,56,600
Standard
deduction
(@
30%
48,600
|
Less:
Deductions Net
annual
value
1,62,000
Less:
60%
of
Municipal
tax
paid
18,000
Gross
annual
value
1,80,000
Actual
rent
|Compute
net
annual
value
..
Expected
rent
is
1,44,000
R15,000 x
12
Hence,
GAV
shall
be
higher
However,
if
cannot
excecd
60%
of
standard
rent
L.e.
R144,000.
1,58,400
of
the
above
two
i.e.
21,80,000.
1,80,000
Hence,
it
shall
be
(60%
of22,64,000)
It
shall
be
60%
of
municipal
value
or
fair
rent
whichever
is
hipher.
Compute
expected
rent
(A)
House
property
let:
Solution:
Since
60%
of
he
propcrty
is
let
and
the
balance
self-0ccupicd
we
shall
compute
the
income
separately.
Interest
on
money
borrowed
for
purchase
of
housc
property
which
was
acquired
in
2010
1,80,00030,000
Municipal
taxes
paid
Standard
rent
20,000
p.m.
22,000
p.m
Far
ret
2,00,000
Municipal occupicdby
him
Illustration
Particulars
(omputc
s
mcOme
Iron
house
property
from
the
following
infonaion
nubmilled
to
you
ad
interest
shall
also
bc
apportioncd
on
he
basis
of
buil
up/tloor
arcu
space.
nrovisio1s
and
thc
Toor
which
is
Nell-oceupied
shall
be
comuled
separately
as
per
self-occupied
provisions,
Municipal
tax
shall
not
be
treated
as
a
single
unit,
Iostead,
incoe
from
lint
tooH
whieh
is
let
shall
he
computed
separately
as
per
iet
our
Smlarly,
wherC.
n
a
buldinp
the
ground
(loor
iN
Nelle0ceupied
nd
first
floor
is
let
out
or
viceversM,
SCH
a
propty
on
built
up
arca
bavis,
Munieipal
valuc
Tar
rent
iT
not
given
sepaately,
nlhall
be
upportioped
between
the
et
out
porion
snd
self
occupied
pon
ER
where
one
mt
IN
let
out
and
the
othc
uilin
nellcubied
heu
he
whole
ooperty
capot
be
taken
as
ia
single
e
detemincd
as
pe
ata
S.10
nder
tlhe
"elf
0ccupied
property"
category
6.11
147
Chap. 5
he/it
shall
an
individual
or
HUF
opts
to
be
taxedon
under
section
115BAC,
neither
be
allowed
loss
of
272,000
from
house
property,
it
shall
not
be
allowed
to
be
set
off
trom
any
other
head,
if
the
individual
or
HUF
onts
to
of
elf-occupied
1
portion
nor
the
loss
of
5,400
on
the
account
is
a
as
if
of
portion
of
the
property
let,
there
loss
under
valueof
the
house
5.14:
R
ows
a
houNC
property
in
Delhi,
o0%
ot
he
pronerty
it
let
out
for
15,000
p.m,
and
40%
portion
I5
Se
uder
o
separatelv
un
he
let
out
poperty
ud
le
income
ofthe
poion
Ibe
part
propety
wlich
is
self
occupied
shall
be
In
this
case
the
Anual
value,
deduetion
and
the
icoe
o
he
past
of
the
popety
which
is
let
shall
he
comnputed
Computation
of
income
of
houNe
property
which
is
purtly
let
and
partly
self
oceupled

11. 5,000
20,000
)
Pavable
on
loan
taken
for
struction
of
house
1)
insurance
Premium
(paid)
to
be
taxed
under
section
5BAC.
account
if
of
portion
t
h
e
head
income
property,
it
i)
Collection
charges
Note.
-T
an
individual
or
HUF
opts
to
be
taxed
under
section
115BAC,
he/it
shall
neither
be
allowed
loss
of
30,000
(
i
)
Repairs
Total
Income
1,60,300
1,80,000
1,70,300
1.90.300
Other
Income
Net
income
from
house
property
1,90,300
out
at
a
rent
of
27,000
per
month
per
unit.
