Free BCOC-136 Solved Assignment | Valid from 1st July 2024 to 30th June 2025 | INCOME TAX LAW & PRACTICE | IGNOU

BCOC-136 Solved Assignment 2025

INCOME TAX LAW AND PRACTICE

Valid from 1st July 2024 to 30th June 2025

Section-A

(Attempt all the questions. Each question carries 1 0 1 0 10\mathbf{1 0}10 marks.)
  1. Explain the procedure for E-Filing of Return.
  2. Explain the provisions relating to House Rent Allowance u/s 10 (13A)
  3. Explain the certain incomes for which the tax is paid in the same year
  4. Explain the provisions relating to exemption of incomes of Charitable and Religious Trust and a Political Party
  5. Compute the total Income of Mr. Manas from the following particulars of his income for A.Y. 2023-24.
Particular Rs.
I) Salary 180,000
II) Dividend received from Indian Company 10,000
III) Share of profits from HUF 12,000
IV) Dividend from a Co-operative Society 6,000
V) Rental Income from home property 10,000
Particular Rs. I) Salary 180,000 II) Dividend received from Indian Company 10,000 III) Share of profits from HUF 12,000 IV) Dividend from a Co-operative Society 6,000 V) Rental Income from home property 10,000| Particular | | Rs. | | :— | :— | :— | | I) | Salary | 180,000 | | II) | Dividend received from Indian Company | 10,000 | | III) | Share of profits from HUF | 12,000 | | IV) | Dividend from a Co-operative Society | 6,000 | | V) | Rental Income from home property | 10,000 |

Section-B

(Attempt all the questions. Each question carries 6 marks.)
  1. Explain the Provisions of commutation of Pension u / s 10 u / s 10 u//s10\mathrm{u} / \mathrm{s} 10u/s10 (10A)
  2. What is ITR-1 (SAHAJ)?
  3. Write the Provisions relating to Clubbing of minor’s income
  4. Explain the Provisions relating to Gratuity u / s 10 ( 10 ) u / s 10 ( 10 ) u//s10(10)\mathrm{u} / \mathrm{s} 10(10)u/s10(10) in case of employees is covered by Payment of Gratuity Act, 1972.
  5. After 25 years stay in India, Mr. Ram went to U.S.A. on April 15, 2012 and came back to India on March 12, 2023. Determine his residential status for the assessment year 2023-24.

Section-C

(Attempt all the questions. Each question carries 5 5 5\mathbf{5}5 marks.)
11. Write short note on following:
a) Partial Integration of Agricultural and Non-Agricultural Income.
b) Deduction u / s 80 D u / s 80 D u//s80D\mathrm{u} / \mathrm{s} 80 \mathrm{D}u/s80D.
c) "Defective return is no return"
d) Standard Deduction u / s 16 u / s 16 u//s16\mathrm{u} / \mathrm{s} 16u/s16 (i)

Expert Answer:

Section-A

(Attempt all the questions. Each question carries 10 marks.)

Question:-1

Explain the procedure for E-Filing of Return.

Answer:

1. Introduction to E-Filing of Return
E-filing of returns refers to the process of submitting income tax returns electronically via the official income tax department portal or authorized intermediaries. This method has gained popularity due to its efficiency, convenience, and ease of use. In contrast to the traditional paper filing system, e-filing offers various advantages, including faster processing, instant acknowledgment, and reduced errors. Understanding the procedure for e-filing returns can help individuals and businesses ensure timely tax compliance while minimizing the risk of mistakes.
2. Benefits of E-Filing
The e-filing of tax returns provides several benefits, making it an attractive option for taxpayers:
  • Convenience: Taxpayers can file their returns from the comfort of their homes or offices without visiting a tax office.
  • Faster Processing: The income tax department processes electronically filed returns faster than paper returns, leading to quicker refunds.
  • Reduced Errors: E-filing systems automatically calculate figures and flag potential mistakes, reducing the chances of errors.
  • Security: E-filing systems are encrypted, ensuring that sensitive financial information remains secure.
  • Immediate Acknowledgment: Taxpayers receive an instant acknowledgment of submission, which serves as proof that their return has been successfully filed.
3. Prerequisites for E-Filing of Return
Before beginning the e-filing process, there are a few prerequisites to keep in mind:
  • PAN Card: A Permanent Account Number (PAN) is mandatory for filing income tax returns.
  • Aadhaar Number: Link your Aadhaar number with your PAN for identity verification.
  • Form 16/16A: This document provides details of salary, TDS, and other income for salaried individuals.
  • Bank Account Details: Ensure that bank details are accurate to facilitate refunds, if applicable.
  • Digital Signature (if required): For certain categories of taxpayers, such as companies or those with large returns, digital signatures are mandatory.
  • Previous Year’s Return: Have access to last year’s filed return for reference or verification.
  • Income Sources: Gather all relevant details of income, such as salary, house property income, capital gains, or income from business/profession.
4. Steps to E-File Income Tax Return
The e-filing process is relatively simple and can be broken down into several key steps:
Step 1: Register on the Income Tax Portal
To start e-filing, visit the official Income Tax Department’s website and register as a user. New users will need to provide their PAN, name, and date of birth to create an account. If you have already registered, log in using your credentials.
Step 2: Select the Appropriate ITR Form
Different Income Tax Return (ITR) forms are available based on the type of income you earn. For instance, ITR-1 is for salaried individuals, while ITR-4 is for individuals with business income. Select the form that corresponds to your income source.
Step 3: Download the ITR Utility
Once you have determined the correct ITR form, download the corresponding ITR utility from the income tax website. The utility comes in the form of an Excel or Java tool that helps taxpayers input their financial data for the relevant assessment year.
Step 4: Fill in the Required Information
Open the ITR utility and begin filling in the details of your income, deductions, taxes paid, and any other relevant information. The utility will automatically calculate your total tax liability or refund based on the inputs provided.
Step 5: Validate the Data
Once all required details have been entered, use the "Validate" button within the utility to ensure there are no mistakes. The system will flag any errors or inconsistencies that need correction before proceeding.
Step 6: Generate XML File
After successfully validating the data, generate an XML file by clicking on the "Generate XML" button. This XML file contains all the information from the ITR form and is ready for upload.
Step 7: Upload the XML File
Log back into the income tax e-filing portal, navigate to the "e-File" section, and select the "Upload Return" option. Choose the appropriate assessment year, attach the XML file, and submit.
Step 8: Verification of Return
The return must be verified after filing. There are several ways to verify the return:
  • E-Verification (EVC): The easiest and fastest method, wherein you can verify the return using a one-time password (OTP) received on your Aadhaar-linked mobile number.
  • Digital Signature: This option is mandatory for businesses or individuals with large transactions.
  • Physical Submission (ITR-V): If e-verification is not possible, the taxpayer can physically sign the ITR-V acknowledgment form and send it to the Centralized Processing Center (CPC) in Bengaluru via regular post.
5. Methods of Verifying ITR
Verification is a crucial step in completing the e-filing process. There are several methods available for verifying your return:
  • Aadhaar OTP: For individuals who have linked their Aadhaar to their PAN, verification can be done by receiving an OTP on the Aadhaar-registered mobile number.
  • Net Banking: Some banks offer the option to e-verify the return through their net banking portals.
  • Bank Account Number: You can also verify your return using your pre-validated bank account details.
  • Pre-Validated Demat Account: If you hold a Demat account, this can also be used for verification.
6. Post-E-Filing Procedures
After filing and verifying your return, the following steps may occur:
  • Processing of Return: The Income Tax Department will process your return. If everything is in order, your refund (if applicable) will be credited to your bank account.
  • Refund Status: You can check the status of your refund on the income tax portal using the acknowledgment number.
  • Intimation under Section 143(1): You will receive an intimation from the income tax department under Section 143(1) of the Income Tax Act. This intimation details any discrepancies between your filed return and the department’s records, if any.
7. Rectification and Revisions
In case there are errors or omissions in the filed return, taxpayers can rectify or revise their return.
  • Rectification: If you receive an intimation under Section 143(1) and notice any discrepancies, you can file for rectification.
  • Revised Return: If you discover any mistakes in the original return after submission, you can file a revised return before the end of the assessment year.
8. Common Mistakes to Avoid in E-Filing
Some common errors to avoid during e-filing include:
  • Incorrect Form Selection: Filing the wrong ITR form can lead to rejections or discrepancies.
  • Inaccurate Bank Details: Incorrect bank details may delay refunds.
  • Mismatching PAN and Aadhaar: Ensure that your PAN and Aadhaar details match exactly to avoid rejections.
  • Forgetting to Verify the Return: Failure to verify the return within the stipulated time renders the e-filing incomplete.
Conclusion
E-filing of tax returns has revolutionized the tax-paying process, making it more convenient and efficient. By understanding the procedure and following the steps carefully, taxpayers can ensure they file their returns correctly and on time. Regularly checking for updates from the tax department and ensuring compliance with current regulations will make the process seamless and hassle-free.


