Tax Practice Book Sample Ay 2012-13

Roots Institute of Financial Markets RIFM
Practice Book Tax Planning and Estate Planning Assessment Year 2012-13
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Roots Institute of Financial Markets
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Our Team
Deep Shikha Malhotra CFPCM M.Com., B.Ed. AMFI Certified for Mutual Funds IRDA Certified for Life Insurance IRDA Certified for General Insurance PG Diploma in Human Resource Management
CA. Ravi Malhotra B.Com. FCA DISA (ICA) CERTIFIED FINANCIAL PLANNERCM
Vipin Sehgal CFPCM
B.Com. NCFM Certification In Capital Market (Dealers) Module AMFI Certified for Mutual Funds IRDA Certified for Life Insurance
Neeraj Nagpal CFPCM B.Com. AMFI Certified for Mutual Funds IRDA Certified for Life Insurance NCFM Certification In: Capital Market (Dealers) Module Derivatives Market (Dealers) Module Commodities Market Module
Kavita Malhotra
M.Com. Previous (10th Rank in Kurukshetra University) AMFI Certified for Mutual Funds IRDA Certified for Life Insurance Certification in all Modules of CFPCM Curriculum (FPSB India)
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Tax Planning and Estate Planning Exam Pattern Test Duration No. of Questions 1Marks 40 2 Marks 20 4 Marks 15 Maximum Marks Pass % Passing Marks Negative Marking Grade System
Grade A B C FAIL
Score(percentage) Equal and above 80% Equal and above 70% and less than 80% Equal and above 60% and less than 70% Less than 60%
120 Min. 75
140 60 84 Nil
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Curriculum Tax Planning & Estate Planning

COURSE TITLE: Tax Planning & Estate Planning
COURSE DESCRIPTION: This module would cover the knowledge requirements relating to tax planning and estate planning for a CFP professional. LEARNING OBJECTIVES: At the end of this module, a student should be able to:
1. 2. 3. 4.
Evaluate the appropriateness of tax strategies for individual family situations. Integrate tax planning into the six step Financial Planning process. To understand the universal nature of estate planning needs. To recognize the high level of ignorance regarding estate planning among the general population as well as students. 5. To comprehend the fundamental objective of greater efficiency in wealth transfer.
DETAILED CLASS OUTLINE:
Tax Planning Considerations
1. Ethical considerations in tax planning a. Privileged communications b. Dangers of tax evasion 2. Tax compliance matters a. Filing tax returns and documentation b. Advance tax c. The audit process d. Refund of income tax e. Judicial review 3. Taxation terminology a. Inclusions b. Exclusions

c. Deductions Tax Computations
4. Tax calculations and special rules
a. b. c. d. e. f.
Gross income Adjusted gross income Itemized deductions Taxable income Tax liability Clubbing of Income
5. Tax characteristics of business forms
a. b. c. d. e. f. g. h.
Sole proprietorship General partnership Limited liability companies Trusts Foundations/exempt organizations Professional associations/corporations Co-operative Societies Others
6. Non Resident Indians (NRIs)
a. b. c. d.
Residential status of individuals Types of accounts for non-residents Investment opportunities for non-residents Tax implication for non-residents
7. Heads of income
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a. b. c. d. e. f.
Salaries Income from other sources Capital gains Business/ profession House property Interest on government securities
8. Capital Gains tax rules
a. b. c. d. e.
Determination of gain or loss Characterization of gain or loss Netting rules Indexation benefits Capital loss limitations
Tax Planning Strategies
9. Tax relief
a. Exemptions b. Deductions c. Rebates
10. Non taxable transactions (e.g., gifts, estate)
11. Tax management techniques
a. b. c. d.
Deferral and acceleration Maximizations of exclusions and credits Managing loss limitations Capital asset transactions Roots Institute of Financial Markets
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e. Deductible expenditures of individuals and business forms
12. Interest and penalty taxes and other charges
a. b. c. d.
Failure to file tax return or to pay tax Preparer penalties Accuracy related penalties Fraud/concealment penalties
Estate Planning
13. Features of trust
a. Classification of trusts b. Characteristics of selected trust provisions c. Rule against perpetuities
14. Taxation of trust
A. Income tax implications of trusts
a. b. c. d. e. f.
Exemptions Simple and complex trusts Distributable net income Tax implications of trusts Recommendations and justifications of the most appropriate trust Tax issue on retirement plans at death
15. Property documentation
viii

a. b. c. d. e.
Sale letter/ power of attorney Freehold Mutation Will Succession
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Tax Planning and Estate Planning Assessment Year 2012-13 Index

