NISM Series X-B Chapter 5: Retirement Products Practice Questions

Q: Mr. D, a private sector employee not covered under the Payment of Gratuity Act, retires after 25 years and 8 months of service. His last drawn basic salary was Rs. 80,000 per month, and his Dearness Allowance (DA) was Rs. 20,000 per month, forming part of salary for retirement benefits. He received a gratuity of Rs. 15,00,000. What is the taxable amount of gratuity for Mr. D?

Rs. 2,50,000. Mr. D is not covered by the Payment of Gratuity Act. The exemption for gratuity in such cases is the least of the following: 1. Half month’s salary for each completed year of service: * Completed years of service = 25 years (8 months are ignored). * Salary for calculation = Basic Salary + DA = Rs. 80,000 + Rs. 20,000 = Rs. 1,00,000 per month. * Half month's salary = Rs. 1,00,000 / 2 = Rs. 50,000. * Exempt amount = Rs. 50,000 * 25 years = Rs. 12,50,000. 2. Maximum statutory limit: Rs. 20,00,000. 3. Gratuity actually received: Rs. 15,00,000. The least of these three amounts (Rs. 12,50,000, Rs. 20,00,000, Rs. 15,00,000) is Rs. 12,50,000. Therefore, Exempt Gratuity = Rs. 12,50,000. Taxable Gratuity = Actual Gratuity Received - Exempt Gratuity = Rs. 15,00,000 - Rs. 12,50,000 = Rs. 2,50,000

Q: According to the Income Tax Act, which of the following incomes of a non-resident assessee shall always be taxable in India?

Income received or is deemed to be received in India in the previous year.. As per the text, for a non-resident assessee, income received or is deemed to be received in India in the previous year by or on his behalf is taxable in India. Table 7.1 confirms that 'Income received or is deemed to be received in India' is taxable for a Non-resident. Income accruing or arising outside India, even if derived from a business controlled from India, is listed as 'Not-taxable' for a Non-resident

Q: Mr. D, an Indian citizen, was working overseas for several years and was a non-resident in India for 9 out of the 10 preceding financial years. He returned to India in FY 2024-25 and stayed for 200 days. In the 7 financial years preceding FY 2024-25, his total stay in India was 600 days. What is his residential status for FY 2024-25?

Resident but Not Ordinarily Resident. 1. Basic Resident Test: Mr. D stayed 200 days in FY 2024-25, which is more than 182 days. Hence, he is a 'Resident'. 2. Not Ordinarily Resident (NOR) Test: To be NOR, he needs to satisfy any one of the following conditions: - Stayed 729 days or less in last seven years: His stay was 600 days, which is less than 729 days (Condition Satisfied). - Being a non-resident in 9 out of 10 preceding years: He was a non-resident in 9 out of 10 preceding years (Condition Satisfied). Since he satisfies both conditions, he is a 'Resident but Not Ordinarily Resident' for FY 2024-25

Q: Which of the following deductions or exemptions is NOT available to an employee opting for the New Tax Regime under the head 'Income from Salary'?

Exemption for House Rent Allowance (HRA). As per the 'Old Tax regime' vs 'New tax regime' table provided in the text: - **Standard deduction:** Rs. 75,000 is available under the New Tax Regime. - **House Rent Allowance (HRA):** Exemption of HRA is 'Not allowed under new regime'. - **Deduction u/s 80CCD(2) for Employer's contribution to NPS:** Up to 14% of salary is available under the New Tax Regime. - **Gratuity:** The computation of the exempted amount of gratuity under section 10(10) is the same for both regimes, meaning it is available. Therefore, the exemption for House Rent Allowance (HRA) is not available under the New Tax Regime

Q: According to the Income Tax Act, 1961, which of the following incomes would NOT be taxable under the head 'Income from House Property'?

Rental income derived from a vacant plot of land.. The text explicitly states: 'Example, if any income is derived from a vacant land then such income shall not be chargeable to tax under the head ‘Income from house property’ as the property does not consist of any building. Such rental income is chargeable to tax under the head ‘profits and gains from business or profession’ or ‘Income from other sources’.' The other options are forms of income that are taxable under the head 'Income from House Property'

Q: Mr. C, an Indian Citizen, was working in London for some years and then returned to India. His physical stay in India for various financial years is provided below: Sr. No | Financial Year | Physical stay in India (no. of days) ---|---|--- 1. | 2024-25 | 298 2. | 2023-24 | 264 3. | 2022-23 | 70 4. | 2021-22 | 70 5. | 2020-21 | 50 6. | 2019-20 | 50 7. | 2018-19 | 34 8. | 2017-18 | 40 9. | 2016-17 | 60 10. | 2015-16 | 52 11. | 2014-15 | 40 If Mr. C continues to stay in India for 190 days in FY 2025-26, what will be his residential status for FY 2025-26?

Resident and Ordinarily Resident. To determine Mr. C's residential status for FY 2025-26: 1. **Basic Condition (Resident Status):** Mr. C stays 190 days in FY 2025-26, which is more than 182 days. Therefore, he is a Resident. 2. **Additional Conditions (Ordinarily Resident Status):** To be classified as a 'Resident but Not Ordinarily Resident' (RNOR), a Resident must satisfy *any one* of the following conditions. If neither is satisfied, the person is 'Resident and Ordinarily Resident' (ROR): * **Condition 1:** Stayed 729 days or less in the 7 financial years immediately preceding FY 2025-26 (i.e., FY 2018-19 to FY 2024-25). Total stay in these 7 years = 298 (2024-25) + 264 (2023-24) + 70 (2022-23) + 70 (2021-22) + 50 (2020-21) + 50 (2019-20) + 34 (2018-19) = 836 days. Since 836 days is MORE than 729 days, this condition (stayed 729 days or less) is NOT satisfied. * **Condition 2:** Has been a non-resident in 9 out of the 10 financial years immediately preceding FY 2025-26 (i.e., FY 2015-16 to FY 2024-25). Let's check his status for these 10 years: FY 2024-25: Resident (298 days > 182 days) FY 2023-24: Resident (264 days > 182 days) FY 2022-23: Non-Resident (70 days < 182 days) FY 2021-22: Non-Resident (70 days < 182 days) FY 2020-21: Non-Resident (50 days < 182 days) FY 2019-20: Non-Resident (50 days < 182 days) FY 2018-19: Non-Resident (34 days < 182 days) FY 2017-18: Non-Resident (40 days < 182 days) FY 2016-17: Non-Resident (60 days < 182 days) FY 2015-16: Non-Resident (52 days < 182 days) In these 10 preceding years, Mr. C was a Non-Resident for 8 years. Since 8 is not '9 out of 10', this condition is NOT satisfied. Since Mr. C satisfies neither of the conditions to be an RNOR, he will be classified as a Resident and Ordinarily Resident (ROR) for FY 2025-26

Question 1

According to Table 7.1 and the provided text, which type of income is always taxable in India, irrespective of whether the assessee is a Resident and Ordinarily Resident, Resident but Not Ordinarily Resident, or a Non-resident?

Accepted Answer

Income received or is deemed to be received in India.. As per Table 7.1, 'Income received or is deemed to be received in India' is marked as 'Taxable' for all three residential statuses: Resident and ordinarily resident, Resident but not ordinarily resident, and Non-resident. Other options are not taxable for all categories

Question 2

Ms. E is a private sector employee with a basic salary of Rs. 18,00,000 for FY 2024-25. Her employer makes contributions: EPF Rs. 2,16,000 and NPS Rs. 2,52,000. Ms. E opts for the New Tax Regime. What will be her taxable income under the head 'Salary' for FY 2024-25?

