Assam University B. Com 3rd Sem Solved Question Paper 2021 CBCS Pattern
TDC (CBCS) Odd Semester Exam, 2020 (Held in 2021)
COMMERCE (3rd Semester)
Course No.: COMHCC-302T
(Assam University Silchar Income-tax Law and Practice Question Paper Solution 2021)
Full Marks: 50
Pass Marks: 20
Time: 3 hours
The figures in the margin indicate full marks for the questions.
SECTION – A
1. Answer any ten of the following questions: 2x10=20
(a) What is an Assessment Year?
Ans: An Assessment Year is the year in which an individual's or organization's income tax is assessed. It is the year following the Financial Year (FY), during which the income earned in the FY is assessed and tax liability for that year is determined.
(b) Who is an assessee?
Ans: An assessee is a person or organization who is liable to pay tax, and whose income and tax liability is assessed by the tax authorities.
(c) What does PAN stand for?
Ans: PAN stands for Permanent Account Number. It is a unique, 10-digit alphanumeric identification number issued by the Income Tax Department of India to individuals, organizations, and businesses.
(d) What is meant by gratuity?
Ans: Gratuity is a monetary benefit or payment given by an employer to an employee in recognition of the employee's service to the organization. Gratuity is usually paid on retirement or termination of employment, and is calculated based on the employee's salary and length of service.
(e) How is the contribution to RPF treated?
Ans: Contributions to the Recognized Provident Fund (RPF) are treated as deductions in computing total income, and are eligible for tax benefits under section 80C of the Income Tax Act.
(f) How is the valuation of rent-free unfurnished house done?
Ans: The valuation of a rent-free unfurnished house is done by considering the market rent of similar properties in the same location. The annual value of the house is then determined by multiplying the market rent by a prescribed percentage, as per the Income Tax Act.
(g) What is business?
Ans: Business refers to any activity that is undertaken with the intention of earning profits or income. It can be a commercial enterprise, a trade, a profession, or any other activity that involves the production or exchange of goods or services.
(h) What is depreciation?
Ans: Depreciation is the reduction in the value of an asset over time due to wear and tear, obsolescence, or other factors. It is a non-cash expense that is recorded in the financial statements of a business, and is used to reflect the decrease in the value of the asset due to its use or passage of time.
(i) What is capital gain?
Ans: Capital gain is the profit or gain realized from the sale of a capital asset, such as real estate, securities, or personal property. It is the difference between the sale price of the asset and its original cost.
(j) What do you mean by rounding of income?
Ans: Rounding of income refers to the practice of rounding off the income or loss declared in a tax return to the nearest multiple of 10. This is done to simplify the calculation of tax liability and to avoid the need to pay small amounts of tax.
(k) For what period can the capital losses be carried forward?
Ans: Capital losses can be carried forward for a period of 8 assessment years following the assessment year in which the loss was incurred. The carried forward loss can be set off against any capital gain in the subsequent years, to reduce the tax liability.
(l) Write one deduction to be made in computing total income.
Ans: One deduction to be made in computing total income is the standard deduction, which is a fixed amount that is allowed as a deduction from the gross total income, without requiring any supporting documentation. Standard deduction is available to salaried individuals and pensioners.
(m) What is meant by revised return?
Ans:A revised return is a tax return that is filed to correct any errors or omissions in the original return that was filed earlier. It is filed to correct any mistakes or to update any additional information that was not included in the original return.
(n) What is meant by belated return?
Ans: A belated return is a tax return that is filed after the due date for filing the return has passed. Belated returns can be filed within one year from the end of the relevant assessment year, or within a longer period if the tax authorities allow it.
(o) What is the exemption limit in case of an individual?
