(a) The particulars given below are of Mr. Radhey's income (age 47 years) posted in a private company in Delhi, for the previous year 2023-24: (i)…

CA Intermediate · Taxation · PYQS · September 2024
(a) The particulars given below are of Mr. Radhey's income (age 47 years) posted in a private company in Delhi, for the previous year 2023-24: (i) Basic Pay - 35,000 per month till January 31, 2024,40,000 p.m. from February 2024. (ii) Dearness allowance 30% of basic salary (54% of DA forms part of retirement benefits) (iii) Leave encashment for P.Y. 2023-2410,000. (iv) He received salary for the month of April 2024 in advance on 31 st March 2024. Also, he received an arrear salary for the month of March 2023 on the same day. (v) His employer gave him a rent-free accommodation (fully furnished) in Delhi from 01.04.2019. This house is owned by his employer. During the previous year 2019-20, the perquisite value of such rent-free furnished accommodation was valued at 39,000. The employer also provided him with the facility of a gardener to maintain this house. The salary of gardener paid by the employer was - 1,000 p.m. The furniture and appliances provided with the house were bought by the employer at an aggregate cost of 1,50,000 on 01.01.2020. Electricity and water bills of 4,000 p.m. for the said house were paid by the employer. Cost Inflation Index F.Y. 2019-20-289, F.Y. 2020-21-301, F.Y. 2023-24-348. (vi) The employer also spent - 50,000 on a refresher course for upgrading Mr. Radhey's skills. (vii) During the previous year his wife had been admitted in a notified hospital for treatment of her kidney disease, the hospital bills amounting to 3,50,000 were paid by the employer. You are required to compute the taxable salary income of Mr. Radhey for the Assessment Year 2024-25 assuming that he has opted out of the default tax regime under section 115BAC.

Suggested Answer and Working Notes:

Computation of taxable salary of Mr. Radhey for A.Y.2024-25 Particulars ₹ Basic Pay [₹ 35,000 x 10 +40,000 x 2] 4,30,000 Dearness Allowance [₹ 4,30,000 x 30%] 1,29,000 Leave encashment for P.Y. 2023-24 10,000 Advance salary for April 2024 received on 31.3.2024 40,000 [Note - Alternatively, it is possible to assume that the advance salary is inclusive of DA. In such a case, advance salary for April 2024 would be - 52,000.] Arrear salary for March 2023, assumed it is taxed on due basis during the P.Y. 2022-23. -- Value of Rent-free accommodation From April 2023 to August 2023 Value of Rent-free accommodation {15% of 2,07,515 i.e., [₹ 1,75,000 (35,000 x 5, basic salary) +28,350 (1,75,000 x 30% x 54%, DA) + 4,167 (10,000/12 x 5, leave encashment]} 31,128 Add: Value of furniture [₹ 1,50,000 × 10% p.a. for 5 months] 6,250 37,378 From September 2023 to March 2024 Value of Rent-free accommodation {10% of 3,02,143 i.e., [₹ 2,55,000 (35,000 x 5 + 40,000 x 2, basic salary) +41,310 (2,55,000 x 30% x 54%, DA) + 5,833 (10,000/12 x 7, leave encashment]} 30,214 Add: Value of furniture [₹ 1,50,000 × 10% p.a. for 7 months] 8,750 38,964 76,342 [Note - In the absence of the information of the month in which leave encashment is received, leave encashment is proportionated in 5:7 months period. Alternatively, it is possible to assume that the amount of 10,000 is received either during the April to August month or September to March 2024. In such case, perquisite value of rent-free accommodation would undergo a change. Facility of gardener [Salary of gardener paid by the employer would be taxable as perquisite] [₹ 1,000 x 12] 12,000 Facility of use of electricity [Electricity and water bills paid by the employer would be taxable as perquisite] [₹ 4,000 x 12] 48,000 Refresher course for upgrading skills [Tax free perquisite] Nil Value of medical treatment [Exempt, since medical treatment for wife is in notified hospital] Nil Gross Salary 7,45,342 Less: Deduction under section 16 - Standard deduction 50,000 Taxable Salary 6,95,342

Topics: Paper 3A: Income Tax Laws

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