Question:-2

Explain the provisions relating to House Rent Allowance u/s 10 (13A).

Answer:

1. Introduction to House Rent Allowance (HRA)
House Rent Allowance (HRA) is an essential component of an employee’s salary aimed at helping employees meet their rental expenses. Under Section 10(13A) of the Income Tax Act, 1961, salaried individuals can claim an exemption on HRA, subject to specific conditions. This exemption helps reduce the taxable income, thereby providing tax relief to employees living in rented accommodation. Understanding the provisions under Section 10(13A) is crucial for both salaried employees and employers to optimize tax benefits.
2. Purpose of HRA
The primary objective of HRA is to provide financial assistance to employees in covering their house rent expenses. Employers pay HRA as part of the employee’s salary package, and employees living in rented houses can claim an exemption on HRA under Section 10(13A). This provision is designed to lessen the financial burden on employees residing in rental accommodations, as living costs, especially in urban areas, can be significant.
The exemption allows a portion of the HRA to be non-taxable, reducing the overall tax liability. However, the exemption is not available to individuals who do not live in rented accommodation or those who own their houses.
3. Eligibility for HRA Exemption
To qualify for HRA exemption under Section 10(13A), specific eligibility criteria must be met:
  • Salaried Employee: Only salaried employees who receive HRA as part of their salary package can claim the exemption. Self-employed individuals are not eligible for HRA benefits.
  • Living in Rented Accommodation: The employee must live in a rented house. HRA exemption is not applicable if the employee resides in their own house.
  • Actual Rent Payment: The employee must be paying rent for the accommodation in which they live. No exemption can be claimed if rent is not paid.
  • Excess of Rent over 10% of Salary: The exemption is calculated based on the excess of rent paid over 10% of the employee’s salary.
4. Calculation of HRA Exemption
The calculation of HRA exemption is based on three different parameters, and the least of the following amounts is exempt from tax:
  • Actual HRA Received: The total HRA amount provided by the employer to the employee during the financial year.
  • 50% of Salary (for Metro Cities) or 40% of Salary (for Non-Metro Cities): This component depends on the employee’s residential location. If the employee resides in a metro city (Delhi, Mumbai, Kolkata, or Chennai), the exemption is calculated as 50% of the basic salary. For non-metro cities, it is 40% of the basic salary.
  • Rent Paid minus 10% of Salary: This amount is derived by subtracting 10% of the employee’s basic salary from the actual rent paid. Only the excess amount is considered for HRA exemption.
These components ensure that the tax benefit is provided only to the extent of actual rental expenses incurred by the employee. The least of these three parameters will be considered as the HRA exemption.
5. Components of Salary for HRA Calculation
The salary for calculating HRA exemption includes several components:
  • Basic Salary: This is the primary component of an employee’s earnings and forms the basis for HRA calculations.
  • Dearness Allowance (DA): If DA is a part of the employee’s salary structure and is considered while calculating retirement benefits, it must be included in the salary for HRA purposes.
  • Commission on Turnover: If an employee receives commission based on the turnover achieved, this commission is also included in the salary for calculating HRA.
Bonuses, incentives, and other allowances are not considered part of the salary for HRA calculation purposes.
6. HRA Exemption for Metro vs. Non-Metro Cities
HRA exemption varies depending on whether an employee resides in a metro or non-metro city. For those living in metro cities like Delhi, Mumbai, Kolkata, and Chennai, the exemption is calculated as 50% of their salary. In non-metro cities, the exemption is calculated at 40% of the salary.
This distinction reflects the higher cost of living in metropolitan areas compared to non-metro regions, where rents are generally lower. The provision ensures that employees living in cities with higher rental rates receive appropriate tax relief.
7. Documents Required for Claiming HRA Exemption
Employees must provide certain documents to their employer or the income tax department to claim HRA exemption:
  • Rent Receipts: Rent receipts from the landlord are essential documents to prove that rent has been paid. These receipts should include the name of the landlord, rent amount, and period of payment.
  • Rental Agreement: A rental agreement between the landlord and the tenant helps validate the rent payments and ensures compliance.
  • Landlord’s PAN (for Rent Above Rs. 1 Lakh): If the total annual rent exceeds Rs. 1 lakh, the employee must provide the landlord’s PAN. If the landlord does not have a PAN, a declaration must be submitted.
These documents are crucial to ensure that the HRA claim is valid and that there is no discrepancy between the rent paid and the exemption claimed.
8. Special Cases in HRA Exemption
Certain scenarios require special attention while claiming HRA exemption:
  • Living with Parents: Employees living in a house owned by their parents can still claim HRA exemption, provided they pay rent to their parents. However, the rent received by the parents will be treated as income and must be declared in their tax returns.
  • Rent Paid to Spouse: An employee cannot claim HRA exemption if they pay rent to their spouse, as such an arrangement is not recognized as a valid rental transaction by tax authorities.
  • Part of the Year: If an employee lives in rented accommodation for only part of the financial year, HRA exemption can be claimed for that specific period only. The exemption must be calculated proportionally based on the number of months the employee lived in the rented house.
9. HRA Exemption and Deduction Under Section 80GG
Individuals who do not receive HRA as part of their salary but still pay rent can claim a deduction under Section 80GG of the Income Tax Act. However, this deduction is subject to certain conditions:
  • The individual must be self-employed or salaried but not receive HRA.
  • The individual, spouse, or minor child should not own any residential property in the location where they reside.
  • The least of the following is deductible:
    • Rs. 5,000 per month.
    • 25% of the total income.
    • Rent paid minus 10% of total income.
Section 80GG serves as an alternative for individuals who pay rent but do not qualify for HRA exemption under Section 10(13A).
10. Impact of Budgetary Changes on HRA Exemption
The government periodically introduces amendments to the Income Tax Act that may affect HRA provisions. In recent budgets, the emphasis has been on improving tax compliance and transparency, leading to changes in documentation requirements, such as the mandatory PAN submission by landlords for rent exceeding Rs. 1 lakh. Employees and employers must stay updated with such changes to ensure proper compliance with tax regulations and optimize HRA exemptions.
Conclusion
House Rent Allowance (HRA) is a critical component of an employee’s salary and provides significant tax relief under Section 10(13A) of the Income Tax Act. By understanding the provisions, eligibility criteria, and calculation methods, employees can ensure they claim the maximum exemption available. Accurate documentation and compliance with specific rules related to rent payment are essential to successfully claim HRA exemption, while also benefiting from tax savings.