The
Municipal
Value
of
t
h
e
40%
of
such
Municipal
Value,
which
were
paid
during
t
h
e
year.
Ihe
other
expenses
were
as
follows:
house
property
is
4,00,000
and
the
Municipal
Taxes
are
2,10.000
(
-
)
19,
7
00
(
-
)
(
-
)
19,700
units,
the
property
was
constructed
on
31.5.1995.
Each
of
them
occupies
one
uni
t
for
hi
s
residence
and
the
other
three
units
ar
e
l
e
t
llustration
5.15:
Three
brothers
A,
B
and
C
having
cqual
share
ar
e
co-owners
of
a
house
property
consisting
of
s
i
X
identical
|Self-occupied
portion
(
-
)
30,000
(
-
)
30,000
(
-
)
30.001
Let
out
portion
10,300
10,300
10.300
oWned
by
one
owner
and
thereafter
t
h
e
income
so
computed
shall
be
apportioned
amongst
each
co-oWner
as
per
owners
is
let
out,
the
income
from
such
property
or
part
thereof
shall
be
first
computed
as
if
this
property'
their
definite
share.
ncome
from
House
Property
(
<
)
(?)
A
R
interest
on
borrowed
money.
of
Computation
of
t
h
e
total
income
of
t
h
e
three
brothers
(a)
Where
house
property
is
self-occupied
by
each
cO-OWner:
Where
t
h
e
house
property
owned
by
the
co-owners
is
Selt
occupied
by
each
of
t
h
e
co-owner,
t
h
e
annual
Value
or
t
h
e
property
f
o
r
each
of
such
co-owner
shall
be
ni
l
and
each
(
-
)
30,000!
(-)
30,000
(
-
)
30,000!
Income
from
self-occupied
property
restricted
to
maximum
30,000
f
o
r
each
co-owner
30,000
30.0001
30.000
Sometimes
t
h
e
shall
not
be
assessed
as
an
AOP
in
respect
of
such
property,
but
t
h
e
share
of
each
such
person
in
t
h
e
income
from
t
h
e
persons,
who
are
known
as
co-0wTners.
In
such
cases,
1T
their
respective
shares
are
definite
and
ascertainable,
such
persons
property
consisting
of
buildings
or
t
h
e
buildings
and
lands
appurtenant
thereto
is
owned
by
t
w
o
or
more
property,
as
computed
in
accordance
wi
t
h
sections
22-25.
shall
be
included
in
hi
s
total
income
as
under:
Interest
on
loan
(I,21,0003=
40,333)
|
L
ess:
Deduction
ws
5.15
Property
owned
by
Co-owners
[Section
26]
Ni
t
l
|Annual
value
Ni
l
(
R
}
(
7
)
deduction.
sum
equal
to
30%
of
t
h
e
arrears
of
rent
or
t
h
e
unrcalised
rent
referred
to
in
section
25A(|)
shall
be
allowed
as
(
2
)
Standard
deduction
@
30%
to
be
allowed
from
such
arrears
of
rent
or
unrealized
rent
|Section
25A(2)):A
house
property,
whether
t
h
e
assessee
is
t
h
e
owner
of
t
h
e
property
or
not
in
that
financial
year.
rent
is
received
or
realised,
and
shall
be
included
in
t
h
e
total
income
of
t
h
e
assessee
under
the
head
Income
from
by
an
assessee
shall
be
deemed
to
be
t
h
e
income
from
house
property
in
respect
of
t
h
e
financial
year
in
which
such
Self-occupied
property
Therefore,
share
of
each
co-owner
is
I/3rd
of
30.900
Income
from
l
e
t
10.300
t
h
e
unrealised
rent
realised
subsequently
from
a
tenant
30,900
121,000
1,86,100
arrears
of
rent
received
from
a
tenant,
or
Property
(Section
25A(1):
The
amount
of
(
1
)
Arrears
of
rent
or
unrealized
rent
received
subsequently
to
be
taxed
under
t
h
e
head
"Income
from
House
5.
