Question

Mr. Sohan, being an author and a businessman, provides the following information for the year ending 31.03.2014 :
(a) Salary ₹ 7,96,200 per year.
(b) D.A. ₹ 96,000 per year.
(c) Commission on turnover achieved by him @ 5% of ₹ 20,00,000.
(d) He is provided a car of 1·81 engine capacity with chauffeur for his official and private purposes.
(e) Bonus ₹ 20,000
(f) He is provided a rent-free furnished house and the employer pays ₹ 1,20,000 per year for the house and ₹ 50,000 per month for the furniture.
(g) Premium of mediclaim insurance taken for wife : ₹ 9,000.
(h) Royalty received on a book written for school : ₹ 3,50,000.

Hint:

Add salary items and the taxable value of the car, house and furniture. Then add royalty and subtract Sections 80D and 80QQB.

Answer 1

Step 1: What the question needs:
The printed question gives only the data (a) to (h). It does not print the final requirement. The usual requirement for this data is to find the income from salary and the total (taxable) income. We do that, for the year ending 31.03.2014 (AY 2014-15).

Step 2: Salary for valuing perquisites:
Salary = Basic ₹7,96,200 + D.A. ₹96,000 + Commission ₹1,00,000 + Bonus ₹20,000 = ₹10,12,200.
Commission = 5% of ₹20,00,000 = ₹1,00,000. It is taxable as salary because it is paid by the employer.

Step 3: Car perquisite:
The employer owns the car and pays all costs. The car is used for both official and private purposes.
The engine is above 1.6 litre, so the value is ₹2,400 per month, plus ₹900 per month for the chauffeur.
Value = (₹2,400 + ₹900) x 12 = ₹39,600.

Step 4: Rent-free house:
The employer pays rent of ₹1,20,000 a year for a leased house. The taxable value is the lower of the rent paid and 15% of salary.
15% of ₹10,12,200 = ₹1,51,830. The lower figure is ₹1,20,000.

Step 5: Furniture:
The furniture is hired, so the hire charges paid by the employer are taxable. As printed, ₹50,000 x 12 = ₹6,00,000.

Step 6: Income from salary:
₹10,12,200 + ₹39,600 + ₹1,20,000 + ₹6,00,000 = ₹17,71,800.
No standard deduction applied for AY 2014-15, and no professional tax is given.

Step 7: Royalty and gross total income:
Royalty ₹3,50,000 is added as income from his writing work. Gross total income = ₹17,71,800 + ₹3,50,000 = ₹21,21,800.

Step 8: Deductions and total income:
Section 80D: mediclaim for wife ₹9,000 (limit ₹15,000), so ₹9,000 is allowed.
Section 80QQB: royalty of a resident author is allowed up to ₹3,00,000. Royalty is ₹3,50,000, so ₹3,00,000 is allowed.
Total income = ₹21,21,800 - ₹9,000 - ₹3,00,000 = ₹18,12,800.

Final Answer:
Income from salary is ₹17,71,800, gross total income is ₹21,21,800 and the total (taxable) income is ₹18,12,800.