Question:-3

Explain certain incomes for which the tax is paid in the same year.

Answer:

1. Introduction to Incomes Taxed in the Same Year
In the Indian tax system, income earned during a financial year (April to March) is usually taxed in the following assessment year. However, there are certain incomes for which tax is paid in the same year they are earned. These exceptions exist due to specific provisions in the Income Tax Act, 1961, which stipulate immediate taxation of certain types of income. This method ensures that taxes are collected promptly on income that may otherwise evade taxation due to the nature of its accrual. In this guide, we will explore the various categories of income that are taxed in the same year they are earned.
2. Casual Incomes
Casual incomes refer to windfall earnings that are not part of the regular income. These include lottery winnings, gambling, horse racing, card games, and other forms of betting. Since these incomes are unpredictable and often result from luck rather than effort, they are taxed immediately. The following points highlight key aspects of taxation on casual incomes:
  • Tax Rate: Casual incomes are subject to a flat tax rate of 30% without any basic exemption limit or deductions under Section 80C to 80U.
  • No Deductions Allowed: Unlike regular income, taxpayers cannot claim deductions for expenses or losses related to earning casual income. For instance, expenses incurred while purchasing lottery tickets cannot be deducted from the winnings.
  • Surcharge and Cess: In addition to the 30% tax rate, applicable surcharge and health & education cess are also levied, increasing the overall tax liability.
By taxing these incomes immediately, the government ensures prompt collection and prevents tax evasion in these high-risk, high-reward situations.
3. Advance Salary
When an employee receives an advance salary or arrears for future months, the amount is taxed in the same financial year as it is received. The reason behind this is that once the income has been credited to the employee’s account, it is considered earned, regardless of the service period it is meant to cover.
The key points regarding the taxation of advance salary include:
  • Clubbed with Current Year Income: The advance salary is added to the income of the year in which it is received, increasing the taxable income for that year.
  • Relief under Section 89(1): In cases where receiving a lump sum advance salary pushes the employee into a higher tax bracket, relief under Section 89(1) can be claimed. This section allows employees to distribute the income over the years to which it pertains, thus reducing tax liability by avoiding a sudden increase in the tax slab.
4. Advance or Arrear Pension
Similar to advance salary, advance or arrears of pension received by retired employees are taxed in the year of receipt. Pensioners may receive a lump sum amount due to delays in the release of pension payments or changes in pension policy, but this income is taxed in the year it is paid.
The taxation treatment for pension arrears includes the following considerations:
  • Taxation at the Time of Receipt: Pension arrears are taxed in the year in which they are received, irrespective of when they were due.
  • Relief under Section 89(1): Pensioners can claim relief under Section 89(1) to mitigate the impact of increased tax liability due to receiving arrears in a lump sum.
5. Income from Assets Seized in Search Operations
In cases where the Income Tax Department conducts a search operation (commonly referred to as a "raid") and discovers undisclosed assets or income, the value of those assets or income is taxed in the same year. The logic behind this immediate taxation is to prevent any further evasion of taxes. Some key points include:
  • Deemed Income: The undisclosed income or assets are treated as deemed income under Section 69A of the Income Tax Act.
  • Immediate Taxation: The individual is required to declare the undisclosed income, and it is taxed in the year the search operation takes place.
  • Higher Tax Rates: In addition to the regular income tax, penalties, interest, and other penalties may be imposed on the undisclosed income.
This provision ensures that individuals or entities cannot continue evading taxes on income or assets that have been deliberately hidden.
6. Tax on Income from Gifts
Income in the form of gifts can also be subject to immediate taxation in certain cases. According to Section 56(2)(x) of the Income Tax Act, gifts received by an individual or Hindu Undivided Family (HUF) in excess of Rs. 50,000 are taxed in the year they are received, unless they fall under exempt categories.
Key points regarding the taxation of gifts are:
  • Taxable Gifts: Gifts in the form of cash, property, or other valuables received from non-relatives are taxable if the value exceeds Rs. 50,000 in a financial year.
  • Exemptions: Gifts received from close relatives (as defined under the Act), on occasions such as marriage, through inheritance, or from charitable trusts are exempt from taxation.
  • Fair Market Value: For gifts of property, the fair market value is used to determine the taxable value.
By taxing gifts in the year they are received, the government ensures that individuals do not use gifts as a means to avoid declaring taxable income.
7. Tax on Profit in Speculative Transactions
Speculative transactions, especially in the stock market, involve the purchase and sale of securities without taking actual delivery. The profits earned from these transactions are taxed immediately in the same financial year due to their speculative nature. These transactions are considered risk-based and are not carried forward to the next year for taxation.
Key aspects of taxation on speculative transactions include:
  • Immediate Taxation: Profits from speculative transactions are considered income and taxed in the same year. Losses from speculative transactions can only be set off against speculative gains.
  • Business Income: For traders and brokers, speculative income is treated as business income and taxed under the head "Profits and Gains from Business or Profession."
This provision ensures that profits from highly volatile and risky speculative activities are taxed in real-time, reducing opportunities for tax deferral or evasion.
8. Income from Winning Game Shows and Prizes
Income from participating in and winning game shows, contests, and prizes such as "Kaun Banega Crorepati" or similar events is taxed in the same year it is received. This category falls under casual income, similar to lottery winnings.
Important points to note about income from game shows include:
  • Tax Rate: Similar to lottery winnings, the income from game shows is taxed at a flat rate of 30%, with no basic exemption limit or deductions.
  • No Deduction for Expenses: Participants cannot claim deductions for any expenses incurred in connection with winning these prizes.
  • Surcharge and Cess: Applicable surcharge and health & education cess also apply to the prize money.
By taxing this income in the same year, the government ensures prompt collection of taxes from such high-value rewards.
9. Capital Gains from Sale of Short-Term Assets
Capital gains earned from the sale of short-term capital assets are taxed in the year the sale is made. Short-term capital assets are assets held for less than 36 months (or 24 months for certain assets such as immovable property).
Key points regarding taxation on short-term capital gains:
  • Taxable in the Year of Sale: The capital gains earned from the sale of short-term assets are taxed in the year the sale occurs.
  • Applicable Tax Rate: For short-term capital gains, the tax rate is 15% if the asset is listed equity shares or mutual funds. In other cases, the gains are taxed according to the applicable income tax slab rate of the individual.
  • Deductions Not Available: Deductions under Sections 80C to 80U are not available for short-term capital gains on listed securities.
Conclusion
Certain incomes, by their nature, must be taxed immediately in the year they are earned to ensure timely collection and prevent potential tax evasion. These include casual incomes like lottery winnings, advance salary or pension, undisclosed income from search operations, gifts, speculative profits, game show winnings, and short-term capital gains. Taxpayers must understand the provisions governing such incomes to comply with tax laws effectively and avoid penalties. Immediate taxation in these cases reflects the need for real-time tax compliance in volatile or high-risk income categories.