1
4
Special
provision
f
o
r
arrears
of
rent
and
unrealised
rent
received
subsequently
(Section
25AI
b)
Interest
on
loan
(50%)
a)
Standard
deduction
@
30%
65,
1
00)
Less:
Deductions
u/
s
24
2.17,000
Net
annual
value
80,000
of
t
h
e
recipient
f
o
r
such
purpose.
t
h
e
same
has
been
paid
or
deducted
at
source
and
in
respect
of
which
there
is
no
person
in
India,
who
may
be
treated
as
an
Interest
on
borrowed
money
which
is
payable
outside
India
shall
not
be
allowed
as
deduction
u/
s
24(6),
unless
t
h
e
t
a
v
Less:
Municipal
taxes
paid
(50%
of?1,60.000)
2,97,000
2.97,00o
5.
1
3
Interest
when
not
deductible
from
"Income
from
House
Property"
[Section
25)
(
a
)
Municipal
value
(50%
of
4,00,000)
12
x
3)
3,24,000
-
27,000
(vacancy
of
one
unit
for
3
rnonths)
2.60.00
whole
or
any
part
of
t
h
e
previous
year.
annual
value
wi
l
l
have
to
be
computed
if
such
house
property
which
is
forming
part
of
ni-kcots-trade
was
not
let
during
t
h
e
property
till
31.3.2024
shall
be
taken
as
ni
l
if
it
has
not
been
l
e
t
at
al
l
till
that
date.
However,
w.e.f.
1.
4
.
Gross
annual
value
Let
out
Property
(50%
Le.
3
units)
Solution
t
h
e
competent
authority.
period
up
to
t
w
O
years
year
2022-23.
t
h
e
annual
value
of
such
property
or
part
of
t
h
e
property
shall
be
taken
to
be
ni
l
for
t
h
e
t
h
e
t
h
e
end
of
r
e
s
p
ect
i
v
el
y
.
and
the
head
"Income
from
House
Pruperty"
and
the
total
Incom
of
the
three
brothers
for
assesSrnent
He
doces
not
own
any
other
house.
The
oher
incorne
of
A,
C
Onc
of
t
h
e
l
e
t
consisting
of
any
building
or
l
a
nd
149
Chap.
5
[Section
23(5)]
Where
t
h
e
property
Income
under
t
h
e
Head
"Income
from
House
Property"
Chap.
5.
1
2
as
148
Simplified
Approach
to
Income
Tar
e
to
i
s
t
e.
ed
he
se
does
nof
Own
any
tei
w:
r
terest
if
the
ssessee
could
nei
I
ital
is
able
bject
to
i
m
um
of
,
0
00;
even
0ccupy
th
on
ed
nor
t
h
e
l
o
ss
of
19,700
on
account
of
portion
of
t
h
e
property
a
let,
as
self-occupied
s
there
is
loss
und
shall
not
be
allowed
to
be
s
e
t
of
f
from
a
n
y
other
head,
if
from
house
if
t
h
e
individual
or
HUF
19,700
part
is
(b)
Where
t
h
e
entire
or
part
of
t
h
e
property
is
let:
As
regards,
t
h
e
property
or
part
of
t
h
e
property
which
is
owned
by
C
o
-
of
the
co-OWner
shall
be
entitled
to
the
maximum
deduction
of
230,000/
2,00,000
under
section
24(b)
on
account
24(6)
out
property
(
b
)
Act
u
al
rent
(9.000
.2024,
t
h
e
notional
has
obtained
a
certificate
of
completion
from
t
h
e
competent
authority
on
6.5.2021.
In
this
case,
t
h
e
annual
value
of
the
house
Example:
R
Ltd.
a
builder
has
constructed
a
house
property,
t
h
e
construction
of
which
was
completed
on
15.12.2020.1
property
or
any
part
of
t
h
e
property
is
not
l
e
t
during
t
h
e
whole
or
any
part
of
t
h
e
previous
veo
t
h
e
financial
year
of
in
which
t
h
e
certificate
completion
construction
of
of
the
property
is
obtaine
A
from
Compute
t
h
e
income
under
B
and
ar
e
1,84),00;
I.90,000;
and
22.10,000
t
r
ansferTed
to
Mumbai
he
out
units
remaincd
vacant
for
three
months
during
t
h
e
ycar.
