Multiple Choice Questions (50)
Q1
MCQ · 1 mark
EasyResidential Status and Income Taxability
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?
AIncome accrues or arises outside India if derived from a business controlled from India.
✓Income received or is deemed to be received in India.
CAny other income that accrues or arises outside India.
DIncome from a profession set up outside 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.
Q2
MCQ · 1 mark
HardSalary Income Calculation (New Tax Regime)
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?
✓Rs. 17,25,000
BRs. 17,70,000
CRs. 18,00,000
DRs. 16,50,000
💡 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**
Q3
MCQ · 1 mark
EasyIncome from Salary Prerequisites
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?
AThe income must be received in India.
BThe assessee must be an Indian citizen.
✓There must be an employer-employee relationship.
DThe income must be received on a due basis.
💡 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.
Q4
MCQ · 1 mark
MediumResidential Status
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?
AResident and Ordinarily Resident (ROR)
✓Resident but Not Ordinarily Resident (RNOR)
CNon-Resident (NR)
DDeemed Resident
💡 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.
Q5
MCQ · 1 mark
HardGratuity Taxation
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?
ARs. 0
✓Rs. 2,50,000
CRs. 5,00,000
DRs. 15,00,000
💡 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.
Q6
MCQ · 1 mark
EasyTaxation of Non-Residents
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.
BIncome accrues or arises outside India if it is derived from a business controlled from India.
CAny other income that accrues or arises outside India (including income from a profession set up outside India).
DIncome from a profession set up outside 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 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.
Q7
MCQ · 1 mark
MediumDetermination of Residential Status
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?
AResident and Ordinarily Resident
✓Resident but Not Ordinarily Resident
CNon-resident
DDeemed 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.
Q8
MCQ · 1 mark
MediumIncome from Salary - Deductions and Exemptions
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'?
AStandard Deduction of Rs. 75,000
✓Exemption for House Rent Allowance (HRA)
CDeduction for employer's contribution to NPS under Section 80CCD(2)
DExemption for gratuity received as per Section 10(10)
💡 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.
Q9
MCQ · 1 mark
EasyIncome from House Property
According to the Income Tax Act, 1961, which of the following incomes would NOT be taxable under the head 'Income from House Property'?
ARental income from a building and land appurtenant thereto owned by the assessee.
BIncome from a self-occupied house property.
✓Rental income derived from a vacant plot of land.
DIncome from a deemed let-out house property.
💡 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'.
Q10
MCQ · 1 mark
MediumResidential Status
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
BResident but Not Ordinarily Resident
CNon-Resident
DDeemed 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.
Q11
MCQ · 1 mark
MediumSalary Deductions & Exemptions
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?
AStandard deduction
BDeduction for employer's contribution to NPS under section 80CCD(2)
✓Exemption of House Rent Allowance (HRA)
DTaxability of employer's contribution to EPF above 12% of salary
💡 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.
Q12
MCQ · 1 mark
MediumTaxability based on Residential Status
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?
AYes, as all income of a resident is taxable in India.
✓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.
CYes, but only if the interest is received in India.
DYes, but only if Mr. B is an Indian citizen.
💡 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.
Q13
MCQ · 1 mark
MediumTaxation of Income based on Residential Status
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?
AYes, because all income of a Resident is taxable in India.
✓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.
CYes, because it is deemed to be received in India.
DNo, because it is foreign income and never taxable in India for any status.
💡 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.
Q14
MCQ · 1 mark
EasyIncome from House Property Conditions
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?
AThe property must consist of any building or lands appurtenant thereto.
BThe assessee must hold the legal title of the property in their name (i.e., be the owner).
CThe property must not be under construction, as income from such property is taxed under other heads.
✓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.
Q15
MCQ · 1 mark
HardTaxable Salary - Old Tax Regime
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'?
ARs. 1,32,00,000
✓Rs. 1,20,00,000
CRs. 1,31,75,000
DRs. 1,17,75,000
💡 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
Q16
MCQ · 1 mark
EasyResidential Status
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?
ANon-resident
✓Resident
CResident but not ordinarily resident
DResident and ordinarily 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.
Q17
MCQ · 1 mark
MediumResidential Status Determination
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.
AResident and Ordinarily Resident (ROR)
✓Resident but Not Ordinarily Resident (RNOR)
CNon-Resident (NR)
DDeemed Resident
💡 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.
Q18
MCQ · 1 mark
MediumResidential Status Determination
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?
AResident and Ordinarily Resident
✓Resident but Not Ordinarily Resident
CNon-resident
DDeemed 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.