Question:-4

Explain the provisions relating to exemption of incomes of Charitable and Religious Trust and a Political Party.

Answer:

1. Introduction to Exemption of Income for Charitable and Religious Trusts and Political Parties
Under the Income Tax Act, 1961, specific provisions offer tax exemptions to certain organizations such as charitable and religious trusts and political parties. These exemptions encourage their activities by reducing their tax burden, allowing them to focus on their social, religious, or political goals. The exemptions are provided under Sections 11 to 13 and Section 13A of the Income Tax Act, with conditions laid down to prevent misuse. Understanding these provisions is crucial for these organizations to maintain compliance and maximize the benefits available to them.
2. Provisions Relating to Charitable Trusts under Section 11
Charitable trusts enjoy tax exemption on income from various sources if they meet the conditions specified under Section 11 of the Income Tax Act. The primary purpose of this exemption is to ensure that funds and resources dedicated to charitable purposes are not taxed, allowing these organizations to better serve society.
  • Eligibility for Exemption: Charitable trusts must be established for religious or charitable purposes, including education, relief of poverty, medical relief, or any other objective of public benefit.
  • Income Eligible for Exemption: The income derived from property held under trust for charitable or religious purposes is exempt from tax, provided it is applied solely towards these purposes. Any income that is not applied for charitable purposes during the year but accumulated for future use (up to 85% of income) also remains exempt, subject to specified conditions.
  • Application of Income: At least 85% of the trust’s income must be applied for the charitable or religious purposes it was established for. Failure to apply this percentage will result in the loss of exemption for that portion of income unless it is accumulated for future use with the permission of the Assessing Officer.
  • Corpus Donations: Donations made specifically towards the corpus of the trust (capital donations) are exempt from income tax, as these funds are not meant for immediate use but rather for long-term purposes or investments.
  • Accrued Income and Investments: Any income accumulated for specific purposes is also exempt from tax, provided it is invested in prescribed forms of investment such as government securities or deposits in scheduled banks.
3. Provisions Relating to Religious Trusts under Section 12
Religious trusts receive tax benefits under the same sections as charitable trusts, provided their income is applied towards religious activities or purposes. However, unlike charitable trusts, religious trusts do not need to provide relief to the public at large and can serve specific religious communities.
  • Purpose of Religious Trusts: The trust must serve religious purposes, such as supporting places of worship, religious education, and the propagation of religion. Income used for promoting any other activity unrelated to the religious objectives may not qualify for tax exemption.
  • Exemption on Specific Income: Income from voluntary contributions made with a specific direction to form part of the trust’s corpus is fully exempt from tax.
  • Accumulation of Income: Similar to charitable trusts, religious trusts are allowed to accumulate 15% of their income for future purposes without losing the tax exemption status. However, the remaining 85% must be applied towards religious objectives.
4. Provisions of Section 13: Conditions and Restrictions on Exemptions
While Sections 11 and 12 provide exemptions for charitable and religious trusts, Section 13 lays down conditions under which these exemptions may be denied. This section seeks to prevent misuse of the tax benefits by ensuring that the trust’s income is not misapplied for the benefit of certain persons or for purposes other than the charitable or religious objectives.
  • Prohibition of Private Benefits: Income should not directly or indirectly benefit any particular individual, trustee, or associated person. If the trust income benefits trustees, relatives, or any specified persons, the exemption will be withdrawn.
  • Investment Restrictions: The trust’s funds must be invested or deposited only in specified forms of investments, such as government securities or scheduled bank deposits. Any investment outside these forms, such as in private companies, will lead to the withdrawal of the tax exemption for that portion of income.
  • Political Contributions Prohibited: Charitable or religious trusts are not permitted to make donations or contributions to political parties. If they do, they will lose the tax exemption on their income.
5. Provisions Relating to Exemption of Political Parties under Section 13A
Political parties are also granted tax exemptions under Section 13A of the Income Tax Act, with specific conditions designed to ensure transparency in their financial activities. The exemption aims to support the functioning of political parties by ensuring that they are not burdened with taxes on their income, provided they comply with disclosure requirements.
  • Exempt Income: A political party’s income from house property, voluntary contributions, and other income such as interest, dividends, or capital gains is exempt from tax. However, these exemptions apply only if the political party files its return of income on time and maintains accurate records.
  • Maintenance of Books of Accounts: Political parties must maintain books of accounts documenting all voluntary contributions and income, along with detailed records of expenditure. These books must be audited by a qualified Chartered Accountant to ensure compliance.
  • Disclosure of Donations: Voluntary contributions above Rs. 20,000 must be disclosed in the party’s returns, along with details of the donor. This provision is meant to prevent anonymous funding and ensure transparency in the political financing process.
  • Cash Donations Restricted: Contributions received in cash exceeding Rs. 2,000 are not eligible for tax exemption. This provision, introduced to curb black money in political funding, ensures that larger donations are made via banking channels for accountability.
6. Filing and Reporting Requirements for Trusts and Political Parties
To avail the tax exemptions under Sections 11, 12, and 13A, charitable trusts, religious trusts, and political parties must comply with various filing and reporting requirements. Non-compliance with these requirements can result in the loss of tax exemption.
  • Filing of Income Tax Return: All trusts and political parties must file their income tax returns on or before the specified due date to claim the exemption.
  • Audit of Accounts: If the total income of the trust or political party exceeds the prescribed limit, the accounts must be audited, and the audit report must be submitted along with the income tax return.
  • Form 10B (for Trusts): Charitable and religious trusts must file Form 10B, which includes details about their income, expenses, and investments. This form ensures that the income is being used for the intended charitable or religious purposes.
7. Restrictions on Political Contributions by Charitable Trusts
While political parties enjoy tax exemptions on their income under Section 13A, charitable trusts are expressly prohibited from contributing to political parties. If a charitable or religious trust makes a donation to a political party, its income will become taxable, as it is considered a violation of the conditions laid out in Section 13.
  • Loss of Exemption: Any charitable or religious trust found to be making donations to political parties risks losing its tax exemption. The primary purpose of charitable trusts is to serve society at large, and any political involvement is seen as a deviation from this purpose.
Conclusion
The Income Tax Act provides specific exemptions to charitable and religious trusts under Sections 11, 12, and 13, as well as political parties under Section 13A, to support their societal and political functions. These exemptions come with strict conditions to ensure transparency and proper application of funds toward the intended purposes. While charitable and religious trusts must apply a significant portion of their income for charitable or religious purposes, political parties benefit from exemptions on income derived from voluntary contributions and other sources. Compliance with documentation, filing, and audit requirements is essential for maintaining these exemptions and ensuring that funds are used ethically and transparently.