Accepted Answer

Rs. 17,25,000. Here's the calculation for Ms. E under the New Tax Regime:
1.  **Basic Salary**: Rs. 18,00,000
2.  **Add: Employer's contribution to NPS [s. 17(1)(viii)]**: Rs. 2,52,000
3.  **Add: Employer's contribution to EPF [s. 17(1)(vi)]**: Employer's EPF contribution is Rs. 2,16,000. 12% of basic salary (Rs. 18,00,000 × 12%) is also Rs. 2,16,000. Since the contribution is not *above* 12% of salary, the taxable amount under this section is Nil.
4.  **Add: Aggregate of employer's contribution to Superannuation fund, EPF and NPS exceeding Rs. 7,50,000 [s. 17(2)(vii)]**: Total employer contribution (EPF + NPS) = Rs. 2,16,000 + Rs. 2,52,000 = Rs. 4,68,000. Since Rs. 4,68,000 is less than Rs. 7,50,000, no amount is added under this section. (Nil)
5.  **Gross Salary**: Rs. 18,00,000 (Basic) + Rs. 2,52,000 (Employer NPS) = Rs. 20,52,000
6.  **Less: Standard Deduction (New Tax Regime)**: (Rs. 75,000)
7.  **Taxable Salary (A) before 80CCD(2) deduction**: Rs. 20,52,000 - Rs. 75,000 = Rs. 19,77,000
8.  **Less: Deduction u/s 80CCD(2) (Employer's contribution to NPS - New Tax Regime)**:
    *   Allowed deduction is up to 14% of salary (for private sector employees).
    *   14% of Basic Salary (Rs. 18,00,000) = Rs. 2,52,000.
    *   Actual employer contribution to NPS = Rs. 2,52,000.
    *   The deduction allowed is the lower of the two, which is Rs. 2,52,000.
9.  **Total Deduction (B)**: (Rs. 2,52,000)
10. **Taxable Income (A-B)**: Rs. 19,77,000 - Rs. 2,52,000 = **Rs. 17,25,000**

Question 3

Which of the following is a fundamental prerequisite for an income to be taxable under the head 'Income from Salary' as per the Income Tax Act, 1961, based on the provided text?

Accepted Answer

There must be an employer-employee relationship.. The text explicitly states under 'Certain important concepts under salary': 'Taxability of an income under this head pre-requisites existence of employee and employer relationship.' While income can be taxable on a due or receipt basis, the fundamental requirement for it to fall under the 'Salary' head is the employer-employee relationship

Question 4

Mr. D, an Indian citizen, returns to India after many years abroad. His physical stay in India for the Financial Year 2024-25 is 200 days. His total physical stay in India during the seven financial years preceding FY 2024-25 (i.e., FY 2017-18 to FY 2023-24) was 700 days. Furthermore, in the ten financial years preceding FY 2024-25 (i.e., FY 2014-15 to FY 2023-24), he was a non-resident for 8 years and a resident for 2 years. What is Mr. D's residential status for FY 2024-25?

Accepted Answer

Resident but Not Ordinarily Resident (RNOR). To determine Mr. D's residential status for FY 2024-25:
1.  **Basic Condition for Resident:** Mr. D stayed 200 days in India in FY 2024-25. Since this is more than 182 days, he is a 'Resident'.
2.  **Additional Conditions for Not Ordinarily Resident (RNOR):** A resident is considered RNOR if they satisfy ANY ONE of the following two conditions:
    *   **Condition 1:** Stayed 729 days or less in India during the seven financial years immediately preceding the relevant financial year. Mr. D stayed 700 days in the preceding seven years (700 <= 729). This condition is SATISFIED.
    *   **Condition 2:** Was a non-resident in 9 out of the 10 financial years immediately preceding the relevant financial year. Mr. D was a non-resident for 8 years out of the preceding 10 years (8 < 9). This condition is NOT SATISFIED.
Since Mr. D satisfies Condition 1, he is a Resident but Not Ordinarily Resident (RNOR) for FY 2024-25

Question 5

Mr. D, a private sector employee not covered under the Payment of Gratuity Act, retires after 25 years and 8 months of service. His last drawn basic salary was Rs. 80,000 per month, and his Dearness Allowance (DA) was Rs. 20,000 per month, forming part of salary for retirement benefits. He received a gratuity of Rs. 15,00,000. What is the taxable amount of gratuity for Mr. D?

Accepted Answer

Rs. 2,50,000. Mr. D is not covered by the Payment of Gratuity Act. The exemption for gratuity in such cases is the least of the following:
1.  Half month’s salary for each completed year of service:
    *   Completed years of service = 25 years (8 months are ignored).
    *   Salary for calculation = Basic Salary + DA = Rs. 80,000 + Rs. 20,000 = Rs. 1,00,000 per month.
    *   Half month's salary = Rs. 1,00,000 / 2 = Rs. 50,000.
    *   Exempt amount = Rs. 50,000 * 25 years = Rs. 12,50,000.
2.  Maximum statutory limit: Rs. 20,00,000.
3.  Gratuity actually received: Rs. 15,00,000.

The least of these three amounts (Rs. 12,50,000, Rs. 20,00,000, Rs. 15,00,000) is Rs. 12,50,000.

Therefore, Exempt Gratuity = Rs. 12,50,000.
Taxable Gratuity = Actual Gratuity Received - Exempt Gratuity = Rs. 15,00,000 - Rs. 12,50,000 = Rs. 2,50,000

Question 6

According to the Income Tax Act, which of the following incomes of a non-resident assessee shall always be taxable in India?

Accepted Answer

Income received or is deemed to be received in India in the previous year.. As per the text, for a non-resident assessee, income received or is deemed to be received in India in the previous year by or on his behalf is taxable in India. Table 7.1 confirms that 'Income received or is deemed to be received in India' is taxable for a Non-resident. Income accruing or arising outside India, even if derived from a business controlled from India, is listed as 'Not-taxable' for a Non-resident

Question 7

Mr. D, an Indian citizen, was working overseas for several years and was a non-resident in India for 9 out of the 10 preceding financial years. He returned to India in FY 2024-25 and stayed for 200 days. In the 7 financial years preceding FY 2024-25, his total stay in India was 600 days. What is his residential status for FY 2024-25?

Accepted Answer

Resident but Not Ordinarily Resident. 1. Basic Resident Test: Mr. D stayed 200 days in FY 2024-25, which is more than 182 days. Hence, he is a 'Resident'.
2. Not Ordinarily Resident (NOR) Test: To be NOR, he needs to satisfy any one of the following conditions:
   - Stayed 729 days or less in last seven years: His stay was 600 days, which is less than 729 days (Condition Satisfied).
   - Being a non-resident in 9 out of 10 preceding years: He was a non-resident in 9 out of 10 preceding years (Condition Satisfied).
Since he satisfies both conditions, he is a 'Resident but Not Ordinarily Resident' for FY 2024-25

Question 8

Which of the following deductions or exemptions is NOT available to an employee opting for the New Tax Regime under the head 'Income from Salary'?

Accepted Answer

Exemption for House Rent Allowance (HRA). As per the 'Old Tax regime' vs 'New tax regime' table provided in the text:
-   **Standard deduction:** Rs. 75,000 is available under the New Tax Regime.
-   **House Rent Allowance (HRA):** Exemption of HRA is 'Not allowed under new regime'.
-   **Deduction u/s 80CCD(2) for Employer's contribution to NPS:** Up to 14% of salary is available under the New Tax Regime.
-   **Gratuity:** The computation of the exempted amount of gratuity under section 10(10) is the same for both regimes, meaning it is available.
Therefore, the exemption for House Rent Allowance (HRA) is not available under the New Tax Regime

Question 9

According to the Income Tax Act, 1961, which of the following incomes would NOT be taxable under the head 'Income from House Property'?

Accepted Answer

Rental income derived from a vacant plot of land.. The text explicitly states: 'Example, if any income is derived from a vacant land then such income shall not be chargeable to tax under the head ‘Income from house property’ as the property does not consist of any building. Such rental income is chargeable to tax under the head ‘profits and gains from business or profession’ or ‘Income from other sources’.' The other options are forms of income that are taxable under the head 'Income from House Property'

Question 10

Mr. C, an Indian Citizen, was working in London for some years and then returned to India. His physical stay in India for various financial years is provided below:

Sr. No | Financial Year | Physical stay in India (no. of days)
---|---|---
1. | 2024-25 | 298
2. | 2023-24 | 264
3. | 2022-23 | 70
4. | 2021-22 | 70
5. | 2020-21 | 50
6. | 2019-20 | 50
7. | 2018-19 | 34
8. | 2017-18 | 40
9. | 2016-17 | 60
10. | 2015-16 | 52
11. | 2014-15 | 40

If Mr. C continues to stay in India for 190 days in FY 2025-26, what will be his residential status for FY 2025-26?