A
could
not
OcCupy
hi
s
unt
for
si
x
months
as
was
appurtenant
thereto
is
held
as
stock-in-trade:
held
for
No
notional
income
house
property
stock-in-trade
for
a
period
upto
two
year

12. R9
%
per
annum
interest
f
o
r
t
h
e
purpose
of
construction
of
t
h
i
s
house.
The
entire
l
o
an
is
still
outstanding.
constructed
on
1.3.2021
and
has
been
occupied
by
hi
m
f
o
r
hi
s
own
residence
since
then.
He
t
o
ok
a
l
o
an
of
29.00.000
on
1.8.2019
0
on
3112.1991.
This
has
been
l
e
t
out
on
a
rent
of?30,000
p.
m
.
to
a
company
f
o
r
i
t
s
office.
The
second
house
is
in
Jaipur
which
w
Illustration
5.18:R
is
a
Sales-tax
Oficer
at
Jaipur.
He
owns
t
w
o
residential
houses.
The
first
is
in
Delhi
and
was
constructeu
operty
were
as
der:
upation
other
particulars
of
llustration
5.19:
R
has
a
house
property
situated
in
Del
h
i
whi
c
h
consists
of
t
w
o
units.
Uni
t
A
Le.
29,600
f
o
r
five
years.
erest
l
o
r
pre-construction
has
60%
floor
area,
whereas
Income
from
house
property
3,99,000
3,99,000
3,99,000
3,
9
9,
0
00
rent
shall
be
20,000
×
12
=2,40,000.
e
second
house
has
been
l
e
t
out
@
20.000
p.
m
.
,
therefore
in
t
h
e
absence
of
ot
h
er
intomation,
t
h
e
expected
r
e
nt
or
fai
r
Less:
Statutory
deduction
@
30%
1,71,000
1,71,000
1,71,000
1,71,000
Net
annual
value
5,70.000
5,70,00
5,70,000
5,70,000
Income
from
house
property
321.6001
3,21,600
|
Less:
Municipal
value
30,000
30,000
30,000
30,000
(
0
)
Interest
on
Loan
(72,000
+
9,600)
1,53,600
86.400
Gross
annual
value
86,400
6,00,000
6,00,000
6,00,000
81,000
72,000
6,00,000
(
a
)
Statutory
deduction
@30%
Uni
t
I
Unit
I
Unit
II
Unit
II
Less:
Deductions
u/
s
24
be
taxed
u/
s
115BAC
Does
not
opt
to
115BAC
be
taxed
u/
s
Does
not
Opts
to
be
taxed
u/
s
115BAC
Opts
to
be
taxed
u/
s
115BAC
Net
annual
value
2.40,000
2,40,000
Less:
Municipal
taxes
It
wi
l
l
be
determined
as
if
t
h
e
property
is
l
e
t
,
as
pe
provisions
of
section
23(0).
Solution:
In
this
case,
t
h
e
self-occupied
property
has
been
l
e
t
out
f
o
r
part
of
t
h
e
year
and
as
such
annual
value
shall
not
be
ni
l
.
(
b
)
Actual
rent
received
or
receivable
20,000
x
4
80,000
240,000!
2.40,000
from
house
property?
Illustration
5.17:
In
lustration
No.
5.
1
6
if
t
h
e
self-occupied
portion
was
l
e
t
out
f
o
r
three
months
then
what
will
be
t
h
e
income
|
2
,40,000
(
a
)
Municipal
value
or
Fair
rent
whichever
is
more
i
.
e
.