Question:-5

Compute the total Income of Mr. Manas from the following particulars of his income for A.Y. 2023-24.

Particular Rs.
I) Salary 180,000
II) Dividend received from Indian Company 10,000
III) Share of profits from HUF 12,000
IV) Dividend from a Co-operative Society 6,000
V) Rental Income from home property 10,000
Particular Rs. I) Salary 180,000 II) Dividend received from Indian Company 10,000 III) Share of profits from HUF 12,000 IV) Dividend from a Co-operative Society 6,000 V) Rental Income from home property 10,000| Particular | | Rs. | | :— | :— | :— | | I) | Salary | 180,000 | | II) | Dividend received from Indian Company | 10,000 | | III) | Share of profits from HUF | 12,000 | | IV) | Dividend from a Co-operative Society | 6,000 | | V) | Rental Income from home property | 10,000 |

Answer:

1. Salary: Rs. 180,000

Income from salary is fully taxable under the head Income from Salary. Since no deductions or exemptions are mentioned, the entire salary amount will be taxable.
  • Taxable Salary Income = Rs. 180,000

2. Dividend Received from an Indian Company: Rs. 10,000

Dividends from Indian companies are taxable under Income from Other Sources after the abolition of the Dividend Distribution Tax (DDT). Therefore, the full amount of Rs. 10,000 will be taxed in the hands of the recipient.
  • Taxable Dividend Income = Rs. 10,000

3. Share of Profits from HUF: Rs. 12,000

Any share of profits received from a Hindu Undivided Family (HUF) is exempt from tax under Section 10(2) of the Income Tax Act. This means this amount is not taxable.
  • Taxable Income from HUF = Rs. 0 (Exempt)

4. Dividend from a Co-operative Society: Rs. 6,000

Dividend income from a co-operative society does not enjoy any specific exemption and is taxed under Income from Other Sources. Therefore, the entire amount of Rs. 6,000 is taxable.
  • Taxable Dividend from Co-operative Society = Rs. 6,000

5. Rental Income from House Property: Rs. 10,000

Rental income from house property is taxed under Income from House Property. As per Section 24(a), a standard deduction of 30% of the gross annual value (rental income) is allowed for repairs and maintenance.
  • Gross Annual Value (GAV) = Rs. 10,000
  • Less: Standard Deduction (30% of Rs. 10,000) = Rs. 3,000
  • Net Taxable Rental Income = Rs. 10,000 – Rs. 3,000 = Rs. 7,000

Total Taxable Income Calculation

Now, let’s sum up all the taxable income:
Income Head Amount (Rs.)
Salary 180,000
Dividend from Indian Company 10,000
Dividend from Co-operative Society 6,000
Income from House Property 7,000
Total Taxable Income 203,000

Conclusion

The total taxable income of Mr. Manas for A.Y. 2023-24 is Rs. 203,000.
This breakdown considers the correct tax treatment for each type of income and applies the necessary deductions, ensuring an accurate calculation of taxable income.


Section-B

(Attempt all the questions. Each question carries 6 marks.)

Question:-6

Explain the Provisions of commutation of Pension u/s 10 (10A).

Answer:

Provisions of Commutation of Pension u/s 10(10A) of the Income Tax Act

Section 10(10A) of the Income Tax Act, 1961, deals with the commutation of pension and its tax implications. Pension is a regular payment made to an individual after retirement from service. In some cases, individuals may opt to receive a lump-sum amount in place of periodic pension payments, referred to as commutation of pension. This section provides clarity on the extent of tax exemption on such commuted pensions.

1. What is Commutation of Pension?

Commutation of pension refers to the option available to retirees to convert a portion or the entire regular pension into a lump-sum payment. Instead of receiving a monthly pension, the retiree receives a one-time lump sum, with the remaining pension (if not fully commuted) continuing as a periodic payment.

2. Categories of Employees for Tax Exemption

Under Section 10(10A), the tax treatment of commuted pension varies depending on whether the individual is a government employee or a non-government employee. This section provides exemptions to the following categories of individuals:
  • Government Employees: Employees of the central or state government, local authorities, statutory corporations, and certain others.
  • Non-Government Employees: Employees of private-sector organizations or other non-government institutions.

3. Exemption for Government Employees

For government employees, commuted pension is fully exempt from tax under Section 10(10A)(i). This means that if a government employee opts to commute a portion or the entire pension, the entire commuted amount is not subject to any income tax, regardless of the amount.

4. Exemption for Non-Government Employees

For non-government employees, the tax exemption on commuted pension depends on whether the individual receives gratuity upon retirement:
  • If Gratuity is Received: As per Section 10(10A)(ii), if a non-government employee has received gratuity, the commuted pension that is exempt from tax is one-third of the full value of the commuted pension. The remaining two-thirds is taxable as income.
  • If Gratuity is Not Received: As per Section 10(10A)(iii), if gratuity is not received, the exempt portion of the commuted pension is half of the full value of the pension. In this case, only 50% of the commuted pension is taxable, with the other 50% being tax-exempt.

5. Key Points for Commutation of Pension under Section 10(10A)

  • Applicability: The provisions of Section 10(10A) apply only to individuals receiving pensions upon retirement from service.
  • Exemption for Full or Partial Commutation: The commutation of a portion or the entire pension is eligible for tax exemption based on the conditions stated.
  • Lump-Sum Payment: The exemption under this section is available only when a lump-sum amount is received instead of regular monthly pension payments.

6. Taxation on Uncommuted Pension

It is important to note that the regular or uncommuted pension (monthly payments) is fully taxable as salary income under the head "Income from Salary" or "Income from Other Sources" depending on the nature of employment.

Conclusion

Section 10(10A) of the Income Tax Act provides a significant tax benefit to individuals opting for the commutation of pension, especially government employees who are eligible for full exemption. Non-government employees can also avail partial exemptions based on whether they have received gratuity upon retirement. These provisions aim to provide flexibility to retirees while ensuring that the tax benefits on pensions are appropriately structured.


Question:-7

What is ITR-1 (SAHAJ)?

Answer:

ITR-1 (SAHAJ): An Overview

ITR-1 (SAHAJ) is a simplified Income Tax Return form for individuals in India. It is designed for those with relatively straightforward sources of income, primarily salaried individuals. The form is part of the suite of Income Tax Return (ITR) forms prescribed by the Income Tax Department under the Income Tax Act, 1961, for the financial year and assessment year that follows.

1. Who is Eligible to File ITR-1 (SAHAJ)?

ITR-1 (SAHAJ) can be filed by resident individuals who have the following types of income:
  • Salary or Pension Income: Individuals who earn income through salary or pension are eligible to use ITR-1.
  • Income from One House Property: If an individual earns income from one house property (rented or self-occupied), they can file ITR-1. However, if they have losses under house property, it can still be filed using this form.
  • Other Sources of Income: Individuals earning income from sources such as interest from savings accounts, fixed deposits, or any other interest-based income can file ITR-1.
  • Agricultural Income: Individuals with agricultural income up to Rs. 5,000 can use ITR-1.
The ITR-1 form is intended for simple tax situations where the individual’s income is limited to these basic sources and where income does not exceed Rs. 50 lakh.

2. Who Cannot Use ITR-1 (SAHAJ)?

There are several categories of individuals who are not eligible to file ITR-1 (SAHAJ). These include:
  • Non-Residents: ITR-1 is only applicable to resident individuals. Non-residents and Resident but Not Ordinarily Residents (RNOR) must file other forms such as ITR-2 or ITR-3.
  • Individuals with Income Exceeding Rs. 50 Lakh: If an individual’s total income exceeds Rs. 50 lakh, they cannot use ITR-1. They must file ITR-2 or other applicable forms.
  • Multiple House Properties: If an individual has income from more than one house property, they are not eligible for ITR-1.
  • Capital Gains: Individuals who have earned capital gains (short-term or long-term) during the financial year cannot use ITR-1.
  • Business or Profession Income: Those earning income from a business or profession must file other ITR forms, such as ITR-3 or ITR-4.
  • Foreign Assets or Foreign Income: If an individual owns foreign assets or earns foreign income, they cannot use ITR-1.
  • Agricultural Income Above Rs. 5,000: Individuals with agricultural income exceeding Rs. 5,000 cannot file ITR-1.

3. Key Sections of ITR-1 (SAHAJ)

The ITR-1 form consists of various sections to capture details about the taxpayer’s personal information and income:
  • Part A: General information, including name, PAN, address, and filing status.
  • Part B: Details of gross total income from salary, house property, and other sources.
  • Part C: Deductions under Chapter VI-A, such as Section 80C (investments in savings schemes), 80D (medical insurance), etc.
  • Part D: Tax computation and status, which includes total income, taxes paid, and any refunds due.

4. Mode of Filing ITR-1

ITR-1 can be filed electronically through the Income Tax Department’s official e-filing portal. After filing, the return must be verified either online (through e-verification methods like Aadhaar OTP, net banking, etc.) or offline by sending a signed physical copy of the ITR-V (acknowledgment) to the Centralized Processing Center (CPC) in Bengaluru.

Conclusion

ITR-1 (SAHAJ) is a user-friendly and simplified return form, ideal for salaried individuals with straightforward sources of income. By limiting eligibility to individuals with income up to Rs. 50 lakh and restricting complex income situations, it provides an easy way to comply with tax filing requirements. However, taxpayers with multiple income sources, foreign assets, or more complex financial situations must file other forms such as ITR-2 or ITR-3.


Question:-8

Write the Provisions relating to Clubbing of minor’s income.

Answer:

Provisions Relating to Clubbing of Minor’s Income

Clubbing of income refers to the inclusion of another person’s income into the taxpayer’s income for tax calculation purposes. This principle is covered under various sections of the Income Tax Act, 1961, to prevent tax evasion. The clubbing of minor’s income with the income of parents is an important provision under Section 64(1A) of the Act. This provision ensures that income earned by minors is not taxed separately at a lower rate but is instead taxed with the income of their parents.

1. What is Clubbing of Minor’s Income?

Clubbing of a minor’s income means that the income earned by a minor child (below 18 years of age) is not taxed in the hands of the child but is added to the income of the parent. The primary reason for this rule is to prevent parents from transferring assets or funds to their minor children to reduce the family’s overall tax liability.

2. Parent Responsible for Clubbing

As per Section 64(1A), the income of a minor child (who is not earning from their own efforts) is clubbed with the income of either of the parents whose income is higher. This ensures that the income is taxed at the applicable rate of the parent in the higher tax bracket.
  • If both parents are earning, the income of the minor is clubbed with the income of the parent whose income is greater.
  • If parents are separated, the income of the minor is clubbed with the parent who is responsible for the minor’s maintenance.
Once the income is clubbed with the income of one parent, it remains clubbed with the same parent in subsequent years, unless there is a change in circumstances (e.g., divorce or legal separation).

3. Exemptions to Clubbing of Minor’s Income

While the general rule is to club a minor’s income with that of the parents, there are certain exemptions where the minor’s income is not clubbed. These include:
  • Income of a Minor Child Suffering from Disability: If the minor is suffering from a disability as specified under Section 80U, such as mental illness, blindness, or hearing impairment, the income is not clubbed with the parent’s income. Instead, it is taxed in the minor’s hands at the normal tax rates applicable.
  • Income from Manual Work or Skill-Based Activities: If the minor earns income through manual work or activities that involve the application of skills, knowledge, talent, or experience, such income is taxed in the minor’s own hands. For example, if a minor child earns through acting, singing, or sports, this income is not clubbed with the parents.

4. Exemption under Section 10(32)

To provide some relief to parents whose minor child’s income is being clubbed with their income, Section 10(32) of the Income Tax Act offers an exemption. Under this section:
  • A parent is eligible to claim an exemption of Rs. 1,500 per child per year on the income of the minor child that is clubbed with their own income.
  • If the minor’s income is less than Rs. 1,500, the entire income is exempt from tax.
This provision is limited to Rs. 1,500 per minor child, and the exemption can be claimed for every minor child whose income is being clubbed.