Accepted Answer

Resident and Ordinarily Resident. To determine Mr. C's residential status for FY 2025-26: 1. **Basic Condition (Resident Status):** Mr. C stays 190 days in FY 2025-26, which is more than 182 days. Therefore, he is a Resident. 2. **Additional Conditions (Ordinarily Resident Status):** To be classified as a 'Resident but Not Ordinarily Resident' (RNOR), a Resident must satisfy *any one* of the following conditions. If neither is satisfied, the person is 'Resident and Ordinarily Resident' (ROR): * **Condition 1:** Stayed 729 days or less in the 7 financial years immediately preceding FY 2025-26 (i.e., FY 2018-19 to FY 2024-25). Total stay in these 7 years = 298 (2024-25) + 264 (2023-24) + 70 (2022-23) + 70 (2021-22) + 50 (2020-21) + 50 (2019-20) + 34 (2018-19) = 836 days. Since 836 days is MORE than 729 days, this condition (stayed 729 days or less) is NOT satisfied. * **Condition 2:** Has been a non-resident in 9 out of the 10 financial years immediately preceding FY 2025-26 (i.e., FY 2015-16 to FY 2024-25). Let's check his status for these 10 years: FY 2024-25: Resident (298 days > 182 days) FY 2023-24: Resident (264 days > 182 days) FY 2022-23: Non-Resident (70 days < 182 days) FY 2021-22: Non-Resident (70 days < 182 days) FY 2020-21: Non-Resident (50 days < 182 days) FY 2019-20: Non-Resident (50 days < 182 days) FY 2018-19: Non-Resident (34 days < 182 days) FY 2017-18: Non-Resident (40 days < 182 days) FY 2016-17: Non-Resident (60 days < 182 days) FY 2015-16: Non-Resident (52 days < 182 days) In these 10 preceding years, Mr. C was a Non-Resident for 8 years. Since 8 is not '9 out of 10', this condition is NOT satisfied. Since Mr. C satisfies neither of the conditions to be an RNOR, he will be classified as a Resident and Ordinarily Resident (ROR) for FY 2025-26

Question 11

Which of the following deductions or exemptions related to 'Income from Salary' is **NOT** allowed under the New Tax Regime, as specified in the provided text?

Accepted Answer

Exemption of House Rent Allowance (HRA). As per the table 'Old Tax regime vs New tax regime' under 'Applicable deductions and exemptions on income from salary':
- Standard deduction is allowed (Rs. 75,000 in New Tax Regime).
- Deduction u/s 80CCD(2) for employer's contribution to NPS is allowed (up to 14% of salary for private sector employees in New Tax Regime).
- Exemption of House Rent Allowance is 'Not allowed under new regime'.
- Taxability of employer's contribution to EPF above 12% of salary is an income component, not a deduction/exemption, and is applicable under both regimes

Question 12

Mr. B is a Resident but not ordinarily resident in India during the Financial Year 2024-25. He earns interest income from bonds held in a foreign country, which accrues and arises outside India. Will this income be taxable in India?

Accepted Answer

No, because income accruing or arising outside India is not taxable for a Resident but not ordinarily resident, unless it is derived from a business controlled from India or a profession set up in India.. According to Table 7.1 'Taxation of income based on residential status' and Example 3(b) in the provided text, 'Any other Income that accrues or arises outside India (including income from a business controlled from outside India or from a profession set up outside India)' is 'Not-taxable' for a 'Resident but not ordinarily resident'. Therefore, the bond interest income accruing and arising outside India will not be taxable in India for Mr. B

Question 13

Mr. A is a Resident but not ordinarily resident in India for FY 2024-25. He earns interest income from a bank account in USA. Will this interest income be taxable in India?

Accepted Answer

No, because income accruing outside India is not taxable for a Resident but not ordinarily resident, unless derived from a business controlled from India or a profession set up in India.. According to Table 7.1 and Example 2(a) in the text, 'Any other Income that accrues or arises outside India' is 'Not-taxable' for a 'Resident but not ordinarily resident'. Interest income from a USA bank account falls under this category

Question 14

Which of the following conditions must be satisfied for income to be chargeable to tax under the head 'Income from House Property' as per the provided text?

Accepted Answer

All of the above.. The text states several conditions for income to be taxable under 'Income from House Property':
1.  'Income is taxable under this head if it arises from a property which consists of any building or lands appurtenant thereto.' (Option A)
2.  'Under construction property is not a building and any income pertaining to it cannot be taxed under this head, but has to be taxed as Income from business or profession or income from other sources.' (Supports Option C)
3.  'Income from a building and land appurtenant thereto is chargeable to tax under the head ‘house property’ only in the hands of an owner. If a person, deriving rental income from a property, is not the owner of such property, then the income so derived shall be chargeable to tax either as business income or income from other sources but not as income from house property. To become an owner of a property, a person must hold the legal title of the property in his name.' (Supports Option B)
Therefore, all the given conditions must be satisfied

Question 15

Mr. Z, a private sector employee, has a basic salary of Rs. 1,00,00,000 (1 Crore) for FY 2024-25. His employer makes the following contributions: EPF Rs. 12,00,000 and NPS Rs. 14,00,000. Mr. Z's employee contribution to EPF is Rs. 12,00,000 and to NPS is Rs. 50,000. If Mr. Z opts for the Old Tax Regime, what is his Taxable Income under the head 'Salary'?

Accepted Answer

Rs. 1,20,00,000. Calculation for Old Tax Regime:
1. Basic Salary: Rs. 1,00,00,000
2. Add: Employer’s contribution to NPS [s. 17(1)(viii)]: Rs. 14,00,000
3. Add: Employer’s contribution to EPF (12% of basic salary is Rs. 12,00,000. Employer contribution Rs. 12,00,000 is within 12%, so Nil taxable): Rs. 0
4. Add: Aggregate of employer’s contribution to superannuation fund, EPF and NPS exceeding Rs. 7,50,000 [section 17(2)(vii)]:
   - Total employer contribution = EPF (Rs. 12,00,000) + NPS (Rs. 14,00,000) = Rs. 26,00,000.
   - Excess over Rs. 7,50,000 = Rs. 26,00,000 - Rs. 7,50,000 = Rs. 18,50,000
5. Gross Salary: Rs. 1,00,00,000 + Rs. 14,00,000 + Rs. 18,50,000 = Rs. 1,32,50,000
6. Less: Standard deduction (Old Tax Regime): Rs. (50,000)
7. Net Salary (A): Rs. 1,32,50,000 - Rs. 50,000 = Rs. 1,32,00,000
8. Less: Employee’s contribution to EPF u/s 80C (Max deduction limit is Rs. 1,50,000, as shown in example): Rs. (1,50,000)
9. Less: Employee’s contribution to NPS (section 80CCB(1B)): Rs. (50,000)
10. Less: Employer’s contribution to NPS (10% of salary for old regime) (section 80CCD(2)):
    - 10% of Basic Salary (Rs. 1,00,00,000) = Rs. 10,00,000. Deduction allowed: Rs. (10,00,000)
11. Total deduction (B): Rs. (1,50,000) + Rs. (50,000) + Rs. (10,00,000) = Rs. (12,00,000)
12. Taxable income (A-B): Rs. 1,32,00,000 - Rs. 12,00,000 = Rs. 1,20,00,000

Question 16

Mr. C, an Indian Citizen, returned to India in FY 2024-25. His physical stay in India during FY 2024-25 was 298 days. Based on this information alone, what is his residential status for FY 2024-25 according to the provided text?

Accepted Answer

Resident. As per the provided text, 'Mr. C’s stay in FY 2024-25 is more than 182 days. Hence, he is a resident.' The conditions for 'ordinarily resident' require further checks on preceding years, which are not solely covered by the given statement

Question 17

Mr. D, an Indian citizen, was working abroad. He returned to India and stayed for 200 days in FY 2024-25. In the 7 financial years preceding FY 2024-25, his total physical stay in India was 600 days. He was a non-resident in 7 out of the 10 financial years preceding FY 2024-25. Determine his residential status for FY 2024-25.