Q19
MCQ · 1 mark
MediumIncome from Salary - Old Tax Regime
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?
A₹17,10,000
B₹16,60,000
✓₹13,10,000
D₹14,25,000
💡 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
Q20
MCQ · 1 mark
EasyTaxation of Income based on Residential Status
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?
AOnly Resident and Ordinarily Resident
BOnly Non-resident
✓Resident and Ordinarily Resident, and Resident but Not Ordinarily Resident
DResident but Not Ordinarily Resident, and Non-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'.
Q21
MCQ · 1 mark
EasyTaxability based on Residential Status
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?
ATaxable in India.
✓Not taxable in India.
CTaxable only if repatriated to India.
DTaxable at a reduced rate.
💡 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.
Q22
MCQ · 1 mark
MediumTaxable Salary - New Tax Regime
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?
ARs. 16,35,000
✓Rs. 14,25,000
CRs. 17,10,000
DRs. 13,10,000
💡 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
Q23
MCQ · 1 mark
EasyHeads of Income
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?
AIncome from House Property
BProfits and Gains from Business or Profession
CIncome from Other Sources
✓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'.
Q24
MCQ · 1 mark
HardIncome from Salary - New Tax Regime
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?
A₹1,32,50,000
B₹1,31,75,000
C₹1,20,00,000
✓₹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
Q25
MCQ · 1 mark
MediumResidential Status Determination
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.
AResident and ordinarily resident
✓Resident but not ordinarily resident
CNon-resident
DDeemed 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.
Q26
MCQ · 1 mark
EasyTaxability of Income for Non-Residents
Based on the provided text, for a Non-Resident assessee, which of the following incomes is taxable in India?
✓Income received or is deemed to be received in India in the previous year.
BIncome accrues or arises outside India if it is derived from a business controlled from India.
CAny other income that accrues or arises outside India.
DInterest income from an offshore bank account.
💡 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.
Q27
MCQ · 1 mark
HardIncome from Salary - Computation (New Tax Regime)
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.
✓Rs. 1,17,75,000
BRs. 1,20,00,000
CRs. 1,31,75,000
DRs. 1,32,50,000
💡 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
Q28
MCQ · 1 mark
MediumIncome from House Property Classification
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?
AIncome from House Property
BIncome from Salary
✓Profits and Gains from Business or Profession or Income from Other Sources
DCapital Gains
💡 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’.'
Q29
MCQ · 1 mark
MediumIncome from Salary - Deductions
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?
AStandard Deduction
BDeduction for employer's contribution to NPS under section 80CCD(2)
✓Exemption for House Rent Allowance (HRA)
DExemption for Gratuity
💡 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'.
Q30
MCQ · 1 mark
EasyResidential Status Determination
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?
ANon-Resident
BResident but Not Ordinarily Resident
✓Resident and Ordinarily Resident
DDeemed 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.
Q31
MCQ · 1 mark
MediumResidential Status Determination
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?
AResident and Ordinarily Resident (ROR)
✓Resident but Not Ordinarily Resident (RNOR)
CNon-Resident (NR)
DDeemed Resident
💡 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.
Q32
MCQ · 1 mark
EasyIncome from House Property
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?
AThe income must be derived from a vacant plot of land.
✓The assessee must be the legal owner of the property.
CThe property must be under construction during the financial year.
DThe income is derived from a business controlling the property, not on behalf of the owner.
💡 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.
Q33
MCQ · 1 mark
EasyTaxation of Non-Residents
According to the provided text, which of the following incomes is taxable in India for a non-resident assessee?
✓Income received or deemed to be received in India.
BAny other income that accrues or arises outside India.
CIncome accrues or arises outside India from a business controlled from India.
DWorldwide income, regardless of its source.
💡 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.
Q34
MCQ · 1 mark
EasyIncome from Salary - Basic Concepts
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?
AThe income is derived from an employer-employee relationship.
BThe income is taxable on a due basis or receipt basis, whichever is earlier.
CThe income includes perquisites or profits in lieu of salary.
✓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.
Q35
MCQ · 1 mark
MediumIncome from Salary
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?
AThe income must be received in cash only.
✓There must be an employer-employee relationship.
CThe income must be earned exclusively within India.
DThe income must be taxable only on a due basis, not receipt basis.
💡 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.
Q36
MCQ · 1 mark
EasyTaxation of Income based on Residential Status
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?
AIt will be fully taxable in India.
✓It will not be taxable in India.
CIt will be taxable only if received in India.
DIt will be taxable at a concessional rate.
💡 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.
Q37
MCQ · 1 mark
EasyResidential Status & Taxation
According to Table 7.1, which of the following incomes is taxable in India for a Non-Resident (NR)?