5. Income Included for Clubbing

The following types of income earned by a minor are subject to clubbing:
  • Interest earned on investments such as fixed deposits, savings accounts, or bonds.
  • Rental income from property transferred to the minor child.
  • Any other income earned from assets transferred by the parent to the minor child without adequate consideration.

6. Impact of Clubbing on Tax Calculation

The clubbing of a minor’s income increases the taxable income of the parent. As a result, the parent’s overall tax liability may increase due to the addition of the minor’s income. This makes it important for parents to account for such clubbing provisions while filing their income tax returns.

Conclusion

The provisions relating to the clubbing of a minor’s income under Section 64(1A) are aimed at preventing tax avoidance by transferring assets to children. The income of a minor child is clubbed with the parent having the higher income, and parents can claim an exemption under Section 10(32) for up to Rs. 1,500 per child. Understanding these provisions is crucial for taxpayers to avoid potential tax complications and to file their income tax returns accurately.


Question:-9

Explain the Provisions relating to Gratuity u/s 10(10) in case of employees covered by the Payment of Gratuity Act, 1972.

Answer:

Provisions Relating to Gratuity u/s 10(10) for Employees Covered by the Payment of Gratuity Act, 1972

Gratuity is a lump-sum benefit paid by an employer to an employee as a token of appreciation for their services. It becomes payable upon retirement, resignation, or death, provided the employee has served for at least five years in the same organization. Under Section 10(10) of the Income Tax Act, 1961, gratuity is exempt from tax subject to certain conditions. The exemption differs for employees covered by the Payment of Gratuity Act, 1972, and those not covered by it. This note focuses on the provisions for employees who are covered by the Payment of Gratuity Act, 1972.

1. Eligibility for Gratuity under the Payment of Gratuity Act, 1972

As per the Payment of Gratuity Act, 1972, an employee is entitled to gratuity if they meet the following conditions:
  • The employee has rendered continuous service for five years or more.
  • Gratuity is payable upon the employee’s retirement, resignation, or termination (except in cases of misconduct).
  • Gratuity is also payable to the employee’s nominee in the event of the employee’s death, without the five-year service condition.

2. Calculation of Gratuity

For employees covered under the Payment of Gratuity Act, 1972, the amount of gratuity payable is calculated as follows:
Gratuity Amount = ( Last Drawn Salary × 15 × Years of Service ) ÷ 26 Gratuity Amount = ( Last Drawn Salary × 15 × Years of Service ) ÷ 26 “Gratuity Amount”=(“Last Drawn Salary”xx15 xx”Years of Service”)-:26\text{Gratuity Amount} = (\text{Last Drawn Salary} \times 15 \times \text{Years of Service}) \div 26Gratuity Amount=(Last Drawn Salary×15×Years of Service)÷26
Where:
  • Last Drawn Salary includes basic salary and dearness allowance.
  • 15 represents the 15 days of salary for each year of service.
  • 26 represents the number of working days in a month (excluding Sundays).
For example, if an employee’s last drawn salary is Rs. 20,000 and they have served for 10 years, the gratuity would be calculated as:
( 20 , 000 × 15 × 10 ) ÷ 26 = R s . 115 , 385 ( 20 , 000 × 15 × 10 ) ÷ 26 = R s . 115 , 385 (20,000 xx15 xx10)-:26=Rs.115,385(20,000 \times 15 \times 10) \div 26 = Rs. 115,385(20,000×15×10)÷26=Rs.115,385

3. Exemption Limit under Section 10(10)

Under Section 10(10) of the Income Tax Act, 1961, the gratuity received by an employee covered under the Payment of Gratuity Act, 1972, is exempt from tax to the extent of the least of the following three amounts:
  • Actual Gratuity Received.
  • Rs. 20,00,000 (as per the latest amendment, the maximum limit for exemption was increased from Rs. 10 lakh to Rs. 20 lakh in March 2018).
  • Gratuity Calculated as per the Payment of Gratuity Act, 1972 formula (discussed above).
Any amount of gratuity received beyond the exemption limit will be taxable under the head Income from Salary.

4. Gratuity in Case of Death or Disability

In the unfortunate event of an employee’s death, gratuity is paid to the nominee or legal heir, and such gratuity is fully exempt from tax, regardless of the amount. Similarly, if an employee becomes permanently disabled, the gratuity paid to them is fully exempt from tax, irrespective of the exemption limit.

5. Other Key Points

  • Service Requirement: The minimum service period required to be eligible for gratuity is 5 years. However, in the case of death, the service requirement is waived.
  • Gratuity Paid on Retirement or Resignation: Gratuity received by employees at the time of retirement or resignation, which is within the exemption limits as per Section 10(10), is not taxable.

6. Filing and Reporting

Employees who receive gratuity should report it in their Income Tax Return (ITR). If the gratuity amount exceeds the exemption limit of Rs. 20,00,000, the excess amount should be declared under the head "Income from Salary," and the applicable tax must be paid.

Conclusion

The provisions of Section 10(10) of the Income Tax Act provide tax exemptions on gratuity for employees covered by the Payment of Gratuity Act, 1972. The exemption helps reduce the tax burden on employees after years of service. The least of the actual gratuity received, Rs. 20,00,000, or the calculated gratuity amount under the Act is exempt from tax. In cases of death or disability, gratuity is fully exempt from tax, providing additional relief to employees or their families.


Question:-10

After 25 years stay in India, Mr. Ram went to U.S.A. on April 15, 2012, and came back to India on March 12, 2023. Determine his residential status for the assessment year 2023-24.

Answer:

To determine Mr. Ram’s residential status for the Assessment Year (A.Y.) 2023-24, we need to analyze his period of stay in India during the relevant previous year (i.e., the financial year 2022-23) and past years based on the provisions under the Income Tax Act, 1961. The residential status of an individual is determined based on the number of days spent in India during the previous year and the preceding years.

Provisions for Determining Residential Status

The residential status of an individual is categorized as:
  1. Resident: Further subdivided into:
    • Resident and Ordinarily Resident (ROR).
    • Resident but Not Ordinarily Resident (RNOR).
  2. Non-Resident (NR).
To determine Mr. Ram’s status, we need to check the following criteria:

1. Resident in India (Section 6 of the Income Tax Act, 1961)

An individual is considered resident in India if:
  • The person is in India for 182 days or more during the previous year (April 1, 2022, to March 31, 2023); or
  • The person is in India for 60 days or more during the previous year and has stayed for 365 days or more in the preceding four years.

2. Resident but Not Ordinarily Resident (RNOR)

Even if a person qualifies as a resident, they can be classified as RNOR if:
  • They have been a non-resident in India in 9 out of the 10 previous years preceding the relevant previous year, or
  • They have stayed in India for 729 days or less in the last 7 previous years preceding the relevant previous year.

3. Non-Resident (NR)

If neither of the above conditions are met, the individual is classified as a non-resident.

