Professional Documents
Culture Documents
Q1. List out items that are included in agriculture income under Sec 2(1A).
Explain the meaning of tax evasion and tax avoidance.
Items that are included in agriculture income under Sec 2(1a) are
as follows:
1) (a) Any rent or revenue derived from land situated in India. When
one person grants to another a right to use his land situated in
India for agricultural purposes; the former receives from the
latter rent or revenue in consideration of such user. Such rent or
revenue is treated as agricultural income.
3) Income from farm house. The income from a farm house is treated
as agricultural income if the following conditions are satisfied.
(a) It is situated on or in the immediate vicinity of the agricultural
land
(b) The building is, by reason of his connection with the land,
used as dwelling house or a store-house or an out-house by
the cultivator or receiver of rent-in-kind.
Tax Evasion
In the tax evasion, facts are deliberately misrepresented and tax
liability is understated by employing the following means:
a) concealment of income
b) inflation of expenses
c) falsification of accounts
d) violation of rules
These devices are unethical. Evasion, once proved, not only
attracts heavy penalties but may also lead to prosecution.
Tax avoidance
Tax avoidance can be defined as the art of dodging tax without
breaking the law. Objective of tax avoidance is minimizing the
incidence of tax by adjusting the affairs in such a manner that
although it is with in the four corners of the taxation laws but the
advantage is taken by finding out loopholes in the laws. But where
the main purpose is to defer, reduce or completely avoid the tax
payable under the law.
Q2. (A.) After serving for 28 years 6 months and 4 days AKRAM retired
from Y Ltd. on 31st August. He received Rs. 3,25,000 as gratuity. His
last month basic was Rs. 10,000 and DA Rs 3,000.He is covered
under the Payment of Gratuity Act. Compute the taxable gratuity.
Ans:
(A.) Akram who retired from Y Ltd is covered under Payment of
Gratuity Act 1972
Q.4 Mr. BALU owns four houses. The particulars regarding the
houses are as follows::
Determine the gross annual value of each of the four houses for the
AY 2009-2010.
Ans:
Determination of Gross Annual Value.
House or part of a house occupied by the owner for full previous year
for the purposes of his own residence Sec. 23(2)(a): Where the
property consists of one house in the occupation of the owner for his
own residence, the annual value of such house shall be taken to be
NIL
Deduction from Annual Value: Interest on borrowed capital.
Sec.24(b)
Interest on borrowed capital (of the current year and pre- construction
period) is deductible. However, it is subject to a maximum ceiling given
below:
a) Where such property has been acquired, constructed, repaired,
renewed or reconstructed with borrowed capital, the maximum limit for
deduction of interest shall be Rs. 30,000.
b) Where such house property is constructed/acquired with capital
borrowed after 31.3.1999, the deduction on account of interest shall be
allowed up to Rs. 1,50,000. The acquisition or construction should be
completed within three years from the end of the financial year in
which capital was borrowed.
Tax Planning
Those who are staying in rented premises can think of availing loan
from banks or approved institutions. They have the pleasure of staying
in their own house. Not bothering to pay monthly rent, they can reduce
their taxable income substantially. Even their disposable income may
not decrease, since they need not pay monthly rent. Even the effective
House self-occupied for part of the previous year and let-out for part of
the previous year: Sec. 23(3): The annual value of the house shall
NOT be nil. Such a house will be treated as let-out house annual value
will be determined u/s 23(1)
More than one house in the occupation of the owner [Sec. 23(4)
Where the owner of the houses occupies more than one house for his
residence for full previous year, except one (at his option), all other
houses are deemed as let out. The income(s) of deemed let out
house(s) shall be computed in the usual manner.
The following points will be considered:
The question of house remaining vacant or unrealized rent will
not arise.
The municipal tax paid can be claimed.
The expected rent will be the gross annual value.
Full amount of interest on loan for acquisition, construction etc.
will be allowed.
Tax Planning
If a Govt. employee is due for retirement shortly, it is better for him not
to encash his salary while he is in service. This is because he can
avoid paying tax on leave encashment which he receives at the time of
retirement. Even an employee in private service gets exemption for a
major part of the amount received as leave encashment. In this
connection employee should also consider the loss of interest on the
amount which is not taking to save tax.