Accepted Answer

Resident but Not Ordinarily Resident (RNOR). 1. **Basic Condition for Resident**: Mr. D stayed 200 days in FY 2024-25, which is more than 182 days. Hence, he is a Resident.
2. **Additional Conditions for Not Ordinarily Resident (RNOR)**: To be RNOR, he needs to satisfy ANY ONE of the following:
   a. Stayed 729 days or less in the last seven years: His total stay in the preceding 7 years was 600 days, which is less than 729 days. (Condition satisfied).
   b. Being a non-resident in 9 out of 10 preceding years: He was a non-resident in 7 out of 10 preceding years, which is not 9 years. (Condition NOT satisfied).
Since he satisfies the first condition (stayed 729 days or less in last seven years), Mr. D is a Resident but Not Ordinarily Resident (RNOR) for FY 2024-25

Question 18

Mr. C, an Indian Citizen, returned to India in FY 2024-25. His physical stay in India for the last seven preceding financial years (FY 2017-18 to FY 2023-24) was as follows: 40, 34, 50, 50, 70, 70, 264 days respectively. For FY 2024-25, he stayed 298 days. What is Mr. C's residential status for FY 2024-25?

Accepted Answer

Resident but Not Ordinarily Resident. 1. Determine Resident Status: Mr. C's stay in FY 2024-25 is 298 days, which is more than 182 days. Therefore, he is a Resident.
2. Determine Ordinarily Resident Status (check for Not Ordinarily Resident conditions):
   To be 'Resident but Not Ordinarily Resident', he needs to satisfy any one of the following conditions:
   a) Stayed 729 days or less in the last seven years preceding the financial year.
   b) Being a non-resident in 9 out of 10 preceding years.
   Calculating the stay for the last seven preceding years (FY 2017-18 to FY 2023-24): 40 + 34 + 50 + 50 + 70 + 70 + 264 = 578 days.
   Since 578 days is less than 729 days, Mr. C satisfies the first condition. Thus, he is a Resident but Not Ordinarily Resident for FY 2024-25

Question 19

Mr. B, a private sector employee, has a basic salary of ₹15,00,000 for FY 2024-25. His employer contributes ₹21,600 to EPF and ₹210,000 to NPS. Mr. B himself contributes ₹21,600 to EPF, ₹50,000 to NPS, and ₹150,000 to PPF. Assuming he opts for the Old Tax Regime, what is his Taxable Income from Salary?

Accepted Answer

₹13,10,000. As per Example 2 (Old Tax Regime) in the text:
1.  Basic Salary: ₹15,00,000
2.  Add: Employer’s contribution to NPS [s. 17(1)(viii)]: ₹2,10,000
3.  Add: Employer’s contribution to EPF (within 12%): Nil
4.  Add: Aggregate employer’s contribution to superannuation fund, EPF and NPS exceeding ₹7,50,000 (₹21,600 + ₹2,10,000 = ₹2,31,600, which is within limit): Nil
5.  Gross Salary: ₹15,00,000 + ₹2,10,000 = ₹17,10,000
6.  Less: Standard deduction: (₹50,000)
7.  Taxable Salary (A): ₹17,10,000 - ₹50,000 = ₹16,60,000
8.  Less: Employee’s contribution to EPF u/s 80C and PPF (limited to ₹1,50,000 under 80C): (₹1,50,000)
9.  Less: Employee’s contribution to NPS (section 80CCD(1B)): (₹50,000)
10. Less: Employer’s contribution to NPS (section 80CCD(2) - 10% of salary): (₹1,50,000)
11. Total deduction (B): ₹1,50,000 + ₹50,000 + ₹1,50,000 = ₹3,50,000
12. Taxable Income (A-B): ₹16,60,000 - ₹3,50,000 = ₹13,10,000

Question 20

According to the Income Tax Act, an income that accrues or arises outside India, but is derived from a business controlled from India, is taxable for which of the following residential statuses?

Accepted Answer

Resident and Ordinarily Resident, and Resident but Not Ordinarily Resident. As per Table 7.1, for 'Income accrues or arises outside India if it is derived from a business controlled from India or from a profession set up in India', it is taxable for both 'Resident and ordinarily resident' and 'Resident but not ordinarily resident'. It is 'Not-taxable' for a 'Non-resident'

Question 21

Mr. Z is a Non-Resident for the Financial Year 2024-25. He earns income from a business controlled from India, but this income accrues outside India. How will this specific income be treated for taxation purposes in India?

Accepted Answer

Not taxable in India.. As per Table 7.1 'Taxation of income based on residential status', income that 'accrues or arises outside India if it is derived from a business controlled from India or from a profession set up in India' is 'Not-taxable' for a 'Non-resident' assessee

Question 22

Mr. B, a private sector employee, has a basic salary of Rs. 15,00,000 for FY 2024-25. His employer contributes Rs. 21,600 to EPF and Rs. 210,000 to NPS. Mr. B opts for the New Tax Regime. What is his taxable income under the head 'Salary' for FY 2024-25?

Accepted Answer

Rs. 14,25,000. Calculation for New Tax Regime:
1. Basic Salary: Rs. 15,00,000
2. Add: Employer’s contribution to NPS [s. 17(1)(viii)]: Rs. 2,10,000
3. Add: Employer’s contribution to EPF (12% of basic salary is Rs. 1,80,000. Employer contribution Rs. 21,600 is within 12%, so Nil taxable): Rs. 0
4. Add: Aggregate of employer’s contribution to superannuation fund, EPF and NPS exceeding Rs. 7,50,000 [section 17(2)(vii)]:
   - Total employer contribution = EPF (Rs. 21,600) + NPS (Rs. 2,10,000) = Rs. 2,31,600.
   - Since Rs. 2,31,600 is within the Rs. 7,50,000 limit, addition is Nil: Rs. 0
5. Gross Salary: Rs. 15,00,000 + Rs. 2,10,000 = Rs. 17,10,000
6. Less: Standard deduction (New Tax Regime): Rs. (75,000)
7. Taxable Salary (A): Rs. 17,10,000 - Rs. 75,000 = Rs. 16,35,000
8. Less: Employee’s contribution to EPF u/s 80C (Not available in New Regime): Rs. 0
9. Less: Employee’s contribution to NPS (section 80CCB(1B)) (Not available in New Regime): Rs. 0
10. Less: Employer’s contribution to NPS (14% of salary for new regime) (section 80CCD(2)):
    - 14% of Basic Salary (Rs. 15,00,000) = Rs. 2,10,000. Deduction allowed: Rs. (2,10,000)
11. Total deduction (B): Rs. (2,10,000)
12. Taxable income (A-B): Rs. 16,35,000 - Rs. 2,10,000 = Rs. 14,25,000

Question 23

Under the Income Tax Act, 1961, if a person derives rental income from a vacant land, under which head of income would it typically be chargeable to tax?

Accepted Answer

Either B or C. The text states: 'if any income is derived from a vacant land then such income shall not be chargeable to tax under the head ‘Income from house property’ as the property does not consist of any building. Such rental income is chargeable to tax under the head ‘profits and gains from business or profession’ or ‘Income from other sources'

Question 24

Mr. A, a private sector employee, has a basic salary of ₹1 crore for FY 2024-25. His employer contributes ₹12,00,000 to EPF and ₹14,00,000 to NPS. Mr. A also contributes ₹12,00,000 to EPF and ₹50,000 to NPS. If Mr. A opts for the New Tax Regime, what will be his Taxable Income from Salary?