2,40,000
3
3
N
i
l
Ni
l
Gross
|
L
ess:
Statutory
deduction
3%
1,71,000
1.71,000
Ni
l
Ni
l
Statutory
deduction
@
30%
1,00,800
2.35.200:
2.35.200
|
N
et
Annual
Value
5.70.000
5,70,000
Ni
l
Ni
T
Less:
Deductions
u/
s
24
|
30,000
30,000
Ne
t
Annual
Value
3.36.000
Gross
Annual
Value
6.00,000
6,00,000
Ni
l
Ni
l
Less:
Municipal
taxes
24,0001
115BAC
3.60,000
taxed
u/
s
115BAC
opt
to
be
u/
s
115BAC
to
be
taxed
lGross
Annual
Value
(Rent
received)
taxed
u
/
s
Opts
to
be
Particulars
I
s
t
house
(let
out)
Does
not
115BAC
taxed
u/
s
Opts
to
be
115BAC
Does
not
opt
tared
u'
s
opt
to
be
taxed
u/
s
115BAC
(Let
out)
Unit
I
(Self-occupied)
Unit
II
Does
not
Opts
to
be
Solution
Sol
u
t
i
o
n
(
b
)
opts
to
be
taxed
under
section
!1SBAC
(
b
)
opts
to
be
taxed
under
section
115BAC
(
a
)
does
Dot
opt
to
be
Detem1ne
t
h
e
income
amountng
to
t60,000
have
been
paid
duing
t
h
e
previous
year.
The
construction
of
t
h
e
property
was
completed
on
1.
I.1995.
and
t
h
e
othet
uni
t
is
l
e
t
out
throughout
t
h
e
previous
vear
on
a
rent
of
50,000
p.
m
.
Municipal
taxes
f
o
r
t
h
e
complete
ho
llustration
S.l6
X
has
s
house
which
has
t
w
o
dentical
units.
One
of
t
h
e
units
is
sell-occupicd
throughout
t
h
e
previous
vens
(
a
)
does
not
opt
to
be
taxed
under
section
day
on
wa
s
l
e
t
ILLUSTRATIONS
ON
HOUSE
PROPERTY
72.000
Th
e
ground
La
n
d
revenue
Int
e
rest
on
l
o
an
rent
of
t
h
e
Dclhi
house
and
t
h
e
municipal
t
a
x
and
land
revenue
of
t
h
e
Jaipur
house
are
unpaid.
10.099
deemed
to
be
l
e
t
out,
can
be
more
than
net
annual
valuc.
ppertcs
due
to
municipal
taxes
as
wel
l
as
deductions.
Smilarly,
deducttons
under
scction
24
in
case
of
nron
Out
,
6.500
1,750
1300
Gr
o
und
r
e
n
t
Fi
r
e
insurance
prcmium
Expenses
ON
repai
r
s
2,00
deduction
of
interest
of
30,000
2.00,000,
as
t
h
e
case
nmay
be
.
Note.-f
t
h
e
indis
idual
or
HUF
opt
s
to
be
taved
under
seetion
11SBAC,
he/it
shall
not
be
2050
Value
60,000
Value
Iay
be
.
therefoe,
there
ma
y
a
l
o
ss
n
espt
of
such
property
(Ies)
up
lo
a
maxmum
of
30,000/2,00,000,
as
h
of
Muscipai
deatuctons
ar
e
alkwd
eNOEN
f
o
r
nterest
on
bonowv
funds
up
to
a
maximum
of
30,000/2,00,000
Muni
c
i
p
al
t
a
x
Muni
c
i
p
al
val
u
at
i
o
n
I
P
%
of
Muncipal
2.49,)
(0
In
so
f
a
r
as
mome
from
one
wo
selfwupid
propety
(ICs)
N
COnCend,
t
h
e
annual
alue
is
aken
ae
.s
Ist
house
Iind
house
I
hi
s
bngs
us
fo
t
h
e
question
as
to
whether
there
can
be
any
l
o
ss
under
this
hcad.
$.
1
7
Can
there
be
any
l
o
ss
under
t
h
e
head
income
from
house
property?
151
Clhap.
5
(
h
ap.
culars
Dt
h
er
Lunder
t
h
e
Head
"]ncome
from
House
Property"
t
h
e
house
Wa
s
also
meant
f
o
r
sell-o
b
u
t
it
wa
s
al
s
o
l
e
t
out
w.
c
.
!
.
1.
1
0.
2
021
f
o
r
28,
0
00
p.
m
.
Th
e
area.