AIncome accrues or arises outside India if derived from a business controlled from India.
BAny other income that accrues or arises outside India.
✓Income received or is deemed to be received in India.
DIncome accrues or arises outside India from a profession set up outside 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.
Q38
MCQ · 1 mark
EasyTaxation of Non-Residents
In the case of a non-resident assessee, which of the following incomes is generally taxable in India as per the provided text?
AOnly income received or deemed to be received in India in the previous year.
BOnly income accruing or arising or deemed to accrue or arise to such person in India during such year.
✓Both income received or deemed to be received in India AND income accruing or arising or deemed to accrue or arise in India.
DWorldwide income, regardless of where it is received or accrued.
💡 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.
Q39
MCQ · 1 mark
MediumSalary Income Taxation (New Tax Regime)
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**.
ARs. 1,31,75,000
BRs. 1,20,00,000
✓Rs. 1,17,75,000
DRs. 1,32,50,000
💡 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**
Q40
MCQ · 1 mark
MediumResidential Status Determination
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?
AResident and Ordinarily Resident (ROR)
✓Resident but Not Ordinarily Resident (RNOR)
CNon-resident (NR)
DStatus cannot be determined with the given information.
💡 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.
Q41
MCQ · 1 mark
HardSalary Income Calculation (New Tax Regime)
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.
✓Rs. 14,25,000
BRs. 13,10,000
CRs. 16,35,000
DRs. 15,00,000
💡 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
Q42
MCQ · 1 mark
EasyIncome from House Property
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?
AThe property must be located in a metropolitan city.
BThe income must be derived from a vacant land.
✓The assessee must hold the legal title of the property in their name.
DThe property must be under construction during the financial year.
💡 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.
Q43
MCQ · 1 mark
HardSalary Income Calculation (New Tax Regime)
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?
ARs. 20,25,000
BRs. 21,50,000
✓Rs. 23,35,000
DRs. 24,10,000
💡 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
Q44
MCQ · 1 mark
MediumSalary Income - New Tax Regime
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)?
✓Rs. 19,85,000
BRs. 20,60,000
CRs. 21,35,000
DRs. 22,25,000
💡 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**
Q45
MCQ · 1 mark
EasyIncome from Salary - Basic Concepts
Which of the following statements is TRUE regarding income taxable under the head 'Income from Salary'?
AIncome under this head is always taxable on a receipt basis, irrespective of when it was due.
✓The existence of an employer-employee relationship is a prerequisite for income to be taxed under this head.
CPerquisites or profits in lieu of salary are explicitly excluded from the definition of 'Salary' under Section 17(1).
DEmployer's contribution to NPS is never taxed as salary income.
💡 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.
Q46
MCQ · 1 mark
HardIncome from Salary - New Tax Regime
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.
ARs. 13,10,000
✓Rs. 14,25,000
CRs. 16,35,000
DRs. 17,10,000
💡 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.
Q47
MCQ · 1 mark
MediumTax Regimes Comparison (Salary Deductions)
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'?
AStandard deduction
BEmployer's contribution to NPS under section 80CCD(2)
✓Employee's contribution to NPS under section 80CCD(1B)
DExemption for Gratuity
💡 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.
Q48
MCQ · 1 mark
EasyIncome from House Property
Which of the following income sources would NOT be taxable under the head 'Income from House Property', according to the provided text?
ARental income from a residential building owned by the assessee.
BRental income from land appurtenant to a commercial building owned by the assessee.
✓Rental income derived from a vacant plot of land owned by the assessee.
DRental income from a property consisting of a building, where the assessee is the legal owner.
💡 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'.
Q49
MCQ · 1 mark
HardIncome from Salary Calculation (Old Tax Regime)
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.
✓Rs. 18,40,000
BRs. 18,90,000
CRs. 22,40,000
DRs. 19,00,000
💡 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**
Q50
MCQ · 1 mark
HardGratuity Exemption Calculation
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?
ARs. 12,00,000
✓Rs. 10,00,000
CRs. 15,00,000
DRs. 20,00,000
💡 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.