Accepted Answer

₹1,17,75,000. As per Example 1 (New Tax Regime) in the text:
1.  Basic Salary: ₹1,00,00,000
2.  Add: Employer’s contribution to NPS [s. 17(1)(viii)]: ₹14,00,000
3.  Add: Employer’s contribution to EPF (within 12%): Nil
4.  Add: Aggregate of employer’s contribution to superannuation fund, EPF and NPS exceeding ₹7,50,000 [section 17(2)(vii)] (₹12,00,000 + ₹14,00,000 = ₹26,00,000; excess = ₹26,00,000 - ₹7,50,000): ₹18,50,000
5.  Gross Salary: ₹1,00,00,000 + ₹14,00,000 + ₹18,50,000 = ₹1,32,50,000
6.  Less: Standard deduction (New Tax Regime): (₹75,000)
7.  Net Salary (A): ₹1,32,50,000 - ₹75,000 = ₹1,31,75,000
8.  Less: Employee’s contribution to EPF u/s 80C: Nil (Not available in New Tax Regime)
9.  Less: Employee’s contribution to NPS (section 80CCD(1B)): Nil (Not available in New Tax Regime)
10. Less: Employer’s contribution to NPS (section 80CCD(2) - 14% of salary for private sector in new regime): (₹14,00,000)
11. Total deduction (B): ₹14,00,000
12. Taxable Income (A-B): ₹1,31,75,000 - ₹14,00,000 = ₹1,17,75,000

Question 25

Mr. Y, an Indian Citizen, returned to India in FY 2024-25. His physical stay in India for the relevant financial years is as follows:
FY 2024-25: 190 days
FY 2023-24: 100 days
FY 2022-23: 80 days
FY 2021-22: 70 days
FY 2020-21: 60 days
FY 2019-20: 50 days
FY 2018-19: 40 days
FY 2017-18: 30 days
FY 2016-17: 20 days
FY 2015-16: 10 days
Determine Mr. Y's residential status for FY 2024-25.

Accepted Answer

Resident but not ordinarily resident. 1.  **Resident Status for FY 2024-25**: Mr. Y's stay in FY 2024-25 is 190 days, which is more than 182 days. Therefore, he is a Resident.
2.  **Ordinarily Resident (ROR) vs. Not Ordinarily Resident (NOR)**: To be 'Not Ordinarily Resident', a resident must satisfy *any one* of the following two conditions:
    *   **Condition 1**: Stayed 729 days or less in the last seven years preceding the current financial year.
        *   Stay in preceding 7 years (FY 2023-24 to FY 2017-18): 100 + 80 + 70 + 60 + 50 + 40 + 30 = 430 days.
        *   Since 430 days is less than 729 days, this condition is satisfied.
    *   **Condition 2**: Being a non-resident in 9 out of 10 preceding financial years.
        *   Stay in preceding 10 years (FY 2023-24 to FY 2015-16): All stays (100, 80, 70, 60, 50, 40, 30, 20, 10) are less than 182 days. Thus, Mr. Y was a non-resident in all 10 preceding financial years. This means he was a non-resident in 9 out of 10 preceding years.
Since Mr. Y satisfies both conditions for 'Not Ordinarily Resident', his residential status for FY 2024-25 is Resident but not ordinarily resident

Question 26

Based on the provided text, for a Non-Resident assessee, which of the following incomes is taxable in India?

Accepted Answer

Income received or is deemed to be received in India in the previous year.. According to Table 7.1 and the introductory text for Non-Resident assessees, 'only Indian income will be taxable in India.' Specifically, income received or deemed to be received in India is taxable for a Non-Resident. Income accruing or arising outside India, even if from a business controlled from India, or any other income from outside India, is explicitly 'Not-taxable' for a Non-Resident

Question 27

Mr. A is a private sector employee with a basic salary of Rs. 1 crore. His employer makes the following contributions: EPF: Rs. 12,00,000; NPS: Rs. 14,00,000. Employee's contribution to NPS is Rs. 50,000 for the year. Calculate Mr. A's Taxable Income under the **New Tax Regime** for the financial year, based on the provided text.

Accepted Answer

Rs. 1,17,75,000. Based on Example 1 in the text for the New Tax Regime:
1.  **Basic Salary:** Rs. 1,00,00,000
2.  **Add: Employer's contribution to NPS [s. 17(1)(viii)]:** Rs. 14,00,000
3.  **Add: Employer's contribution to EPF [s. 17(1)(vi)]:** 12% of basic salary (1,00,00,000 * 12% = 12,00,000). Employer's contribution is Rs. 12,00,000, so the taxable amount is Nil.
4.  **Add: Aggregate of employer’s contribution to superannuation fund, EPF and NPS exceeding Rs. 7,50,000 [s. 17(2)(vii)]:**
    Total employer contributions = EPF (Rs. 12,00,000) + NPS (Rs. 14,00,000) = Rs. 26,00,000.
    Excess over Rs. 7,50,000 = Rs. 26,00,000 - Rs. 7,50,000 = Rs. 18,50,000.
5.  **Gross Salary:** 1,00,00,000 + 14,00,000 + 0 + 18,50,000 = Rs. 1,32,50,000
6.  **Less: Standard deduction (New Tax Regime):** Rs. 75,000
7.  **Net Salary (A):** Rs. 1,32,50,000 - Rs. 75,000 = Rs. 1,31,75,000
8.  **Less: Employee’s contribution to EPF u/s 80C:** Nil (under New Tax Regime)
9.  **Less: Employee’s contribution to NPS (section 80CCB(1B)):** Nil (under New Tax Regime)
10. **Less: Employer’s contribution to NPS (section 80CCD(2)):** Upto 14% of salary for private sector employees. 14% of Rs. 1,00,00,000 = Rs. 14,00,000. Actual employer contribution is Rs. 14,00,000. So, Rs. 14,00,000 is deductible.
11. **Total deduction (B):** Rs. 14,00,000
12. **Taxable Income (A-B):** Rs. 1,31,75,000 - Rs. 14,00,000 = Rs. 1,17,75,000

Question 28

Mr. X owns a vacant plot of land in Mumbai and earns rental income from it. Under which head of income would this rental income typically be taxed as per the Income Tax Act, 1961, based on the provided text?

Accepted Answer

Profits and Gains from Business or Profession or Income from Other Sources. The text states under 'Income from House Property': 'if any income is derived from a vacant land then such income shall not be chargeable to tax under the head ‘Income from house property’ as the property does not consist of any building. Such rental income is chargeable to tax under the head ‘profits and gains from business or profession’ or ‘Income from other sources’.'

Question 29

Which of the following deductions or exemptions available under the Old Tax Regime for 'Income from Salary' is explicitly stated as 'Not allowed' under the New Tax Regime in the provided text?

Accepted Answer

Exemption for House Rent Allowance (HRA). The table comparing Old and New Tax Regimes explicitly states: 'House Rent allowance' exemption is 'Not allowed under new regime'.
- Standard deduction is allowed under both regimes (Rs. 50,000 old, Rs. 75,000 new).
- Deduction u/s 80CCD(2) for employer's contribution to NPS is allowed under both regimes.
- Gratuity exemption rules are stated as 'The computation of exempted amount of gratuity under section 10(10) for both the regimes is same'

Question 30

Mr. Vilayati, a foreign national, came to India for employment on April 1, 2024, after being overseas and a non-resident for 20 years, during which he spent approximately 30 days in India each year. He will continue to stay in India for the entire year(s) going forward. What will be his residential status for FY 2026-27?

Accepted Answer

Resident and Ordinarily Resident. As per Example 3 in the text:
- For FY 2024-25, Mr. Vilayati is Resident but not ordinarily resident.
- For FY 2025-26, Mr. Vilayati is Resident but not ordinarily resident.
- For FY 2026-27, his stay in India will be more than 182 days, making him a Resident. For the secondary tests:
  - He will not be a non-resident in 9 out of 10 preceding years (since he was resident in FY 2024-25 and FY 2025-26).
  - He will have spent more than 730 days in the preceding 7 financial years (365 days in FY 2025-26 + 365 days in FY 2024-25 + 5*30 days in previous 5 years = 365+365+150 = 880 days). Therefore, he does not satisfy either of the two conditions to be 'Not Ordinarily Resident'.
Hence, he will be a Resident and Ordinarily Resident for FY 2026-27

Question 31

Mr. D, an Indian citizen, returned to India in FY 2024-25 and stayed for 200 days. His stay in India in the preceding 7 financial years was 60 days each year. What is his residential status for FY 2024-25?