Uni
t
Z10,000
Uni
t
B
has
40%
floor
A
wa
s
elf-occupied
by
R
f
o
r
8
mont
h
s
a
n
d
w.
e
.
f
.
1.
1
2.
2
021,
it
wa
s
l
e
t
o
u
t
f
o
r
p.
m
.
Uni
t
B
neriod
ie
from
L.
8
.
2
019
to
31.3.2020
amounung
lo
8,000
is
allowable
n
î
v
e
insulnents
opt
to
1,80,000
or
99,000
99,000
Annual
Value
higher
of
t
h
e
following
t
w
o:
IInd
house
(part
of
t
h
e
year
l
e
t
and
part
of
t
h
e
year
self
occupied)
Less:
Municipal
Taxes
taxed
under
section
11SBAC
from
bouse
property
f
o
r
assessment
year
2022-23.
it
:
||SRAC
out
on
t
h
e
same
a
rent
of
R20,000
per
month
from
"Income
house
Comput
e
t
h
e
property"
in
respect
of
Mr
.
R
f
o
r
t
h
e
assessment
year
2022-23.
Assume
R
R
wa
s
transferred
to
Mumbai
on
1.12.2021
where
he
resides
in
a
house
at
a
monthly
rent
of
40.0D00
and
hi
s
house
at
jaipur
eic,
there
ar
e
no
estnctions
on
doductions
and
therctore,
there
can
be
l
O
ss
under
this
hcad
in
resDeet
e
()
ln
rs
ot
any
other
vpe
of
house
property,
namely
a
house
property
which
is
tully
l
e
t
out
or
part
of
t
h
e
veax
allowed..
Naturally,
relevant
part
i
c
in
tespect
of
thesc
houses
are
given
below

13. Muncpal
taxes
paid
luation
20°%
of
municipal
Deemed
Income
for
2
monhs.
W.e.f.
1.12.2021,
it
was
l
e
t
out
f
o
r
1,000
p.
m
.
The
house
property
was
l
e
t
out
W.e.I.
I.4.2021
t
o
r
8,000
p.m.
which
was
vacated
bv
tenant
on
30
9
202
I
remaincd
vacant
Standard
rent
Shall
be
minimunm
in
this
case:
1,00,000
opt
to
be
fron
Fair
rent
1,10,000
Solution
Municipal
valuation
90,000
(
0
)
opts
to
be
taxed
under
section
I15BAC
(
2
)
does
not
opt
to
be
income
from
house
property
for
t
h
e
assessMent
year
Note.
In
t
h
e
absence
of
infomation,
actual
rent
has
been
taken
as
expected
rent.
osuction
of
al
l
t
h
e
threc
houses
was
completed
in
September
2018.
R
had
borrowed
Assume
R:
O,00,000
Income
from
house
propcrty
55,200
+
48,000
=
1,03,200
48,000
48,000
Insurance
Premium
(Paid)
20.000
N
30,000
Municipal
Taxes
(Paid)
(b)lnterest
on
32,000
8.000
32,000
J0.00
20,00}
Fair
Rent
360,000
3,64),0C0
3
(a)Statutory
deduction
(
a
)
30%
24,000
Municipal
Valuation
3
3,00,900
|Less:
Deductions
u/
s
24
Standard
Rent
under
Delhi
Rent
Control
Act
3,30,000)
3,30,004
3,30,600
80,000
80,000
|Less:
Municipal
t
a
x
paid
|6,000
16,000
House
-
House
Gross
annual
value
(b)
Actual
rent
received
or
receivable
8,000
×
6
96,000
96,000
48,000
suggest
which
house
should
be
treated
as
sclf-occupicd.
llustration
5.21:
R
owns
three
identical
houses
in
Delhi,
al
l
of
which
ar
e
sclí-0ccupIcd.