Ans:The exemption limit in case of an individual is the maximum amount of income that is not taxable. For the Financial Year 2022-23 (Assessment Year 2023-24), the exemption
Assam University Silchar Income-tax Law and Practice Question Paper Solution 2021
SECTION – B
Answer any five questions
2. Discuss the residential status of an individual. 6
Ans: The residential status of an individual is an important factor in determining his/her tax liability in India. The residential status of a person determines which tax laws apply to him/her and which income is taxable in India. There are three categories of residential status:
a.Resident and Ordinarily Resident (ROR): A person is considered an ROR if he/she has been resident in India for at least 2 out of the last 10 financial years preceding the relevant assessment year, and has stayed in India for a period of at least 730 days during the 7 years preceding the relevant assessment year. An ROR is taxed on his/her global income in India.
b.Resident but Not Ordinarily Resident (RNOR): A person is considered an RNOR if he/she has been resident in India for at least 2 out of the last 10 financial years preceding the relevant assessment year, but has not stayed in India for a period of at least 730 days during the 7 years preceding the relevant assessment year. An RNOR is taxed on his/her global income, except for income earned outside India and received in India.
d.Non-Resident (NR): A person is considered a NR if he/she is not a resident as per the above two categories. A NR is taxed only on income earned in India or received in India from a business controlled in India or a profession set up in India.
3. Discuss the scope of total income. 6
Ans:The scope of total income refers to the types of income that are included in the calculation of taxable income for an individual or organization. Total income includes all income earned or received by the taxpayer from all sources during the relevant financial year.
The sources of income that are included in the calculation of total income are:
Income from salary, including any allowances, perquisites, and profit in lieu of salary
Income from business or profession
Income from house property
Income from capital gains, such as profit from the sale of capital assets
Income from other sources, such as rent, dividends, and interest income.
Total income is calculated after making certain deductions, such as deductions for investments and expenses incurred in the course of earning the income. The total income is then taxed at the applicable tax rates, as per the income tax slab applicable to the taxpayer.
4. The following are the particulars of the income of Shri Govind for the previous year ending on 31st March, 2020:
(1) Salary @ Rs. 12,000 per month.
(2) Contribution to recognized provident fund Rs. 1,600 p.m.
(3) Employer’s contribution is the same as the employee contributes towards PF.
(4) Dearness allowance Rs. 600 p.m.
(5) Bonus Rs. 3,000.
(6) Contribution to Public Provident Fund Rs. 10,000.
(7) Premium of life policy Rs. 12,000.
(8) Deposited Rs. 4,800 in equity linked saving scheme.
Find out taxable income of Shri Govind for the AY, 2020-21. 6
Ans: Practical Solution will be updated soon as possible.
5. Compute the income from house property from the information given below: 6
Solution: Practical Solution will be updated Soon as possible.
6. Discuss the provisions relating to bonus to employees while computing income under the head Profits and Gains of Business or Profession. 6
Ans: Under the Income Tax Act, 1961, bonus to employees is generally taxable as a part of the profits and gains of a business or profession. However, there are certain provisions that relate to the taxation of bonus to employees while computing income under the head "Profits and Gains of Business or Profession". These provisions are as follows:
Bonus paid to employees is taxable in the year in which it is paid or credited to their accounts, whichever is earlier.
Bonus paid to employees is generally taxable as per the provisions of the Payment of Bonus Act, 1965. As per this Act, an employer is required to pay a minimum bonus of 8.33% of the salary or wages earned by an employee in a year, if the employer has declared profits in that year.
Bonus paid to employees in excess of the minimum bonus required to be paid under the Payment of Bonus Act, 1965 is taxable as per the provisions of the Income Tax Act, 1961.
An employer can claim a deduction for the amount of bonus paid to employees while computing its income under the head "Profits and Gains of Business or Profession".
If an employer fails to pay the minimum bonus required to be paid under the Payment of Bonus Act, 1965, it will not be allowed to claim a deduction for the unpaid bonus while computing its income under the head "Profits and Gains of Business or Profession".
An employer is not required to pay tax on the amount of bonus paid to its employees if the total amount of bonus paid to all employees in a year does not exceed Rs. 3,500.
7. Following is the Profit & Loss A/c of Shri Kesari Prasad for the previous year ending on 31st March, 2020:
Profit & Loss A/c
Compute the taxable income for the AY 2020-21. 6
Ans: Practical solution will be updated as soon as possible.
