Karan, aged 38 years, working as Sales Manager with Arjun Grand Ltd., provides the following information for the year ended 31st March, 2025: Particulars Amount (₹) Basic salary 6,00,000 p.a. DA (50% of it is meant for r

CS Executive · Tax Laws and Practice · PYQS · December 2025
Karan, aged 38 years, working as Sales Manager with Arjun Grand Ltd., provides the following information for the year ended 31st March, 2025: Particulars Amount (₹) Basic salary 6,00,000 p.a. DA (50% of it is meant for retirement benefits) 3,00,000 p.a. Commission as a percentage of turnover of the Company 0.5% Turnover of the Company 60 lakhs Bonus 60,000 p.a. Project Allowance 40,000 p.a. Own Contribution to R.P.F. 40,000 p.a. Professional tax total paid ₹ 2,500 of which ₹ 2,000 was paid by the employer — Employer's contribution to R.P.F. 20% of basic salary Interest credited in the R.P.F. account @ 15% p.a. 15,000 Following further information is given to you as under: Music System purchased on 01.04.2024 by the company for ₹ 95,000 and was given to Karan for personal use on same day. Smart TV worth ₹ 15,000 was given by employer to Karan as gift on his 25th wedding anniversary. Gold ring worth ₹ 75,000 received from Sanjay who is school friend of Karan as gift on his 25th wedding anniversary. Two old light goods vehicles owned by him were leased to a transport company against the fixed charges of ₹ 6,500 p.m. Books of account are not maintained. Karan wants to opt the section 44AE of Income Tax Act, 1961. Received interest of ₹ 8,000 from SBI Bank FD on 24.4.2024 and interest of ₹ 8,100 (Net) from the debentures of Indian Companies on 5.5.2024. Made payment by cheques of ₹ 15,000 towards premium on Life Insurance policies for self and ₹ 22,500 for Mediclaim Insurance policy for spouse. Invested in NSC ₹ 30,000 and in FDR of SBI for 5 years ₹ 50,000. Donations of ₹ 1,50,000 to an institution approved u/s 80G by account payee cheque and of ₹ 25,000 to Prime Minister's National Relief Fund through BHIM UPI were made during the year. On the basis of the above information, you are required to give the following answers, assuming that he has shifted out of the default tax regime under section 115BAC : Compute the income chargeable under the head of Salary for Karan for the Assessment Year 2025-26.

Answer & Explanation:

Computation of Income under the head of Salary for Karan for A.Y. 2025-26 (Paying tax by opting to shift out of section 115BAC) Particulars Amount (₹) Amount (₹) Basic Salary 6,00,000 Dearness Allowance 3,00,000 Commission on Turnover (0.5% of ₹ 60 lakhs) 30,000 Bonus 60,000 Project Allowance (fully taxable) 40,000 Professional tax paid by employer 2,000 Employer's contribution to recognized provident fund Actual contribution [20% of ₹ 6,00,000] 1,20,000 Less: Exempt (93,600) 26,400 Employer's contribution in the recognized provident fund is exempt up to 12% of the salary i.e., 12% of (Basic Salary + DA for retirement benefits + Commission based on turnover) = 12% of (₹ 6,00,000 + (50% of ₹ 3,00,000) + ₹ 30,000) = 12% of 7,80,000 = ₹ 21,600 Interest credited in recognized provident fund account @15% p.a. 15,000 Less: Exempt up to 9.5% p.a. (9,500) 5,500 Gift of Smart TV worth ₹ 15,000 on 25th wedding anniversary from employer 15,000 Less: Exempt (gift value upto ₹ 5,000 from employer) (5,000) 10,000 Perquisite value of music system given for personal use (being 10% of actual cost) i.e. 10% of ₹ 95,000 9,500 Gross Salary Income 10,83,400 Less: Standard deduction under section 16(ia) (50,000) Less: Professional Tax u/s 16(iii) (2,500) Income from Salaries 10,30,900 Note: Gift in kind is not taxable upto ₹5,000 per annum. Hence, upto ₹ 5,000 is taken as exempt income.

Topics: Income Tax

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