Step-by-Step Determination for Mr. Ram

1. Period of Stay in India during the Previous Year (2022-23)

  • Mr. Ram came back to India on March 12, 2023, and stayed in India until March 31, 2023.
  • From March 12, 2023, to March 31, 2023, Mr. Ram stayed in India for 20 days during the financial year 2022-23.
Since Mr. Ram stayed in India for only 20 days, he does not meet the 182 days requirement during the previous year.

2. Stay in India for 60 Days or More + 365 Days in Preceding 4 Years

To check the second condition (60 days in the previous year and 365 days in the last four years):
  • Mr. Ram stayed in India for 20 days during the previous year, which is less than the required 60 days.
  • Therefore, Mr. Ram does not qualify as a resident under this condition either.

3. Conclusion on Residential Status

Since Mr. Ram does not meet any of the conditions for being a resident, he will be classified as a Non-Resident (NR) for the Assessment Year 2023-24.

Conclusion

For the Assessment Year 2023-24, Mr. Ram will be treated as a Non-Resident since his stay in India during the previous year 2022-23 was less than 60 days, and he also does not satisfy the conditions of staying 365 days in the preceding four years.


Section-C

(Attempt all the questions. Each question carries 5 marks.)

Question:-11(a)

Write short note on the following: Partial Integration of Agricultural and Non-Agricultural Income.

Answer:

Partial Integration of Agricultural and Non-Agricultural Income

Partial integration of agricultural and non-agricultural income is a concept in Indian tax law designed to prevent individuals with significant non-agricultural income from taking undue advantage of the tax exemption on agricultural income. Although agricultural income is exempt from income tax under Section 10(1) of the Income Tax Act, 1961, if an individual earns both agricultural and non-agricultural income, the partial integration method is applied to ensure that tax is levied equitably.

Applicability

This provision applies to individuals, Hindu Undivided Families (HUFs), and other taxpayers whose:
  1. Non-agricultural income exceeds Rs. 2,50,000 (basic exemption limit).
  2. Agricultural income exceeds Rs. 5,000.

Procedure for Partial Integration

The process of partial integration is as follows:
  1. Step 1: Calculate tax on the total income (agricultural + non-agricultural).
  2. Step 2: Calculate tax on agricultural income + the basic exemption limit (Rs. 2,50,000 for individuals below 60 years).
  3. Step 3: The tax liability on non-agricultural income is determined by subtracting the tax in Step 2 from the tax in Step 1.
This method ensures that while agricultural income remains exempt, it indirectly pushes the non-agricultural income into a higher tax bracket, preventing tax avoidance by individuals with high agricultural and non-agricultural income.
This system effectively balances the tax benefits provided to agricultural income with the taxation of non-agricultural income.


Question:-11(b)

Deduction u/s 80D.

Answer:

Deduction under Section 80D of the Income Tax Act

Section 80D of the Income Tax Act, 1961, provides a deduction for premiums paid on health insurance policies and contributions to health schemes, helping taxpayers reduce their taxable income. This deduction applies to individuals and Hindu Undivided Families (HUFs) and is available for premiums paid for insuring self, spouse, dependent children, and parents.

Deduction Limits:

  1. Self, Spouse, and Dependent Children:
    • Premiums paid for health insurance can be claimed up to Rs. 25,000.
    • If the individual is a senior citizen (aged 60 or above), the limit increases to Rs. 50,000.
  2. Parents:
    • An additional deduction of Rs. 25,000 can be claimed for premiums paid for insuring parents.
    • If parents are senior citizens, the limit increases to Rs. 50,000.
  3. Preventive Health Check-up:
    • A maximum of Rs. 5,000 within the overall limit can be claimed for preventive health check-ups. This is included in the total deduction.
  4. Medical Expenditure for Senior Citizens:
    • If no health insurance is available for senior citizens, medical expenses up to Rs. 50,000 can be claimed as a deduction.

Important Points:

  • Premiums must be paid by non-cash modes (online banking, credit/debit cards) for claiming deductions.
  • Deduction under Section 80D is over and above deductions available under Section 80C.
Section 80D encourages individuals to secure health insurance and provides relief through tax savings for doing so.


Question:-11(c)

"Defective return is no return".

Answer:

"Defective Return is No Return"

The phrase "Defective return is no return" refers to the provisions under Section 139(9) of the Income Tax Act, 1961, which outlines that a return of income is considered defective if it does not meet certain prescribed conditions. A defective return is essentially incomplete or incorrect, and if not rectified within a specified period, it is treated as though no return has been filed at all.

Common Reasons for Defective Returns:

A return may be considered defective due to:
  1. Missing mandatory information: Important fields such as PAN, details of income, or tax payment are incomplete or incorrect.
  2. Non-submission of necessary documents: Failure to attach mandatory documents such as balance sheets, profit and loss statements, or tax computation for business professionals.
  3. Incorrect or incomplete tax computations: Errors in calculating the tax liability or providing inadequate details of deductions and exemptions.

Procedure for Rectification:

If a return is deemed defective, the taxpayer receives a notice under Section 139(9) from the Income Tax Department, specifying the defects and providing a window of 15 days (or more if extended) to rectify the errors. If the taxpayer fails to correct the defects within the stipulated time, the return is treated as invalid or not filed, and the individual may be liable for penalties.

Conclusion:

A defective return, if not corrected, can lead to penalties and a loss of tax benefits. It is important to ensure that all details are accurate and complete to avoid being categorized as defective.


Question:-11(d)

Standard Deduction u/s 16(i).

Answer:

Standard Deduction u/s 16(i) of the Income Tax Act

Standard Deduction under Section 16(i) of the Income Tax Act, 1961, is a deduction available to salaried individuals and pensioners from their gross salary income. This deduction was reintroduced in 2018 to replace transport allowance and medical reimbursement and provides immediate relief by reducing taxable salary income.

Amount of Deduction:

The standard deduction is available at a flat rate of Rs. 50,000 or the actual salary amount, whichever is lower, for the Assessment Year 2023-24. It applies to all salaried individuals, irrespective of their income bracket, and pensioners receiving pension from a former employer.

Key Features:

  1. Automatic Deduction: This deduction is automatically applicable to eligible individuals, and no proof or documentation is required to claim it.
  2. Salary or Pension: It is available for both current employees and retired individuals receiving a pension, as pension is taxed under the head "Income from Salary."
  3. No Conditions Attached: Unlike other deductions, there are no specific investments or expenditures required to claim the standard deduction. It is a fixed reduction applied to gross salary income.

Benefits of Standard Deduction:

The primary benefit of the standard deduction is that it reduces the overall taxable income for salaried individuals and pensioners, thereby lowering the total tax liability. It simplifies the tax filing process, offering straightforward relief without the need for itemized deductions for transportation or medical expenses.
In conclusion, the standard deduction under Section 16(i) is a significant tax-saving tool for salaried individuals and pensioners, providing a flat deduction that reduces taxable income effectively.


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