1. Ethical consideration in tax planning 2. Tax compliance matters 3. Taxation terminology 4. Tax calculations and special rules 5. Tax characteristics of business forms 6. Non Resident Indians (NRIs) 7. Heads of income 8. Capital Gains tax rules 9. Tax relief 10.Non taxable transactions (e.g., gifts, estate) 11.Interest and penalty taxes and other charges 12. Tax and estate planning 1-3 4-15 16-22 23-36 37-52 53-66 67-124 125-142 143-167 168-172 173-179 180-196 197-210 211-224 225-231 232-251 252-254 255-256 257 258
Sample paper A Sample Paper B Important Questions Most Important Questions Annexure Annexure Annexure Annexure 1 Income Tax Rates for AY 2011-12 2 Dividend Tax under Section 115-O 3 Securities Transaction Tax 4 Minimum Alternate Tax

Chapter-2 Filling Tax Return
1.
As per section 139(1), a company shall have to file return of income: A. When its total income exceeds Rs.1,80,000 B. When its total income exceeds the maximum amount which is non chargeable to income-tax C. In all cases irrespective of any income or loss earned by it.
2.
As per section 139(1), a firm shall have to file return of income: A. When its total income exceeds Rs.1,80,000 B. When its total income exceeds the maximum amount which is non chargeable to income C. In all cases, irrespective of any income or loss can by it
3.
As per section 139 (1), an individual other than a senior citizen or a woman shall have to file return of income if: A. B. C. D. His total income exceeds Rs. 1,80,000 His total income exceeds Rs. 2,50,000 His total income exceeds Rs. 1,90,000 His total income before allowing deduction u/s 80C to 80U and section 10A ,10Band 10BA exceeds Rs. 1,80,000 E. His gross total income exceeds Rs. 1,80,000
4.
As per section 139 (1) an individual, who is of the age of 60 years or more and resident in India shall have to file return of income ifA. His total income exceeds Rs. 2,50,000 B. His gross total income exceeds Rs. 2,50,000 C. If his total income before allowing deduction u/s 80C to 80U and section 10A, 10B and 10BA exceeds Rs. 2,50,000 D. If his total income after allowing of deduction u/s 80C and 80U a rd section 10A, 10B and 10BA exceeds Rs. 2,50,000
5.
An individual who is of the age of 60 years or more but non-resident in India shall have to file return of income if: A. His total income exceeds Rs. 2,50,000 B. His total income before allowing deduction under section 80C to 80U and Roots Institute of Financial Markets
section 10A, 10B and 10BA and exceeds Rs. 2,50,000 C. His total income before allowing deduction under section 80C to 80U and section 10A, 10BA and 10BA exceeds Rs. 1,80,000 6. A woman who is resident in India and less than 60 years of age shall have to file the return of income if her total income exceeds: A. Rs. 1,90,000 B. Rs. 1,90,000 before allowing deduction under section 80C to 80U and section 10A, 10B and 10BA C. Rs. 1,60,000 before allowing deduction under section 80C to 80U and section 10A, 10B and 10BA 7. A woman who is non-resident in India and less than 65 years of age shall have to file the return of income if her total income exceeds: A. Rs. 1,90,000 before allowing deduction under section 80C to 80U and section 10A, 10B and 10BA B. Rs. 1,80,000 before allowing deduction under section 80C to 80U and section 10A, 10B and 10BA 8. As per section 139( I), a person other than a company or a firm shall have to file return of income if: His total income exceeds Rs. 1,80,000 A. His total income exceeds the maximum amount which is not chargeable to tax , B. His total income exclusive of deduction under Chapter VI and sections 10A, 10B and 10BA exceeds the maximum amount which is not chargeable income tax C. In all cases irrespective of any income or loss 9. The total income of a trust before claiming exemption u/s 11 is Rs. 2, 80,000. It is eligible for exemption u/s 11 to the extent of Rs. 1, 00,000. Such trust shall: A. Have to file a return of income B. Not be required to file return of income as its taxable income is Rs. 1,80,000 10. A dies on 15-11-2011 and his total income till 15-11-2011 was Rs. 1, 90,000. Thereafter the business of A was inherited by his son R & his total income from such business was Rs. 1, 45,000. The son do not have any other income. In this case the son: A. Has to file a consolidated return of income amounting to Rs. 3,65,000 B. Has to file two returns of income, one on behalf of his father for Rs. 1,90,000 & other in his own capacity for Rs. 1,75,000 Roots Institute of Financial Markets
C. Has to file one return of income on behalf of his father for Rs. 3,65,000 D. Has to file only one return of income on behalf of his father for Rs. 1,90,000 64 Income Tax Authority below the rank of Deputy Commissioner of Income tax: A. Is appointed by the Central Board of Direct Taxes B. May be appointed by Board/ Director General/Chief Commissioner/ Director /Commissioner if authorised by Board C. Is appointed only by the Central Govt. Board 65 The circulars issued by the Board are: A. Binding on assessee as well as Income Tax Authorities. B. Binding on Income Tax Authority C. Neither binding on Income Tax Authorities nor on the assessee 66 The jurisdiction of the Assessing officer shall be in case of any person: A. Who is carrying on business or profession within the area vested with him B. Who is having place of residence with in that area C. Who is carrying on business or profession or having place of residence within that area 67 Where a person is carrying on business or profession in more places than one, the jurisdiction of such person shall be with: A. Each Assessing Officer in whose jurisdiction such person carry on such business B. That Assessing Officer in whose jurisdiction the principal place of business or profession in situated 68 Any dispute relating to jurisdiction of an Assessing Officer to assess any person shall be determined by: A. The Board B. The Director General / Chief Commissioner or Commissioner of Income Tax C. Joint Commissioner/Joint Director of Income Tax 69 The assessee can object to the jurisdiction of Assessing Officer, if no return is filed: A. Within 3 months of notice u/s 142(1) or 148 for filing the return of income or time allowed to show cause why best judgment assessment u/s 144 should not be made, whichever is earlier B. Within one month of notice u/s 142(1) or 148 for filing the return of Income or time allowed to show cause u/s 144 whichever is earlier Roots Institute of Financial Markets
C. Within the time allowed in notice u/s 142(1) or 148 for filing return of Income or time allowed to show cause u/s 144 whichever is earlier