8. Under what circumstances can the income of other persons be included in the income of an assessee? 6
Ans: The income of other persons can be included in the income of an assessee under the following circumstances:
In case of a Hindu Undivided Family (HUF): The income of a HUF is taxed as a separate entity, and the income of each member of the HUF is included in the total income of the HUF.
In case of a partnership firm: The income of a partnership firm is taxed as the income of the partners, based on their share of profits. The share of profits of each partner is included in his/her total income.
In case of a trust or an association of persons: The income of a trust or an association of persons is taxed as the income of the beneficiaries or members, based on their share of income. The share of income of each beneficiary or member is included in his/her total income.
In case of a company: The income of a company is taxed as the income of the shareholders, based on their share of dividends. The dividends received by each shareholder are included in his/her total income.
In case of a minor child: The income of a minor child (below the age of 18 years) is taxed as the income of the parent or guardian, who is the natural or legal guardian of the child. The income of the minor child is included in the total income of the parent or guardian.
In case of a dependent relative: The income of a dependent relative is taxed as the income of the individual who is supporting the relative. The income of the dependent relative is included in the total income of the supporting individual.
Assam University Silchar Income-tax Law and Practice Question Paper Solution 2021
9. The following are the particulars of income of Shri Digvijay Sen during the year ending 31st March, 2020:
(1) Salary Rs. 50,000 p.m. from which 10% is deducted for statutory provident fund.
(2) Warden ship allowance Rs. 12,000.
(3) Income from house property Rs. 12,000.
(4) He received Rs. 5,000 for writing articles in a journal.
(5) Examiner ship remuneration Rs. 3,500.
(6) Bank interest on savings account Rs. 2,000.
Compute taxable liability of Shri Sen for the AY, 2020-21. 6
10. Discuss about best judgement assessment. 6
Ans: Best judgement assessment is a procedure followed by the tax authorities in cases where an assessee has not filed a tax return or has not disclosed the required information in the tax return. Best judgement assessment is also known as "assessment on estimate basis."
Under best judgement assessment, the tax authorities make an assessment of the assessee's income and tax liability based on the best available information and estimates. The tax authorities may consider various sources of information, such as the assessee's past tax returns, records of financial transactions, and information from third parties, to arrive at an estimated income and tax liability for the assessee.
Best judgement assessment is usually done when an assessee has deliberately not disclosed the required information or has not filed a tax return despite being required to do so. It is also done in cases where the assessee is unable to provide the required information or documents to support the income and deductions claimed in the tax return.
The tax authorities have the power to make a best judgement assessment under certain circumstances, as provided in the Income Tax Act. However, the assessee has the right to appeal against the assessment and provide any additional information or evidence to support his/her income and tax liability.
11. When and how is tax to be deducted at source from salary? 6
Ans: Tax Deducted at Source (TDS) is a system of tax collection in India, under which the tax is deducted at the time the payment is made to the recipient. As per the provisions of the Income Tax Act, 1961, tax is required to be deducted at source from salary in the following cases:
1.When an employee is employed by the government or a local authority, tax is required to be deducted at source from the salary paid to the employee.
2.When an employee is employed by a private company or a non-government organization, tax is required to be deducted at source if the salary paid to the employee exceeds the basic exemption limit prescribed by the Income Tax Act, 1961.
3.Tax is required to be deducted at source from salary paid to a resident employee if the salary is paid by a non-resident employer.
4.Tax is required to be deducted at source from salary paid to a non-resident employee if the salary is paid by a resident employer.
The tax is required to be deducted at the time the salary is paid or credited to the employee's account, whichever is earlier. The tax is required to be deducted at the applicable rate specified in the Income Tax Act, 1961, or at the rate specified in the tax treaty between India and the country of which the employee is a resident, whichever is more beneficial to the employee.
The employer is required to furnish a certificate of tax deducted at source to the employee, and is also required to file a return of tax deducted at source with the Income Tax Department. The employee can claim credit for the tax deducted at source while computing his or her tax liability for the relevant assessment year.
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