Accepted Answer

Resident but Not Ordinarily Resident (RNOR). 1.  **Basic Condition for Resident**: Mr. D stayed 200 days in India during FY 2024-25. Since his stay is more than 182 days, he is a 'Resident'.
2.  **Additional Conditions for ROR/RNOR**: To be 'Resident and Ordinarily Resident' (ROR), a resident must satisfy BOTH of the following conditions:
    *   Stayed in India for 730 days or more in the 7 years immediately preceding the relevant financial year.
    *   Been a resident in at least 2 out of the 10 years immediately preceding the relevant financial year.
    Mr. D's stay in the 7 preceding financial years = 60 days/year × 7 years = 420 days. This is less than 730 days. Therefore, he does not satisfy the first additional condition for being ROR.
    As per the text, to be 'not-ordinarily resident', one needs to satisfy any one of the following conditions: 'Stayed 729 days or less in last seven years' OR 'Being a non-resident in 9 out of 10 preceding years'. Since Mr. D stayed 420 days (less than 729 days) in the last seven years, he satisfies the condition to be a 'Resident but Not Ordinarily Resident' (RNOR) for FY 2024-25

Question 32

For income to be taxable under the head 'Income from House Property', which of the following is a mandatory condition as per the provided text?

Accepted Answer

The assessee must be the legal owner of the property.. The text states under 'Ownership of property': 'Income from a building and land appurtenant thereto is chargeable to tax under the head ‘house property’ only in the hands of an owner. If a person, deriving rental income from a property, is not the owner of such property, then the income so derived shall be chargeable to tax either as business income or income from other sources but not as income from house property.'
- Option A is incorrect: 'if any income is derived from a vacant land then such income shall not be chargeable to tax under the head ‘Income from house property’'.
- Option C is incorrect: 'Under construction property is not a building and any income pertaining to it cannot be taxed under this head'.
- Option D is incorrect as it implies business income, not house property income, if the person is not the owner

Question 33

According to the provided text, which of the following incomes is taxable in India for a non-resident assessee?

Accepted Answer

Income received or deemed to be received in India.. As per the text, for a non-resident assessee, income received or is deemed to be received in India in the previous year by or on his behalf is taxable in India. Table 7.1 also explicitly states 'Income received or is deemed to be received in India' is 'Taxable' for a Non-resident. Options B and C are explicitly stated as 'Not-taxable' for a non-resident in Table 7.1. Option D is incorrect as worldwide income is generally taxable only for a Resident and ordinarily resident

Question 34

Which of the following conditions is NOT a prerequisite for an income to be taxable under the head 'Income from Salary' as per the Income Tax Act, 1961?

Accepted Answer

The income is derived from a business controlled by the assessee.. The text states: 'Taxability of an income under this head pre-requisites existence of employee and employer relationship. In the absence of the employer-employee relationship, the income shall be assessable either as business income or income from other sources.' Therefore, income from a business controlled by the assessee is not taxable under 'Income from Salary'. Options A, B, and C are explicitly mentioned as conditions or inclusions under salary income

Question 35

Which of the following conditions is a prerequisite for an income to be taxable under the head 'Income from Salary' as per the Income Tax Act, 1961?

Accepted Answer

There must be an employer-employee relationship.. The text states: 'Taxability of an income under this head pre-requisites existence of employee and employer relationship. In the absence of the employer-employee relationship, the income shall be assessable either as business income or income from other sources.' Options A, C, and D are incorrect as salary can include non-monetary benefits, a resident and ordinarily resident is taxed on worldwide income, and income is taxable on due or receipt basis, whichever is earlier

Question 36

Mr. E is a Resident but Not Ordinarily Resident (RNOR) in India for the Financial Year 2024-25. He earns income from a business controlled entirely from outside India, which also accrues and arises outside India. How will this income be treated for taxation purposes in India?

Accepted Answer

It will not be taxable in India.. According to Table 7.1, for a Resident but Not Ordinarily Resident (RNOR), any income that accrues or arises outside India (including income from a business controlled from outside India or from a profession set up outside India) is 'Not-taxable' in India. Therefore, Mr. E's income from a business controlled from outside India, accruing outside India, will not be taxable in India

Question 37

According to Table 7.1, which of the following incomes is taxable in India for a Non-Resident (NR)?

Accepted Answer

Income received or is deemed to be received in India.. As per Table 7.1, for a Non-Resident, 'Income received or is deemed to be received in India' is taxable. Income accruing or arising outside India, even if from a business controlled from India or a profession set up outside India, is explicitly stated as 'Not-taxable' for a Non-Resident

Question 38

In the case of a non-resident assessee, which of the following incomes is generally taxable in India as per the provided text?

Accepted Answer

Both income received or deemed to be received in India AND income accruing or arising or deemed to accrue or arise in India.. As per the text, for a non-resident assessee, income taxable in India includes: a) Income received or is deemed to be received in India in the previous year by or on his behalf; and b) Income accrues or arises or is deemed to accrue or arise to such person in India during such year. In other words, only Indian income will be taxable in India

Question 39

Mr. A, a private sector employee, has a basic salary of Rs. 1 crore. His employer contributes Rs. 12,00,000 to EPF and Rs. 14,00,000 to NPS. Calculate his taxable income under the head salary for FY 2024-25 under the **New Tax Regime**.

Accepted Answer

Rs. 1,17,75,000. Based on Example 1 (New Tax Regime) in the text:
1.  **Basic Salary:** Rs. 1,00,00,000
2.  **Add: Employer’s contribution to NPS [s. 17(1)(viii)]:** Rs. 14,00,000
3.  **Add: Employer’s contribution to EPF:** Nil (since employer’s contribution is up to 12% of salary, the taxable amount is Nil – section 17(1)(vi))
4.  **Add: Aggregate of employer’s contribution to superannuation fund, EPF and NPS exceeding Rs. 7,50,000 [section 17(2)(vii)]:**
    *   Total employer contribution = EPF (Rs. 12,00,000) + NPS (Rs. 14,00,000) = Rs. 26,00,000
    *   Excess over Rs. 7,50,000 = Rs. 26,00,000 - Rs. 7,50,000 = Rs. 18,50,000
5.  **Gross Salary:** 1,00,00,000 + 14,00,000 + 0 + 18,50,000 = Rs. 1,32,50,000
6.  **Less: Standard deduction:** (Rs. 75,000) (as per New Tax Regime)
7.  **Net Salary (A):** 1,32,50,000 - 75,000 = Rs. 1,31,75,000
8.  **Less: Employee’s contribution to EPF u/s 80C:** Nil (Not available in New Tax Regime)
9.  **Less: Employee’s contribution to NPS (section 80CCB(1B)):** Nil (Not available in New Tax Regime)
10. **Less: Employer’s contribution to NPS (section 80CCD(2)):** (Up to 14% of salary for private sector employees under New Tax Regime)
    *   14% of Basic Salary (Rs. 1,00,00,000) = Rs. 14,00,000.
    *   Actual employer contribution to NPS is Rs. 14,00,000. So, the deduction is Rs. 14,00,000.
11. **Total deduction (B):** (Rs. 14,00,000)
12. **Taxable income (A-B):** 1,31,75,000 - 14,00,000 = **Rs. 1,17,75,000**

Question 40

Mr. S, an Indian citizen, was working overseas for several years. He returned to India on April 1, 2024, and stayed for the entire Financial Year 2024-25. In the seven financial years immediately preceding FY 2024-25, he had stayed a total of 650 days in India. In the ten financial years immediately preceding FY 2024-25, he was a non-resident for 8 of those years. What is Mr. S's residential status for FY 2024-25?

Accepted Answer

Resident but Not Ordinarily Resident (RNOR). To determine Mr. S's residential status for FY 2024-25:

1.  **Basic Condition for Resident Status:** Mr. S stayed in India for the entire FY 2024-25 (365 days), which is more than 182 days. Hence, he is a **Resident**.

2.  **Secondary Conditions for 'Not Ordinarily Resident' (RNOR):** A resident is considered 'not ordinarily resident' if they satisfy *any one* of the following conditions:
    *   **Condition 1:** Stayed 729 days or less in India during the seven financial years preceding the relevant financial year.
        *   Mr. S stayed 650 days in the seven preceding financial years. Since 650 days <= 729 days, this condition is **satisfied**.
    *   **Condition 2:** Was a non-resident in 9 out of the 10 financial years preceding the relevant financial year.
        *   Mr. S was a non-resident in 8 out of the 10 preceding financial years. Since 8 is not >= 9, this condition is **NOT satisfied**.

Since Mr. S satisfies Condition 1 for being 'not ordinarily resident', he is a **Resident but Not Ordinarily Resident (RNOR)** for FY 2024-25

Question 41

Mr. B is a private sector employee with a basic salary of Rs. 15,00,000 for FY 2024-25. His employer makes the following contributions:
*   Employer's contribution to EPF: Rs. 21,600
*   Employer's contribution to NPS: Rs. 210,000

Mr. B also contributes to EPF Rs. 21,600, to NPS Rs. 50,000, and to PPF Rs. 150,000.
Calculate Mr. B's taxable income under the **New Tax Regime** for FY 2024-25, based on the provided text.

Accepted Answer

Rs. 14,25,000. Calculation for New Tax Regime:
1.  **Basic Salary**: Rs. 15,00,000
2.  **Additions to Salary (Gross Salary calculation)**:
    *   Employer's contribution to EPF (Section 17(1)(vi)): 12% of basic salary = 12% of Rs. 15,00,000 = Rs. 1,80,000. Since the employer's contribution (Rs. 21,600) is within this limit, the taxable amount is Nil.
    *   Employer's contribution to NPS (Section 17(1)(viii)): Rs. 2,10,000 (fully added).
    *   Aggregate of employer's contribution to superannuation fund, EPF, and NPS exceeding Rs. 7,50,000 (Section 17(2)(vii)): Total employer contribution = Rs. 21,600 (EPF) + Rs. 2,10,000 (NPS) = Rs. 2,31,600. Since this is less than Rs. 7,50,000, the addition is Nil.
3.  **Gross Salary**: Rs. 15,00,000 + Rs. 2,10,000 = Rs. 17,10,000
4.  **Less: Standard Deduction (New Tax Regime)**: Rs. 75,000
5.  **Taxable Salary (A)**: Rs. 17,10,000 - Rs. 75,000 = Rs. 16,35,000
6.  **Less: Deductions (B) (New Tax Regime)**:
    *   Employee's contribution to EPF u/s 80C and PPF: Not available in the New Tax Regime (Nil).
    *   Employee's contribution to NPS u/s 80CCD(1B): Not available in the New Tax Regime (Nil).
    *   Employer's contribution to NPS u/s 80CCD(2): Up to 14% of salary for private sector employees. 14% of Rs. 15,00,000 = Rs. 2,10,000. (Deduction allowed up to actual contribution or 14% of salary, whichever is lower. Here, it is Rs. 2,10,000).
7.  **Total Deduction (B)**: Rs. 2,10,000
8.  **Taxable Income (A - B)**: Rs. 16,35,000 - Rs. 2,10,000 = Rs. 14,25,000

Question 42

For income to be chargeable under the head 'Income from House Property' as per the Income Tax Act, 1961, which of the following conditions is essential?

Accepted Answer

The assessee must hold the legal title of the property in their name.. According to the text under 'Income from House Property':
-   The income is taxable under this head if it arises from a property consisting of 'any building or lands appurtenant thereto'. Income from vacant land is explicitly stated as not chargeable under this head.
-   'Under construction property is not a building and any income pertaining to it cannot be taxed under this head'.
-   'Income from a building and land appurtenant thereto is chargeable to tax under the head ‘house property’ only in the hands of an owner. To become an owner of a property, a person must hold the legal title of the property in his name.' This confirms that legal ownership is an essential condition.
-   The location of the property (e.g., metropolitan city) is not mentioned as an essential condition for chargeability under this head

Question 43

Mr. D is a private sector employee with a basic salary of Rs. 20,00,000 for FY 2024-25. His employer makes the following contributions:

*   Employer's contribution to EPF: Rs. 2,40,000
*   Employer's contribution to NPS: Rs. 6,00,000

Assuming Mr. D opts for the New Tax Regime, what is his taxable salary for the year?

Accepted Answer

Rs. 23,35,000. Calculation of Taxable Salary under the New Tax Regime:

1.  **Basic Salary:** Rs. 20,00,000

2.  **Additions to Salary (Gross Salary components):**
    *   **Employer's contribution to NPS [Section 17(1)(viii)]:** Rs. 6,00,000 (fully added to salary)
    *   **Employer's contribution to EPF [Section 17(1)(vi)]:** Nil (since Rs. 2,40,000 is 12% of basic salary, which is within the exempt limit of 12%)
    *   **Aggregate of employer's contribution to Superannuation Fund, EPF, and NPS exceeding Rs. 7,50,000 [Section 17(2)(vii)]:**
        Total employer contributions = EPF (Rs. 2,40,000) + NPS (Rs. 6,00,000) = Rs. 8,40,000
        Excess over Rs. 7,50,000 = Rs. 8,40,000 - Rs. 7,50,000 = Rs. 90,000 (added to salary as a perquisite)

3.  **Gross Salary:**
    Basic Salary + NPS contribution (s.17(1)(viii)) + Excess Aggregate contribution (s.17(2)(vii))
    Rs. 20,00,000 + Rs. 6,00,000 + Rs. 90,000 = Rs. 26,90,000

4.  **Deductions (New Tax Regime):**
    *   **Standard Deduction:** Rs. 75,000
    *   **Employer's contribution to NPS [Section 80CCD(2)]:** This deduction is allowed up to 14% of salary for private sector employees. 'Salary' for this purpose means Basic Salary.
        14% of Basic Salary (Rs. 20,00,000) = Rs. 2,80,000.
        The deduction allowed is the lower of actual employer contribution (Rs. 6,00,000) or 14% of salary (Rs. 2,80,000). So, Rs. 2,80,000.

5.  **Taxable Salary:**
    Gross Salary - Standard Deduction - 80CCD(2) Deduction
    Rs. 26,90,000 - Rs. 75,000 - Rs. 2,80,000 = Rs. 23,35,000

Question 44

Mr. P is a private sector employee with a basic salary of Rs. 20,00,000 per annum. His employer contributes 15% of his basic salary to EPF and 12% of his basic salary to NPS. Mr. P opts for the New Tax Regime for FY 2024-25. What is Mr. P's taxable income under the head 'Salary', before considering any other deductions apart from standard deduction and 80CCD(2)?

Accepted Answer

Rs. 19,85,000. 1. Basic Salary: Rs. 20,00,000
2. Employer's EPF contribution: 15% of Rs. 20,00,000 = Rs. 3,00,000
3. Employer's NPS contribution: 12% of Rs. 20,00,000 = Rs. 2,40,000

**Calculation of Gross Salary:**
*   Basic Salary: Rs. 20,00,000
*   Add: Employer's contribution to NPS [s. 17(1)(viii)]: Rs. 2,40,000 (fully added to salary)
*   Add: Employer's contribution to EPF [s. 17(1)(vi)]: (Rs. 3,00,000 - 12% of Basic Salary i.e., Rs. 2,40,000) = Rs. 60,000 (excess over 12% is taxable)
*   Add: Aggregate of employer's contribution to superannuation fund, EPF and NPS exceeding Rs. 7,50,000 [section 17(2)(vii)]:
    *   Total contributions = Rs. 3,00,000 (EPF) + Rs. 2,40,000 (NPS) = Rs. 5,40,000.
    *   Since Rs. 5,40,000 is less than Rs. 7,50,000, there is no additional perquisite. Hence, Nil.
*   **Gross Salary = Rs. 20,00,000 + Rs. 2,40,000 + Rs. 60,000 + Nil = Rs. 23,00,000**

**Calculation of Taxable Income:**
*   Gross Salary: Rs. 23,00,000
*   Less: Standard Deduction (New Tax Regime): Rs. 75,000
*   Salary after Standard Deduction (A): Rs. 23,00,000 - Rs. 75,000 = Rs. 22,25,000
*   Less: Deduction u/s 80CCD(2) (Employer's NPS contribution, New Tax Regime):
    *   Deduction allowed is up to 14% of salary or actual employer contribution, whichever is lower.
    *   14% of Basic Salary (Rs. 20,00,000) = Rs. 2,80,000
    *   Actual Employer NPS contribution = Rs. 2,40,000
    *   Lower of the two = Rs. 2,40,000
*   **Taxable Income (A-B) = Rs. 22,25,000 - Rs. 2,40,000 = Rs. 19,85,000**

Question 45

Which of the following statements is TRUE regarding income taxable under the head 'Income from Salary'?