Answers Chapter 2
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 C C D C C B B C A D B A A B A B A C A C C C A B C A B D B A 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 D B B C C A D B C C C B A A B C B B A A B B B A B B A C C B 61 62 63 64 65 66 67 68 69 70 71 72 A B A B B C B B C C B B

Chapter- 5 Tax Characteristics of Business Forms
21.
Remuneration received by a non-working partner shall: A. Be taxable in the hands of the partner B. Not be taxable in the hands of such non working partner C. Not be taxable as the firm will not be allowed deduction on account of such amount and it will be treated as share of profits
23.
Amit and Namit are partners in M/s XYZ & Co... a interior decoration firm and sharing profits and losses in ratio of 2:1 for the previous year ending on 31 March, 2012. Book Profit of the firm is Rs.145000.Compute the maximum total amount of allowable remuneration to working partners? A. B. C. D. Rs.150000 Rs.168000 Rs.152600 117000
24.
Namit & Sumit are partners of M/s R. S. & Co. a legal firm and sharing profits and losses in ratio of 6:7 for the previous year ending on 31 March, 2012.Book profit of the firm is Rs.525000.Compute the profit available to be distributed to the partners after allowing the maximum possible remuneration for the partners? A. B. C. D. Rs.222500 Rs.120000 Rs.280000 Rs.245000
25.
Mr. Amit & Sumit are partners in the firm ABC & Co. Their P& L Ratio 3:1, their book profit Rs. 3, 50,000. Computation of Remuneration of Mr. Amit & Sumit each partner in the firm (hint the remuneration paid on the basis of P& L ratio. A. B. C. D. 26,500, 87,500 1,50,000, 15,000 2,25,000, 75000 None of the above
26.
Mr. Amit & Namit are partners in the firm ABC & Co. Their P& L Ratio 5:3, their book loss Rs. 7, 50,000. Computation of Remuneration of Mr. Amit & Namit each partner in Roots Institute of Financial Markets
the firm A. B. C. D. 27. 5,40,000 Nil 7,50,000 1,50,000
Namitj and Sumit are partners in M/s ABC & Co. and sharing profits and losses in ratio of 2:1 for the previous year ending on 31 March, 2012. Book Profit of the firm is Rs.245000.Compute the maximum total amount of allowable remuneration to working partners? A. B. C. D. Rs.150500 Rs.150000 Rs.220500 None of the above
28.
Amit and Sumit are partners of M/s R. S. & Co. and sharing profits and losses in ration of 6:7 for the previous year ending on 31 March, 2012.Book profit of the firm is Rs.425000. Compute the profit available to be distributed to the partners after allowing the maximum possible remuneration for the partners? A. B. C. D. Rs.80000 Rs.875000 Rs.202500 Rs.425000
29.
Income derived from property held under trust wholly for charitable or religious purposes can be accumulated up to_________. A. B. C. D. 35% of income 85% of Income 15% of Income 75% of Income
30.
A charitable trust is assessed to tax as A. B. C. D. Firm Association of persons Company Society
31.
During the previous year 2011-12, charitable trust derived income of Rs. 670600 from the property held under the trust for charitable purpose. The trust actually spent only Rs.270600 during the previous year 2010-11. Determine the taxable income of the Roots Institute of Financial Markets
trust assuming the trust has not applied for the extension option for applying the unutilized portion of the income for charitable purpose during the next previous year, i.e., 2012-13? A. B. C. D. Rs.349100 Rs.341100 Rs.299410 Rs.345840
32.
The Trust has derived income from held property Rs. 1000000/- during the year March 2012, the Trust has only spend 750000/-. What is the unutilized amount for AY201213? A. B. C. D. 100000 250000 850000 NIL

Answer Sheet Chapter 5

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 A B A D B A B B A C D A C C C B C B B 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 C C C A B C D C A C B C A D B C D B C 39 40 41 42 43 44 45 46 47 48 C B D D B D B C D C

Solutions
Solution: 31 Income from property held for charitable purpose=670600 Less: 15% set apart for the future=100590 Less: Amount actually spent during the previous year=270600 Unutilized balance (Taxable amount) =299410 Solution 32 Income from property held for charitable purpose=1000000 Less: 15% set apart for the future=150000 Less: Amount actually spent during the previous year=750000
Solution: 33 Income from property held for charitable purpose=870600 Less: 15% set apart for the future=130590 Less: Amount actually spent during the previous year=370600 Unutilized balance=369410 Less: Amount spent during P.Y.2011-12=67800 Taxable income of the P.Y.2011-12=301610 (369410-67800)

Chapter- 7 Heads of Income

1. R Ltd pays a salary of Rs. 1, 90,000 to his employee G and undertakes to pay the Income Tax amounting to Rs. 3,090 during the previous year 2011-12 on behalf of G. The gross Salary of G shall be: A. Rs. 1,90,000 B. Rs. 1,93,090 C. Rs. 1,86,910 2. R, who is entitled to a Salary of Rs. 1 0,000 p.m., took an advance of Rs. 20,000 against the salary in the month of March 2012. The gross salary of R for assessment year 2012-13 shall be: A. Rs. 1,40,000 B. Rs. 1,20,000 C. none of these two 3. R was employed on 1-7-2003 in the grade of Rs. 15,000-400-17,000-500-22,000.His gross salary for the assessment year 2012-23 shall be A. B. C. D. 4. Rs. 1,99,200 Rs.2,04,000 Rs. 2,14,500 Rs.2,10,000
R was employed from 1-8-2008 in the grade of Rs. 15,000-400-17,000-500-22,000 and his salary was fixed at Rs. 16,200 from the date of joining. His gross salary for the assessment year 2012-13 shall be. A. B. C. D. Rs. 1,99,200 Rs. 2,04,000 Rs. 2,08,000 Rs. 2, I 0,000
5.
Salary of R is Rs. 10,000 p.m. R had taken Salary in advance for the months of April 2011 to June 2011 in March 2011 itself. The gross salary of R for assessment year 20 12-13 shall be: A. Rs. 1,20,000 B. Rs. 90,000 C. none of these two Roots Institute of Financial Markets
6.
The Government of India announced increase in the D.A on 15-3-2011 with retrospective effect from 1-5-2007 and the same were paid on 6-4-2011. The arrears of D.A shall be taxable in the previous year: A. 2010-11 B. 2011-12 C. In respective previous years to which these relate
7.
R is employed with G Ltd., at a salary of Rs. 10,000 p/m. As G Ltd., was in financial crisis, it paid the salary of January 2012 to March 2012 to R only in July 2012. The gross salary of R for assessment year 2012-13 A. Rs. 1,20,000 B. Rs. 90,000 C. none of these two
8.
R, who is entitled to Salary of Rs. 10,000 p.m. took advance salary from his employer for the months of April and May 2012 along with Salary of March 2012 on 31-3-2012.The gross salary of R for assessment year 2012-13 shall be: A. Rs. 1,20,000 B. Rs. 1,40,000 C. none of these two
9.
R who was working with another company joined the present employer w.e.f. 1-52011 at a Salary of Rs. 20,000 p.m. His salary becomes due on first of next month. He was also entitled to a pension of Rs. 8,000 p.m. From his former employer as he retired on 31-3-2011. His gross salary for assessment year 2011-12 shall be: A. Rs.1,20,000 B. Rs. 2,46,000 C. Rs. 2,96,000
10.
Salary of R becomes due on Ist of next month and it is paid on 7th of that month. For assessment year 2012-13, the salary of R shall be taken from: A. April 2009 to March 2010 B. March 2011 to February 2012 C. none of these
11.
Encashment of leave salary at the time of retirement is fully exempt in the case of: A. Central Government employee Roots Institute of Financial Markets
B. State Government employee C. Both Central and State Government employees D. Government employee and employee of local authority. 12. Tick the incomes which will be included in the meaning of salary for encashment of leave salary to other employees. A. B. C. D. E. F. G. 68 D.A Dearness allowance to the extent the terms of employment so provide Bonus Taxable allowance Fixed commission Commission if fixed percentage on turnover Fixed percentage of commission on net profits.
Payment from statutory fund and public provident fund shall be: A. Taxable B. Fully exempt C. Taxable to the extent of employer's contribution and interest thereon
69
An employer has provided free meal worth Rs. 110 per meal for 300 days in the office, during office hours, to his employees. Such facility provided to the employees shall: A. Be a perquisite in the hands of the employees and taxable @ 60 per day for 300 days B. Be a tax free perquisite in the hands of the employees C. Be a tax free perquisite in the hands of the employees but liable to FBT in the hands of the employer D. Neither be a perquisite nor liable to FBT in the hands of the employer
70
An employer has made a gift of Titan Watch worth Rs. 12,000 to his employee. Such gift shall: A. Be a perquisite in the hands of the employee and the value of such perquisite shall be Rs. 12,000 B. Be a perquisite and the value of such perquisite shall Rs. 7,000 C. Not be a perquisite
71
(i) The employer had purchased a car for Rs. 3, 00,000 which was being used for official purposes. After 2 year 6 months of its use, the car is sold to R, the employee, for Rs. 1, 20,000. The value of this perquisite shall be A. Rs. 72,000 B. Rs. 60,000 Roots Institute of Financial Markets
C. Nil D. Rs. 1,23,000 E. Rs. 1,20,000 (ii)What will be your answer if instead of car, the asset purchased is a computer? A. B. C. D. E. Rs. 72,000 Rs. 60,000 Nil Rs. 1,23,000 Rs. 1,20,000
(iii) What will be your answer if the asset is neither car nor any computer? A. B. C. D. E. 72 Rs. 72,000 Rs. 60,000 Nil Rs. 1,23,000 Rs. 1,20,000
(i) R is provided with a rent free accommodation owned by his employer in Delhi. The value of this perquisite shall be: A. B. C. D. E. F. 20% of salary 15% of salary 20% of salary plus excess of FRV over 50% of salary 20% of salary plus excess of FRV over 60% of salary 10% of salary 7.5% of salary
(ii) What will be your answer if the accommodation is provided in a city having population of 9 lakhs as per 2001 census? A. B. C. D. E. F. 73 20% of salary 15% of salary 20% of salary plus excess of FRV over 50% of salary 20% of salary plus excess of FRV over 60% of salary 10% of salary 7.5% of salary
R is entitled to a watchman allowance of Rs. 600 p.m. for the security of his residence. He pays Rs. 500 p.m. to the watchman employed by him. The taxable allowance shall be: A. Rs. 120 p.m. B. Rs. 100 p.m. Roots Institute of Financial Markets
C. Rs. 600 p.m.

Answers Chapter 7
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 B B C C B B A B C B C B C C C B A A,E,G C B i)A ii)A iii)B iv) A v) B vi)C i)B ii)C iii)B iv) C A C B C B 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 C A,B,D,F,I C C A,C,D,E,F, G,H,Q I)B II)D B A C C C A C B B B C C C A 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 i)A,ii)C, iii)E i)B,ii)F C i)C,ii)C,iii)C ,iv)E,v)E i)B,ii)B i)A,ii)A, i)A,ii)A,iii)B i)B,ii)B B B B A B C D A A i)A,ii)D C A 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 C C B C C B B D B C C B C C C A,C,E,F,G,H ,I,J C C A B
56 57 58 59 60 61 62
A A A A C C C
91 92 93 94 95 96 97
B A C B A D B
126 127 128 129 130 131 132
A B C B C C B A,B,C,F,G,H ,I,K,M,P,Q,S ,U,W,Y,Z,AA ,BB,CC,DD C B,C,D,G,I,K, L.M C B B C C
22 23 24 25 26 27
28 29 30 31 32 33 34 35
C D A B C C B B
63 64 65 66 67 68 69 70
D D C D C B A B
98 99 100 101 102 103 104 105
C A B C C A A A
133 134 135 136 137 138 139 140

141 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160
B B B C D C B C B D C B C B A A A C C D
176 177 178 179 180 181 182 183 184 185 186 187 188 189 190 191 192 193 194 195
Answers Chapter 7 B 211 B B 212 C C.D 213 C B,C,D,E,F,G,H,I 214 B B 215 B B 216 A D 217 B B 218 a)B b)D B 219 B B 220 B C.D 221 A D 222 C C 223 A C 224 (a)B (b)D C 225 C A 226 C C 227 C B C B
161 162 163 164 165 166 167 168 169 170 171 172 173 174 175
C C C B B B C B B C B C C B C
196 197 198 199 200 201 202 203 204 205 206 207 208 209 210
B C A B B C C B C B C B B C C

Solution
Solution: 3 Gross Salary 01-04-2011 to 31-06-2011 (17500*3 ) 01-07-2011 to 31-03-2012 (18000*9) 52500 162000 214500 Solution: 5 April 2011 to June 2011 full in A.Y. 2011-12 July 2011 to March 2011 in A.Y. Rs.10000*9 Solution: 9 Salary (20000*10) Pension 200000 96000 296000 Solution: 83 Exempted amount is minimum of the following: Actual amount received =Rs.400000 15 days average salary for 12 years = (15000 x12x15)/30 =Rs.90000 Amount specified= Rs.500000 So tax free amount is Rs.90000 and taxable amount is (400000-90000) =Rs.310000 90000
Solution: 84 Four weeks average salary = (5000+4800+6200+5600)/4 =5400 Exempted amount is minimum of the following: Actual amount received =Rs.450000 15 days average salary for completed years of service = 15 x 5400 x 15/7 =Rs.1, 73,571 Amount specified= Rs.5, 00,000 So tax free amount is Rs.1, 73,571 and taxable amount is (450000-173571) =Rs.2, 76,429
Solution: 85 Exempted amount is minimum of the following: Actual amount received =Rs.1, 50,000 15 days average salary for 11 years = (4800 x11x15)/7 =Rs.1, 13,142 Amount specified= Rs.5, 00,000 So tax free amount is Rs.1, 13,142 and taxable amount is (150000-113142) =Rs.36, 857 Roots Institute of Financial Markets
Solution: 86 Exempted amount is the minimum of the following: Actual amount received = Rs.200000 15 days average salary for 19 years = (18000 x 19 x 15)/30 =Rs.171000 Amount specified = Rs.500000 So tax free amount is Rs.171000 and taxable amount is (200000-171000) = Rs29000
Solution 87 19500 (i) 19500 x 15 x 28 = 3,15,000 26 (ii) 10,00,000 (iii) 3, 30,000 :. 3, 15,000 is exempt and balance Rs. 15,000 is taxable. Note.-If an employee is covered under Payment of Gratuity Act, 1972, salary last drawn is taken and not the salary of preceding 10 months
Solution 88 Rs. Salary from April, 2011 to January, 2012 April 2011 to June, 2012 15,200 x 3 July 2011 to January, 2012 15600 x 7 45,600 109200 ___________ 154800 23220 ___________ 178020 ____________
DA @ 15%
(a) Gratuity Act Applies (I) 15600 + 2340 x 15 x 32 = 3, 31,200 26 (ii) Rs.10,00,000 (iii) Rs. 3, 40,000 Hence Taxable Amt. = 3, 40,000 - 331200 = 8800 Gross Salary = 1,78,020 + 8800
18,68,20
(b) Gratuity Act does not apply 17802 *32 = 18262*33 2 2 Maximum limit Received amount
284832 1,00,00,00 3,40,000 3, 50,000 3, 40,000 = 55,168 Roots Institute of Financial Markets
:. Taxable Amt. = 3, 40,000 - 2848832
Gross Salary 178020 + 55168= 233188 * Average salary on the basis of preceding 10 months 178020 = Rs. 17802 10 Solution 89 The exemption shall be to the extent of the minimum of the following three amounts: (a) Amount of gratuity received Rs. 6, 00,000. (b) 15 days' salary for every year of service i.e., 22400 x 15 x 19 = Rs. 2, 45,538 26 (c) Rs. 10,00,000 Therefore Rs. 2, 45,538 shall be exempt from tax. Solution 90 Rs. Salary (17000 x 3 + 17,500 x 2 1/2) Dearness Allowance @ 50% Gratuity received 2, 40,000 Less: Exempt (i) Amount specified 10,00,000 (ii) Half month average salary for Every year of service [25, 6,50 x 17] 2,18,025 2 (iii) Actual amount received 2, 40,000 - 2, 18,025 Pension (4,000 + 8000 + 8000 + 8000 + 2000 x 3) Computed pension received Less: Exempt [6, 00,000 x 4/3 x 1/3] Gross Salary 6, 00,000 2, 66,667 _________ Rs. 94750 47375
21,975 34,000
3, 33,333 ________ 531,433 __________
Note.-Average Salary = 17000 x 8 + 17,500 x 2 = 1,71,000 + 50% of 85500 =2,56,500/10 = 25,650 Solution 91 1. 50% of Commuted Pension is equal to Rs. 3, 00,000. Hence commuted value of 1/3 of the pension would amount to Rs. 300000 x 100 *1/3 = = Rs. 2, 00,000; 50 Rs. 2, 00,000 would, therefore, be exempt and balance Rs. 1, 00,000 would be taxable. 2. 50% of commuted pension is equal to Rs. 3, 00,000. Hence commuted value of 50% of pension would amount to 300000 x 100 *1/2 = = Rs. 3,00,000; 50 Therefore, entire Rs. 3, 00,000 would be exempt. Taxable NIL

Chapter 10 Non Taxable Transactions (e.g. Gifts, Estate)
1.
Gift, whether in cash or kind, received by an individual on the occasion of his/her marriage shall be: A. fully exempt even if it exceeds Rs. 50,000 B. fully taxable if it exceeds Rs. 50,000 C. exempt upto Rs. 50,000 and balance taxable
2.
Gift exceeding Rs. 50,000 received by HUF from relative of the member of HUF shall be: A. Fully taxable B. Fully exempt C. Taxable to the extent it exceeds Rs. 50,000
3.
Gift exceeding Rs. 50,000 received by an individual from his relative R shall be: A. Fully exempt B. Fully taxable C. Exempt up to Rs. 50,000 and the balance shall be taxable
4.
Gift of immovable property or specified movable property received by an individual or HUF shall be: A. Fully exempt whether the value of such gift is less than or more than Rs.50000 B. Fully taxable C. Fully taxable if the value of such gift exceed Rs.50000
5.
Mr. Amit who is a Non-resident receives a gift from some friends on his marriage in India. The amount of the gift was Rs.2, 45,000.Calculate the amount chargeable to tax under the head Income from other sources? A. B. C. D. Rs.245000 Rs.195000 Rs.0 Rs.50000
6.
W.e.f. 1-10-2009 Gift of specified movable property received by individual or HUF shall Roots Institute of Financial Markets
be taxable in the hands of the recipient: A. To the extent of market value of the movable property as may be prescribed provided if exceeds Rs. 50,000 B. To the extent of the cost of the movable property 7. Mr. Amit who is a Non-resident receives a gift from his father on his visit to India. The amount of the gift was Rs.45000.Calculate the amount chargeable to tax under the head Income from other sources? A. B. C. D. 8. Rs.45000 Rs.5000 Rs.0 Rs.50000
An individual has received a gift of Rs. 30,000 each during the previous year from his two friends, the amount taxable under the head income from the other sources shall be: A. Rs. 10,000 B. Rs. 60,000 C. Nil
9.
X receives a cash gift of Rs. 50,000 on September 30, 2010 from his friend A. He receives another cash gift of Rs. 50,000 from his friend B on October 1, 2010. What is the taxable value in the hand of X for AY 2012-13? A. B. C. D. 50,000 Nil 1,00,000 None of the above

Answer Sheet chapter 10

1 2 3 4 A A A C 5 6 7 8 C A C B 9 10 11 12 B C B A 13 14 15 16 D D D B

Sample Paper A
One Mark Questions (40 Question) 1. Income tax Act extends to: A. B. C. D. Whole of India Whole of India except Jammu & Kashmir Whole of India except Sikkim Whole of India except Jammu & Kashmir and Sikkim
2. In Some Cases assessment year and previous year can be same financial year. A. True B. False 3. Casual Income received by the assess is: A. Fully exempt B. Exempt up to Rs. 5000 C. Fully taxable 4. Export incentives received by an assess are A. Exempt B. Taxable under section 28 C. Exempt up to certain limits 5. The tax on total income exclusive of long term capital gain is 30% +7.5% surcharge + education cess @ 2% in case of A. An Indian Company B. A domestic company C. A foreign company 6. The maximum exemption in case of leave encashment shall be: A. Rs. 240000 B. Rs. 350000 C. Rs. 300000 7. If rent is paid for a house situated in Delhi, the house rent allowance shall be exempt to the maximum extent of: A. 40% of salary B. 50% of salary C. 60% of salary Roots Institute of Financial Markets
8. A surcharge of 7.5% on income tax is payable by A. Any company B. An Indian company C. Domestic company 9. An income under the head capital gain to a local authority is: A. Exempt B. Taxable 10. Encashment f leave salary at the time of retirement is fully exempt in the case of: A. B. C. D. Central Government employee State government employee Bothe central and government employees Government employee and employee of local authority.
Four Mark Questions 4. R is provided with a car of 1.6 liter capacity by the employer along with driver. The expenses of running and maintenance of car are met by R himself. Besides using the car for official purposes also. The valuation of the perquisite of car shall be A. B. C. D. Rs. 32400 Rs. 12000 Rs. 8000 Rs. 10400
5. R ltd. Paid Rs. 11000000 during the previous year 2010-11 for acquiring the telecommunication rights which were effective for 11 years. It commenced the business of operating the telecommunication service with effect from previous year 2011-12. R limited shall be entitled to a deduction of: A. B. C. D. Rs. 10 lakhs w.e.f. previous year 2009-10 Rs. 11 lakhs w.e.f. previous year 2011-12 Rs. 12 lakhs w.e.f. previous year 2011-12 None of these
6. R who was working with another company joined the present employer w.e.f. 1-5-2011 at a salary of Rs. 10000 p.m. His salary becomes due on first of next month. He was also entitled to a pension of Rs. 4000 p.m. from his former employer. His gross salary for the assessment year 2012-13 shall be: A. B. C. D. Rs. 110000 Rs. 158000 Rs. 148000 Rs. 168000
7. Where a shareholder of an amalgamating company gets the shares of the amalgamated company in lieu of the shares held by him in an amalgamating company, the cost of acquisition of such shares shall be: Roots Institute of Financial Markets
A. Market value of the shares of an amalgamating company as on the date of amalgamation. B. Cost of the shares held in amalgamating company C. Market value of the share of the amalgamated company as on the date of amalgamation 8. An employee availed the exemption of leave encashment of Rs. 100000 in the past. He received from the second employer a sum of Rs. 250000 as encashment of leave. He will be entitled to exemption to the extent of: A. B. C. D. Nil Rs. 250000 Rs. 200000 Rs. 140000
9. Municipal valuation of the house is Rs. 100000 whereas the fair rent of house property Rs. 120000 and standard rent is Rs. 110000; actual rent received or receivable is Rs. 140000; municipal taxes paid 10%. The annual value in this case shall be: A. B. C. D. Rs. 90000 Rs. 100000 Rs. 130000 Rs. 120000