Case-Based Questions (2 sets)
Case 1
Case-Based · 2 marks each
Residential Status and Income Taxability
Mr. Rajan, an Indian citizen, worked in the USA for many years. He returned to India on June 1, 2024, intending to stay permanently. His physical stay in India over the past few financial years is as follows:
- FY 2024-25: 304 days (from June 1, 2024 to March 31, 2025)
- FY 2023-24: 45 days
- FY 2022-23: 60 days
- FY 2021-22: 20 days
- FY 2020-21: 15 days
- FY 2019-20: 30 days
- FY 2018-19: 10 days
- FY 2017-18: 5 days
- FY 2016-17: 8 days
- FY 2015-16: 12 days
Mr. Rajan has the following income sources for FY 2024-25:
1. Salary from an Indian company (after returning to India): Rs. 15,00,000, received in India.
2. Interest from a US bank account: Rs. 5,00,000, accrued and received in USA.
3. Rental income from a property in Chennai: Rs. 3,00,000, received in India.
4. Income from a business in Singapore, controlled entirely from India: Rs. 7,00,000, accrued and received in Singapore.
Easy Sub-question 1
What is Mr. Rajan's residential status for the Financial Year 2024-25 according to the Indian Income Tax Act, 1961?
AResident and Ordinarily Resident (ROR)
✓Resident but Not Ordinarily Resident (RNOR)
CNon-Resident (NR)
DDeemed Resident
💡 For FY 2024-25:
1. Basic Condition (Resident): Mr. Rajan's stay in India for FY 2024-25 is 304 days (June 1, 2024 to March 31, 2025). Since 304 days > 182 days, he is a Resident.
2. Additional Conditions (Ordinarily Resident): To be ROR, he must satisfy both additional conditions. To be RNOR, he needs to satisfy at least one of the following conditions:
a) Has been a Non-Resident in 9 out of 10 preceding previous years.
b) Has stayed in India for 729 days or less in the 7 preceding previous years.
Let's check condition (b) first: Stay in last 7 preceding years (FY 2017-18 to FY 2023-24):
FY 2023-24: 45 days
FY 2022-23: 60 days
FY 2021-22: 20 days
FY 2020-21: 15 days
FY 2019-20: 30 days
FY 2018-19: 10 days
FY 2017-18: 5 days
Total stay = 45 + 60 + 20 + 15 + 30 + 10 + 5 = 185 days.
Since 185 days is less than 729 days, Mr. Rajan satisfies the condition for being RNOR.
Thus, Mr. Rajan is a Resident but Not Ordinarily Resident (RNOR) for FY 2024-25.
Hard Sub-question 2
Suppose Mr. Rajan's residential status for FY 2024-25 was Resident and Ordinarily Resident (ROR). If he also had an income of Rs. 2,00,000 from a profession set up in the USA, with the income accruing and received in the USA, how would this additional income be treated for tax purposes in India?
AIt would be fully exempt from tax as it accrues outside India.
✓It would be taxable in India, as RORs are taxed on their worldwide income.
CIt would be taxable only if the profession was controlled from India.
DIt would be taxable at a reduced rate due to DTAA.
💡 The question asks about the treatment of an additional income of Rs. 2,00,000 from a profession set up in the USA, with income accruing and received in the USA, assuming Mr. Rajan was ROR.
As per Table 7.1 and Example 2, a Resident and Ordinarily Resident (ROR) is liable to tax on their worldwide income in India. This includes any income that accrues or arises outside India, even if it is from a business controlled from outside India or a profession set up outside India.
Therefore, the Rs. 2,00,000 income from a profession set up in the USA, accruing and received in the USA, would be fully taxable in India for an ROR.
Medium Sub-question 3
Based on Mr. Rajan's residential status for FY 2024-25, which of the following income sources will be taxable in India?
AOnly Salary from Indian company and Rental income from Chennai property.
BSalary from Indian company, Rental income from Chennai property, and Interest from US bank account.
✓Salary from Indian company, Rental income from Chennai property, and Income from business in Singapore controlled from India.
DAll four income sources will be taxable in India.
💡 Mr. Rajan is RNOR for FY 2024-25.
According to Table 7.1: Taxation of income based on residential status for an RNOR:
1. Income received or deemed to be received in India: Taxable.
- Salary from Indian company (received in India): Taxable.
- Rental income from Chennai property (received in India): Taxable.
2. Income accrues or arises or is deemed to accrue or arise to him in India: Taxable. (Covered by Indian salary/rent)
3. Income accrues or arises outside India if it is derived from a business controlled from India or from a profession set up in India: Taxable.
- Income from business in Singapore controlled from India: Taxable.
4. 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): Not-taxable.
- Interest from US bank account (accrued and received in USA, not from business controlled from India): Not-taxable.
Therefore, Salary from Indian company, Rental income from Chennai property, and Income from business in Singapore controlled from India will be taxable in India.
Easy Sub-question 4
If Mr. Rajan were a Non-Resident (NR) for FY 2024-25, which of his income sources would be taxable in India?
AAll income sources.
BOnly income received or deemed to be received in India.
✓Income received/deemed to be received in India AND income accruing/arising/deemed to accrue/arise in India.
DOnly salary from Indian company.
💡 As per the chapter text for a Non-Resident assessee:
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. This specifically refers to incomes that are physically received in India or have their origin (accrue/arise) in India. Income accruing or arising outside India, even if from a business controlled from India, is not taxable for an NR.
Medium Sub-question 5
Consider Mr. Rajan's residential status as RNOR for FY 2024-25. Calculate his gross taxable income under the 'Five Heads of Income' based on the provided information, ignoring any deductions under Chapter VI-A for now.
ARs. 23,00,000
BRs. 28,00,000
CRs. 30,00,000
✓Rs. 25,00,000
💡 Mr. Rajan is RNOR.
Taxable income sources for RNOR:
1. Salary from Indian company: Rs. 15,00,000 (Income from Salary)
2. Rental income from Chennai property: Rs. 3,00,000 (Income from House Property)
3. Income from business in Singapore, controlled from India: Rs. 7,00,000 (Income from Business or Profession)
4. Interest from US bank account: Rs. 5,00,000 (Not taxable for RNOR as it accrues and arises outside India and is not from a business controlled from India).
Gross Taxable Income = 15,00,000 (Salary) + 3,00,000 (Rent) + 7,00,000 (Business) = Rs. 25,00,000.
Case 2
Case-Based · 2 marks each
Salary Income and Tax Regimes
Ms. Priya, a private sector employee, has a basic salary of Rs. 20,00,000 for FY 2024-25. She also receives a House Rent Allowance (HRA) of Rs. 3,00,000 per annum and a Leave Travel Allowance (LTA) of Rs. 50,000. She pays an annual rent of Rs. 3,60,000 for her accommodation in Mumbai.
Her employer makes the following contributions:
- Employer's contribution to EPF: 12% of basic salary
- Employer's contribution to NPS: 10% of basic salary
Ms. Priya also makes her own contributions:
- Employee's contribution to EPF: 12% of basic salary
- Employee's contribution to NPS: Rs. 70,000 (Tier I account)
- Contribution to PPF: Rs. 1,00,000
Assume 'salary' for HRA and NPS deduction purposes means Basic Salary only.
Hard Sub-question 1
Considering Ms. Priya's total contributions to EPF, NPS, and PPF, what is the maximum additional tax benefit (in terms of deduction amount) she could avail under the Old Tax Regime compared to the New Tax Regime for these specific contributions, excluding standard deduction and employer's NPS contribution deduction?
ARs. 1,50,000
✓Rs. 2,00,000
CRs. 3,50,000
DRs. 4,00,000
💡 This question specifically asks for "additional tax benefit (in terms of deduction amount)" for *employee's* contributions to EPF, NPS, and PPF, *excluding* standard deduction and employer's NPS contribution deduction.
**Employee's Contributions:**
- Employee's EPF contribution: Rs. 2,40,000 (12% of Rs. 20,00,000)
- Employee's NPS contribution: Rs. 70,000
- PPF contribution: Rs. 1,00,000
**Old Tax Regime Deductions:**
- Under Section 80C: Employee's EPF (Rs. 2,40,000) + PPF (Rs. 1,00,000) = Rs. 3,40,000. This is restricted to the maximum limit of Rs. 1,50,000. So, **Rs. 1,50,000** under 80C.
- Under Section 80CCD(1B): Employee's NPS contribution of Rs. 70,000. The maximum deduction allowed is **Rs. 50,000**.
- Total deduction for these contributions under Old Regime = Rs. 1,50,000 (80C) + Rs. 50,000 (80CCD(1B)) = **Rs. 2,00,000**.
**New Tax Regime Deductions:**
- Under the New Tax Regime, deductions under Section 80C, 80CCD(1B) are **not available**.
- So, total deduction for these contributions under New Regime = **Rs. 0**.
**Additional Tax Benefit (Deduction Amount) = Old Regime Deduction - New Regime Deduction**
= Rs. 2,00,000 - Rs. 0 = **Rs. 2,00,000**.
Medium Sub-question 2
Calculate Ms. Priya's 'Income chargeable under the head Salary' for FY 2024-25 if she opts for the **New Tax Regime**.
✓Rs. 24,75,000
BRs. 24,00,000
CRs. 23,50,000
DRs. 22,90,000
💡 **1. Basic Salary:** Rs. 20,00,000
**2. Employer's NPS contribution:** Rs. 2,00,000 (10% of Basic Salary, taxable under S. 17(1)(viii)).
**3. