COmputation of Total Income (1)

7/30/2019 COmputation of Total Income (1)

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COMPUTATION OF TOTAL

INCOME


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MEANING

Computation Of Total Income includes all the heads of income, these are :

income from salary

income from house property

income from capital gains

income from business or profession

income from other sources.

Adding all the above heads gives us the TOTAL INCOME. From this we claim deductions u/s 80(C), 80(CCC), 80(D), 80(DDD), 80(U)

and 80(E).

After these deductions what we get is Total Taxable Income.


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DEFINITIONS

Income from house property : It basically refers to the

income which the owner earns from his house property.

According to section 22, the annual value of property

consisting of any building or apartment thereto, of whichassessee is the owner, other than such portions of such

property as you may occupy for the purpose of any

business or profession shall be chargeable to tax under this

head.

Income from business or profession: It refers to the profits

or gains earned from a business or profession including

vocation carried on by the assessee.


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Income from other sources : It is income of everykind is chargeable but which is not chargeable under

any of the specified heads (u/s 14) is under the head

Income from other sources.

Income from Capital Gains: It refers to the profit (or

loss) made while selling a capital asset.

Income from salary: Income under the head salarycomprises of remuneration in any form (including

perquisites) received by an employee from employer.

Thus, there should be contractual employer-employee

relationship. The contract may be express, oral orim lied.


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INCOME

FROM HOUSE

PROPERTY


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TYPES OF HOUSE PROPERTYLOP:In case of a let out property (LOP) annual value ishigher of the RLV or actual rent.

VLOP:In case of a let out property which was vacant forsometime during the year the (VLOP), the AV is the same but

the annual value is taken as the actual rent, if the actual rentis lower than the RLV due to such vacancy.

SOP: The annual value will be taken as nil, i.e. selfoccupied property.

DLOP: In case more than one house is used by the ownerfor self-occupation, he can choose only one house whoseannual value is to be taken as nil.


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WHEN CAN INCOME BE CHARGEDUNDER THIS HEAD?

The following 3 conditions must be satisfied:

1. The property must consist of any buildings or lands

appurtenant thereto.

2. The property must be owned by the assessee.

3. The property must not be occupied by the owner

for the purpose of any business or profession

carried on by the owner, the profits of whichare taxable.


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INCOME FROM

BUSINESS

OR

PROFESSION


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INCOMEFROM

CAPITAL

GAINS


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CHARGEABILITYCapital Asset: Sec. 2(14): Capital Asset means property of any kind (Fixed, Circulating, movable,

immovable, tangible or intangible) whether or not connected with business or profession.

Exclusions

Stock-in-trade

Personal effects of the assessee

Agricultural land in a rural area

6% Gold Bonds, 1977 or 7% Gold Bonds, 1980 or National Defence Bonds, 1980 issued by

the Central Government Special Bearer Bonds, 1991 issued by the Central Government.

Gold Deposit Bonds issued under Gold Deposit Scheme 1999

Short-term capital asset: Sec. 2(42A): means a capital asset held by an assessee for not morethan thirty six months immediately preceding the date of its transfer. However, in the following

cases, an asset, held for not more than twelve months, is treated as short-term capital asset

Quoted or unquoted equity or preference shares in a company

Quoted Securities

Quoted or unquoted Units of UTI

Quoted or unquoted Units of Mutual Funds specified u/s. 10(23D)

Quoted or unquoted zero coupon bonds

Long-term capital asset: Sec. 2(29A): means a capital asset which is not a short-term capital


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INCOME FORMSALARY


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ALLOWANCES

Section 17 of the income tax act includes:

Basic salary

Wages

Annuity Provident fund (PF)

House rent allowance (HRA)

Gratuity

Cess tax and incentives generated from the salary

Miscellaneous amount

Finance tax

Any encashment of leave salary

Transport allowance


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Exemption of tax in the salary:

This is a myth that every income is taxable that is received from an employer:

Any travelling facility provided by an employer to its employee such as train

or airplane passes is not come under the tax bracket.

Gratuity amount is also not subjected to the income tax.

Any payment received by the employee of central or state government fromthe encashment of his/her leave balance is entitled of exemption from tax.

As per the provident fund act 1925. Provident fund amount is also exempted

from the tax list.

Any sum received under life Insurance policy is exempted from the list as per

sub section (3) of section 80DDA. Income received by way of pension received by an individual or family for a

member who was employed with central government/state government is

also exempted from a tax list.

Armed force professional who won the gallantry award for their services

towards the country are exempted from the list of income tax. Employees ofcentral or state government who have won Param vir Chakra, Maha vir


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DEDUCTIONS CHARGED UNDER COMPUTATION OF TOTAL INCOME

Sec 80(c) :

The total limit under this section is Rs 1 lakh. Included under this heading aremany small savings schemes like NSC, PPF and other pension plans.Payment of life insurance premiums and investment in specified governmentinfrastructure bonds are also eligible for deduction under Section 80C.

Coming under this head are:

- Provident fund - Stamp Duty and

Registration Charges for a home

- Voluntary Provident fund - Post Office Time DepositAccount

- Public Provident Fund - Senior Citizen SavingsScheme (SCSS)

- Life Insurance Premiums - Bank Fixed Deposits- Equity Linked Savings Scheme (ELSS) - National SavingsCertificate (NSC)

- Infrastructure Bonds - Home Loan PrincipalRepayment

- Pension Funds Section 80CCC


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Sec 80(d): includes premiums paid for medical insurance. Thequalifying amounts under Section 80D is upto Rs. 15,000.

Sec 80(dd): If you are incurring expenditure for the treatment of yourhandicapped dependent, you could claim a deduction under section80DD upto Rs 50,000.

Sec 80(u): Income tax law gives a special deduction to the personswho suffer from some kind of disability. This comes under section 80Uof income tax act in which the persons who are suffering from somekind of or total disability has the special relief in income tax act.

Sec 80(e): If you have taken an education loan from any financialinstitution or an approved charitable institution, Section 80E provides a

tax deduction on the loan interest that you are paying.

Sec 80(ccc): Permitted Deduction: Section 80CCC allows to an individual, taxdeduction for amount paid during the financial year out of income chargeable to tax,towards specified Pension Plan. Maximum deduction allowed is Rs.100,000, theoverall limit provided under the Income-tax Act for payments/deposits specifiedunder Section 80C, 80CCC and 80CCD (contribution to pension scheme of Central

Government) in aggregate.


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FORMAT

PARTICULARS AMT AMT

1) Income from salary

2) Income from House Property

a) Let out property

b) self occupied property

3) Income from Business/Profession4) Income for Capital Gains

a) Long-term Capital Gain

b) Short-term Capital Gain

5) Income from other sources

Gross Total Income (1+2+3+4+5)

Less: Deduction under chapter 6 AI) U/S 80 C

ii) U/S 80 CCC

III) U/S 80 D

iv) U/S 80 DD

v) U/S 80 E

vi) U/S 80 UNet Taxable Income

Xx

Xx

Xx

Xx

Xx

Xx

Xx

Xx

Xx

Xx

Xx

Xx

Xx

Xx

xx

Xx

Xxxx


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PROBLEM 1

Dr. Ram Bharose is employed with Bhagwan Hospital as a full time Doctor. Following are the details of his income for theyear ended 31st March,2010.

1. Basic Salary Rs. 12,000/month

2. D.A @ 30% of Basic

3. H.R.A Rs.10,000[ Exempt u/s 10(13A) Rs. 4,500 ]

4. He is provided conveyance facility for journey from his residence to hospital and back costing the hospital Rs.10,000.

5. Entertainment allowance Rs. 500 per month

6. Arrears of salary Rs. 6,000

7. Professional Tax deducted by hospital Rs. 2,400.

8. Best Doctor Award given to him by Bhagwan Hospital Rs. 2,500.

9. He was selected the best surgeon by the state government and was awarded The Dhanvantari award instituted inPublic Interest Rs. 10,000.

10. He received honorarium for presenting papers in various seminars Rs. 3,000.

11. He was owning a surgical equipment which was given on hire to Dr. Laxman Prasad. Charges received by him wereRs. 30,000. The expenses on maintenance amounted to Rs. 2,500 and allowable depreciation Rs. 4,500.

12. He paid Rs. 16,000 by cash to LIC for pension fund.

13. He paid by cheque for medical insurance as follows :

1. For Self 12,670

2. For Wife 12,670

3. Dependent Children 12,670

4. Independent Parents 12,670

50,680

Compute his Net Taxable Income for the A.Y. 2010 11.


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SOLUTION 1

PARTICULARS AMT AMT AMT

A. INCOME FROM SALARYGross Salary From Bhagwan Hospital

Basic (12,000 * 12)

Dearness Allowance (1,44,000 * 30% )

House Rent Allowance (10,000 4,500 )

Entertainment Allowance ( 5000 * 12)Arrears

Best Doctor Award

Less: Deduction u/s 16 - Professional Tax u/s 16

Income from Salaries

B. INCOME FROM OTHER SOURCESBest Surgeon Award

Less: Exempt U/S 10(17A)

Honorarium of Seminars

Equipment Hire Charges

Less : Maintenance

Depreciation

Income From Other Sources

C. GROSS TOTAL INCOME

1,44,000

43,200

5,500

6,0006,000

2,500

10,000

(10,000)

30,000

(4500)

(2500)

2,07,200

2400

NIL

3,000

23,000

2,04,800

26,o00

2,30,800


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PARTICULARS AMT AMT AMT

D. DEDUCTIONS UNDER CHAPTER VIA

U/S 80CCC Contribution to pension funds

U/S 80D Mediclaim Insurance Premium

E. TOTAL INCOME

Working Notes:

1. Conveyance facility between home and office is an

exempt perquisite.

2. Award from employer is taxed as Profit in lieu of

Salary

3. Entertainment allowance is taxable for a Non-

government employee.

4. Medical Insurance Claim = Rs. 15,000(self + wife +

children) + Rs. 12,670(Parents) = Rs. 27,670.

16,000

27,670 (43,670)

1,87,13

0


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Varun Murpana 68Yash Nahata 70

Lakshay rohra 80

Aman takhtani 110

Ronak saluja - 115


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THANK YOU

Documents

COmputation of Total Income (1)