E. One Mark Two Mark Four Mark Questions Questions Questions Question Answer Question Answer Question Answer 1 A 1 C 1 C 2 A 2 C 2 B 3 B 3 D 3 B 4 B 4 B 4 A 5 B 5 A 5 B 6 C 6 A 6 C 7 B 7 B 7 B 8 C 8 C 8 C 9 A 9 B 9 C 10 C 10 C 10 B 11 A 11 A 11 B 12 A 12 B 12 C 13 B 13 B 13 C 14 B 14 C 14 B 15 A 15 D 15 B 16 B 16 B 17 B 17 A 18 B 18 B 19 B 19 F 20 B 20 B 21 C 22 A 23 A 24 D 25 C 26 A,B,D 27 D 28 B 29 B 30 B 31 C 32 A 33 B 34 A 35 C 36 B 37 C 38 C 39 B 40 B

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Faculty and content team, RIFM

Roots Institute of Financial Markets

Vipin Sehgal CFPCM

Roots Institute of Financial Markets

Roots Institute of Financial Markets

Curriculum Tax Planning & Estate Planning

DETAILED CLASS OUTLINE:

Tax Planning Considerations

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c. Deductions Tax Computations

4. Tax calculations and special rules

5. Tax characteristics of business forms

6. Non Resident Indians (NRIs)

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8. Capital Gains tax rules

Tax Planning Strategies

a. Exemptions b. Deductions c. Rebates

10. Non taxable transactions (e.g., gifts, estate)

11. Tax management techniques

e. Deductible expenditures of individuals and business forms

12. Interest and penalty taxes and other charges

13. Features of trust

a. Classification of trusts b. Characteristics of selected trust provisions c. Rule against perpetuities

14. Taxation of trust

A. Income tax implications of trusts

15. Property documentation

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Sale letter/ power of attorney Freehold Mutation Will Succession

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Tax Planning and Estate Planning Assessment Year 2012-13 Index

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Chapter-2 Filling Tax Return

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Roots Institute of Financial Markets

Chapter- 5 Tax Characteristics of Business Forms

the firm A. B. C. D. 27. 5,40,000 Nil 7,50,000 1,50,000

A charitable trust is assessed to tax as A. B. C. D. Firm Association of persons Company Society

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Answer Sheet Chapter 5

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Chapter- 7 Heads of Income

C. Rs. 600 p.m.

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126 127 128 129 130 131 132

A B C B C C B A,B,C,F,G,H ,I,K,M,P,Q,S ,U,W,Y,Z,AA ,BB,CC,DD C B,C,D,G,I,K, L.M C B B C C

98 99 100 101 102 103 104 105

133 134 135 136 137 138 139 140

Roots Institute of Financial Markets

Roots Institute of Financial Markets

:. Taxable Amt. = 3, 40,000 - 2848832

3, 33,333 ________ 531,433 __________

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Chapter 10 Non Taxable Transactions (e.g. Gifts, Estate)

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Answer Sheet chapter 10

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Roots Institute of Financial Markets (RIFM)

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3, 33,333 531,433 __