Atul, aged 32 years, a resident of India employed with FRT Pvt Ltd, received the following sums during the previous year 2020-21: Basic Salary ₹70,000 p.m. DA 12% of basic salary Servant Allowance ₹6,000 p.m. Tiffin/Lunc

CS Professional · Direct Tax Law & Practice · PYQS · June 2021
Atul, aged 32 years, a resident of India employed with FRT Pvt Ltd, received the following sums during the previous year 2020-21: Basic Salary ₹70,000 p.m. DA 12% of basic salary Servant Allowance ₹6,000 p.m. Tiffin/Lunch/Dinner ₹5,000 p.m. He has paid ₹2,25,000 by account payee cheque for Mediclaim premium to insure the health of his mother, aged 62 year, who is not dependent on him as a lump-sum payment for 5 year including the current previous year. Apart from this, he also provided guest lecture to a university in foreign Country during the year. He received ₹15,79,200 from such university after deduction of tax of ₹3,94,800 in that Country. India does not have any double taxation avoidance agreement under section 90 of the Income Tax Act, 1961, with the said foreign Country. Compute the tax liability of Atul for the A.Y. 2021-22. Assume assessee has not opted section 115BAC.

Answer & Explanation:

Computation of total income of Mr. Atul for A.Y. 2021-22 Particulars Amount (₹) Amount (₹) Income under the head Salary Basic Salary (70,000*12) 8,40,000 Dearness Allowance (12% of Basic Salary of ₹8,40,000) 1,00,800 Servant Allowance (₹6,000*12) fully taxable 72,000 Tiffin/Lunch/Dinner Allowance (₹5,000*12) fully taxable 60,000 Gross Salary 10,72,800 Less : Standard Deduction u/s 16 (50,000) Net salary 10,22,800 Income under the head Other Sources Income from lecture in foreign university [₹15,79,200 plus TDS ₹3,94,800] 19,74,000 Gross Total Income 29,96,800 Less : Deduction under chapter VI-A Section 80D - Medical insurance premium of his mother being a resident senior citizen for the year 2020-21 ₹45,000 [being 1/5 of the lump sum premium of ₹2,25,000 paid for 5 year fully allowable even though she is not dependent on him, since the same does not exceed ₹50,000] (45,000) Total Income 29,51,800 Computation of Tax Liability of Mr. Atul Particulars Amount (₹) Amount (₹) Tax on Total Income [₹5,85,540 i.e. 30% of ₹19,51,800 plus 1,12,500] 6,98,040 Add: Surcharge Nil Add: Health and Education Cess @ 4% 27,922 Tax Liability 7,25,962 Average rate of tax in India i.e. ₹7,25,962/₹29,51,800 * 100 24.59% Average rate of tax in Foreign Country i.e. ₹3,94,800/₹19,74,000 * 100 20% Relief u/s 91 on ₹19,74,000 being the doubly taxed income @ 20% [being lower of Indian rate of tax @ 24.59% and foreign tax rate @ 20%] (3,94,800) Tax Payable (Round Off) 3,31,160

Topics: Income Tax Act, 1961

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