Mr. Kunal (age 27 years) is an employee in a private company posted in Delhi. He was appointed on 01.02.2023 in the scale of 60,000 - 1,000 -…

CA Intermediate · Taxation · RTP · May 2025
Mr. Kunal (age 27 years) is an employee in a private company posted in Delhi. He was appointed on 01.02.2023 in the scale of 60,000 - 1,000 - 70,000. He furnishes you the following information for the previous year 2024-25: (i) Dearness allowance @25% of basic salary (60% of DA forms part of retirement benefits) (ii) Bonus equal to one month salary. Paid in November 2024 on basic salary applicable for that month. (iii) Leave encashment for P.Y. 2024-25 of 10,000. (iv) He also received a motor car on 01.12.2024 (cubic capacity of engine exceeds 1.60 litres) along with chauffeur for both official and personal purpose. The motor car is owned by his employer and all expenses are met by the employer. (v) His employer granted him a loan of 2,00,000 on 1st June, 2024 which is repayable in equal quarterly installments over 2 years starting from 1st October, 2024. The State Bank of India (SBI) lending rate for such loans is 9.5% per annum as on 01.04.2024, while the employer recovers interest @5.5% per annum from the employee. (vi) His employer gave him a rent-free accommodation (fully furnished) in Delhi from 01.04.2023. This house is owned by the employer. The perquisite value of such furnished rent-free accommodation during the previous year 2023-24 was valued at 92,000. Further, the accommodation is continued to be provided by the employer to the employee in P.Y. 2024-25 also. (vii) The furniture and appliances provided with the house were bought by the employer at an aggregate cost of 1,50,000 on 01.01.2023. Electricity and water bills of 5,000 p.m. for the said house were paid by the employer. (viii) His colleagues gifted him a mobile phone worth - 45,000 from their own contribution on account of his marriage. You are required to compute the income chargeable under the head Salaries in the hands of Mr. Kunal for the Assessment Year 2025-26 assuming that he wants to pay tax under default tax regime under section 115BAC.

Suggested Answer and Working Notes:

Computation of income chargeable under the head "Salaries" of Mr. Kunal for A.Y.2025-26 under default tax regime Particulars Particulars ₹ Basic Pay [₹ 61,000 x 10 +62,000 x 2] 7,34,000 Dearness Allowance [7,34,000 x 25%] 1,83,500 Bonus 61,000 Leave encashment for P.Y. 2024-25 10,000 Value of perquisite Perquisite of Motor Car [₹ 3,300 x 4] 13,200 As per the provisions of Rule 3(2), in case a motor car (engine cubic capacity exceeding 1.60 litres) owned by the employer is provided to employee with chauffeur for both official and personal use, the value of perquisite shall be - 3,300 (₹ 2,400 +900). The car was provided to employee from 01.12.2024, therefore the perquisite value has been calculated for 4 months. Perquisite of interest on loan (Working Note Below) 5,917 Value of Rent-free accommodation Value of Rent-free accommodation {10% of 9,15,100 i.e., [₹ 7,34,000, basic salary +1,10,100 (₹ 1,83,500 × 60%, DA forming part of retirement benefit) +10,000, leave encashment + 61,000, bonus]} 91,510 Add: Value of furniture [₹ 1,50,000 × 10% p.a.] 15,000 1,06,510 As per Rule 3, value of perquisite in case of accommodation continued to be provided to an employee for more than one previous year, shall not exceed the amount calculated for first previous year, as multiplied by the amount which is a ratio of CII for the previous year for which the value is calculated and CII for the previous year in which accommodation was initially provided to the employee. Accordingly, value of perquisite for P.Y. 2024-25 to be restricted to = 92,000 x 363/348 95,966 95,966 Facility of use of electricity and water [Electricity and water bills paid by the employer would be taxable as perquisite] [₹ 5,000 x 12] 60,000 Mobile phone received as gift from colleagues (Not taxable under the head "Salaries") Nil Gross Salary 11,63,583 Less: Standard deduction under section 16 [Actual salary or - 75,000, whichever is less] 75,000 Net Salary 10,88,583 Working Note: Perquisite of Interest on Loan The value of the benefit to the assessee resulting from the concessional loan made to the employee during the relevant previous year by the employer shall be determined as the sum equal to the interest computed at the rate charged per annum by the State Bank of India (SBI) as on the 1st day of the relevant previous year in respect of loans for the same purpose advanced by it. This rate should be applied on the maximum outstanding monthly balance and the resulting amount should be reduced by the interest, if any, actually paid by him. "Maximum outstanding monthly balance" means the aggregate outstanding balance for loan as on the last day of each month. The perquisite value for computation is 9.5% - 5.5% = 4% p.a. Month Maximum outstanding balance as on last date of month (₹) Perquisite value at 4% for the month (₹) June, 2024 2,00,000 667 July, 2024 2,00,000 667 August, 2024 2,00,000 667 September, 2024 2,00,000 667 October, 2024 1,75,000 583 November, 2024 1,75000 583 December, 2024 1,75,000 583 January, 2025 1,50,000 500 February, 2025 1,50,000 500 March, 2025 1,50,000 500 Taxable Value of perquisite 5,917

Topics: Paper 3A: Income Tax Laws, Paper 3B: Goods and Services Tax

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