Accepted Answer

The existence of an employer-employee relationship is a prerequisite for income to be taxed under this head.. A. False: The income under this head shall be taxable on due basis or receipt basis, whichever is earlier.
B. True: The text states, 'Taxability of an income under this head pre-requisites existence of employee and employer relationship.'
C. False: Section 17(1) defines salary to include 'perquisite or profits in lieu of salary'.
D. False: Employer's contribution to NPS is added as salary income under Section 17(1)(viii) and is also considered for the aggregate contribution limit exceeding Rs. 7,50,000

Question 46

Mr. B is a private sector employee with a basic salary of Rs. 15,00,000 for the Financial Year 2024-25. His employer makes the following contributions:
- Employer's contribution to EPF: Rs. 21,600
- Employer's contribution to NPS: Rs. 210,000
Calculate Mr. B's taxable income under the head 'Salary' if he opts for the New Tax Regime.

Accepted Answer

Rs. 14,25,000. Calculation for Mr. B under the New Tax Regime:
1.  **Basic Salary:** Rs. 15,00,000
2.  **Add: Employer's contribution to NPS [Section 17(1)(viii)]:** Rs. 2,10,000 (This is fully taxable as part of salary).
3.  **Add: Employer's contribution to EPF [Section 17(1)(vi)]:** 12% of Basic Salary = 0.12 * 15,00,000 = Rs. 1,80,000. Since the employer's contribution of Rs. 21,600 is within 12% of salary, the taxable amount is Nil.
4.  **Add: Aggregate of employer’s contribution to superannuation fund, EPF and NPS exceeding Rs. 7,50,000 [Section 17(2)(vii)]:** Total employer contribution (EPF + NPS) = 21,600 + 210,000 = Rs. 2,31,600. Since this aggregate is less than Rs. 7,50,000, there is no additional amount to be added under this section.
5.  **Gross Salary:** 15,00,000 (Basic Salary) + 2,10,000 (Taxable NPS contribution) = Rs. 17,10,000.
6.  **Less: Standard Deduction:** Rs. 75,000 (Allowed under New Tax Regime).
7.  **Taxable Salary (A):** 17,10,000 - 75,000 = Rs. 16,35,000.
8.  **Less: Employee's contribution to EPF u/s 80C and PPF:** Not available under the New Tax Regime (Nil).
9.  **Less: Employee's contribution to NPS (Section 80CCD(1B)):** Not available under the New Tax Regime (Nil).
10. **Less: Employer’s contribution to NPS (Section 80CCD(2)):** Deduction is allowed up to 14% of salary for private sector employees under the New Tax Regime. 14% of 15,00,000 = Rs. 2,10,000. The actual employer contribution to NPS is Rs. 2,10,000. So, the deduction is Rs. 2,10,000.
11. **Total Deduction (B):** Rs. 2,10,000.
12. **Taxable Income (A-B):** 16,35,000 - 2,10,000 = Rs. 14,25,000

Question 47

Which of the following deductions or exemptions available under the 'Old Tax Regime' for salary income is explicitly stated as 'Not allowed' under the 'New Tax Regime'?

Accepted Answer

Employee's contribution to NPS under section 80CCD(1B). Based on the 'Old Tax Regime' vs 'New Tax Regime' table:
*   A. Standard deduction is available in both regimes (Rs. 50,000 old, Rs. 75,000 new).
*   B. Employer's contribution to NPS under section 80CCD(2) is available in both regimes (upto 10% old, upto 14% new for private sector).
*   C. Employee's contribution to NPS under section 80CCD(1B) is specifically stated as 'Not available' under the New Tax Regime.
*   D. Gratuity exemption computation is stated to be 'same' for both regimes

Question 48

Which of the following income sources would NOT be taxable under the head 'Income from House Property', according to the provided text?

Accepted Answer

Rental income derived from a vacant plot of land owned by the assessee.. The text explicitly states: 'if any income is derived from a vacant land then such income shall not be chargeable to tax under the head ‘Income from house property’ as the property does not consist of any building. Such rental income is chargeable to tax under the head ‘profits and gains from business or profession’ or ‘Income from other sources’.' Options A, B, and D describe income from property consisting of a building or land appurtenant thereto, owned by the assessee, which falls under 'Income from House Property'

Question 49

Mr. P is a private sector employee with a basic salary of Rs. 20,00,000 for FY 2024-25. His employer makes the following contributions:
- Employer’s contribution to EPF: Rs. 2,50,000
- Employer’s contribution to NPS: Rs. 2,80,000
Mr. P (employee) makes the following contributions:
- Employee’s contribution to EPF: Rs. 1,80,000
- Employee’s contribution to NPS: Rs. 50,000
Assuming no other income or deductions, calculate Mr. P's 'Taxable income' under the Old Tax Regime for FY 2024-25.

Accepted Answer

Rs. 18,40,000. Here is the calculation for Mr. P under the Old Tax Regime:

**Particulars**

**Amount (Rs.)**

**Salary Income Computation:**
Basic Salary
20,00,000
Add: Employer’s contribution to NPS [s. 17(1)(viii)]
2,80,000
Add: Employer’s contribution to EPF (Taxable portion above 12% of salary)
   (12% of Rs. 20,00,000 = Rs. 2,40,000. Actual contribution = Rs. 2,50,000)
   (Rs. 2,50,000 - Rs. 2,40,000)
10,000
Add: Aggregate of employer’s contribution to superannuation fund, EPF and NPS to the extent to which it exceeds Rs. 7,50,000 [s. 17(2)(vii)]
   (Total Employer Contribution = Rs. 2,50,000 (EPF) + Rs. 2,80,000 (NPS) = Rs. 5,30,000)
   (Since Rs. 5,30,000 is less than Rs. 7,50,000, this addition is Nil)
Nil
**Gross Salary**
**22,90,000**
Less: Standard deduction
(50,000)
**Net Salary (A)**
**22,40,000**

**Less: Deductions (B):**
Employee’s contribution to EPF u/s 80C (Max Rs. 1,50,000)
(1,50,000)
Employee’s contribution to NPS (section 80CCD(1B)) (Max Rs. 50,000)
(50,000)
Employer’s contribution to NPS (section 80CCD(2)) (Least of actual contribution or 10% of salary)
   (10% of Basic Salary = 10% of Rs. 20,00,000 = Rs. 2,00,000)
   (Actual Employer NPS contribution = Rs. 2,80,000. Deductible = Rs. 2,00,000)
(2,00,000)
**Total Deduction (B)**
**(4,00,000)**

**Taxable Income (A-B)**
**18,40,000**

Question 50

Mr. X, a private sector employee not covered under the Payment of Gratuity Act, retires after 25 years and 8 months of service. His last drawn salary (Basic + DA forming part of retirement benefits) was Rs. 80,000 per month. He received a gratuity of Rs. 15,00,000. What is the maximum amount of gratuity exempt from tax?

Accepted Answer

Rs. 10,00,000. For an employee not covered under the Payment of Gratuity Act, the exemption is the least of the following:
1.  Half month’s salary for each completed year of service.
2.  Rs. 20,00,000 (Statutory limit).
3.  Gratuity actually received.

Calculations:
-   Completed years of service = 25 years (8 months are ignored for 'completed years').
-   Half month's salary = Rs. 80,000 / 2 = Rs. 40,000.
-   Half month's salary for each completed year of service = Rs. 40,000 * 25 years = Rs. 10,00,000.
-   Statutory limit = Rs. 20,00,000.
-   Gratuity actually received = Rs. 15,00,000.

The least of these three amounts (Rs. 10,00,000, Rs. 20,00,000, Rs. 15,00,000) is Rs. 10,00,000.
Therefore, the maximum amount of gratuity exempt from tax is Rs. 10,00,000

Ch.5: Retirement Products

What You Will Learn in This Chapter

Multiple Choice Questions (50)

Case-Based Questions (2 sets)

Ready to Test Yourself Under Exam Conditions?