fumn
t
h
e
paculars
piven
below,
(a)
Expected
rent
which
shall
be
8,000
x
|2
Uni
t
B:
Gross
Income
from
housc
propcrty
30000
21,400
S2.200
52,200
21,K00
(b)
Interest
(a)
Stalulory
dcduction
a,
$5.200
S5.200)
40
800)
(6)
lnlerest
on
money
borrowed
(60%
of
20,000)
22.200
12.,000
40,800
Less:
Deductions
w/
s
24
74.000
74
000
(a)
Satutory
leduction
aa
30
28,800
Net
annual
value
IK,000
12
000
LeNs:
Deducios
/s
24
Less
Municipal
axes
paid
92
000
92.000
96,000
96,000
Gross
|Less:
Munieipal
t
u
x
paid
(60%
of
40,000)
24.000
1,20,000
24,000
Gross
Dnual
value
Particulars
1,20,000
,20,000
40,000
taxed
u/
s
115BAC
pt
to
be
Does
not
Opts
taxed
u/
s
1SBAC
(
u
)
Expected
rent
which
shall
be
10,000
x
|2
PS
to
be
Unlt
A
:
Goss
Dnual
value,
higlher
of
t
h
e
following
lwo:
I1SBAC
taxed
u/
s
opt
to
be
Does
ot
Annual
value
92,000
44,000
Opts
to
be
11SBAC
laxed
u/
s
|,000
x
4
48,0M)|
Compututton
of
income
of
houNe
propcrtics.
8,000
x
6
both
hc
houne
properties
shall
be
determined
as
per
Nection
230).
(
b
)
Actual
rent
it
should
be
1,00,000
(b)
opts
to
be
taxcd
()
docs
not
Comput
a
t
i
o
n
of
CAnnot
but
Sol
u
t
l
o
n
Gross
Annual
Value
Compute
ineo)c
r
o
m
house
property
which
shall
be
higher
of
t
h
e
foilowiny
lwo:
Interest
on
moCy
borowcd
20,(000|
(
b
)
opt
s
to
taxed
IusumCC
promiunm
30.000
4D00
(
a
)
Municipal
tuxes
paid
Assumc
R
Int
e
rest
on
moncy
Insurancc
premi
u
m
paj
d
borrowed
for
purchase
of
3,000
40,000)
housc
property
153
Head
"Incone
from
House
Property"
from
House
to
be
l
e
t
out
)
(see
work1ng
not
e
)
ho2
(a)
If
R
does
not
taxed
under
section
115BAC,
he
should
opt
f
o
r
t
h
e
following
as
hi
s
income
prop
axed
under
section
BAC
2022-23.
Illustration
5.20:
R
has
a
house
property
situated
in
Delhi.
From
t
h
e
following
particulars
submited
to
you.
Compute
he
a
9%
p.a.
f
o
r
construction
of
House
I
I
l
(Date
of
borrow
i
n
g
I6.2017}
Dat
e
of
repaymcnt
of
loan
3)
6.221
00,000
a
9%
p.
a
.
f
o
r
construction
of
House
Il
(Dale
of
borowing
1.6.20!7)
Dal
c
of
repayment
of
l
o
an
36.6.2021
noney
borrowed
(40%
of
20,000)
64),00
00,000
(40%
of
40,000)
annual
value,
higher
of
t
h
e
following
two:
96,000
30%
Annual
Valuc
(b)
Actunl
rent
received
or
reccivable
10,000
4
shall
be
292.000
as
it
is
less
than
expected
rent
owing
to
vacancy
benefn
of
nelf-0ccupied
f
o
r
residential
purpose
nhull
not
be
allowed
due
to
provisionN
of
scction
23(3).
In
this
case,
annul
va
Solutlon:
n
t
h
o
aboye
jucstion,
both
houNe
properties
ar
e
part
of
the
year
hell
occupicd
and
part
o
thc
ycar
l
e
t
out
.
reccived
or
rcccivable
unler
section
||SBAC
opt
to
be
taxcd
uder
ncetion
|
1
5BAC
it
excccd
1,00.000
(7.e.
standard
rent)
(
a
)
Expccted
rent
i
e
.
Municipal
value
or
Fair
rent
whichever
Is
fnore
ie
211000
f
o
r
t
h
e
aNCNNmcnl
year
2022-23,
ITR:
be
under
scction
I1SBAC
does
under
scction
not
opt
to
be
taxcd
|
1SBAC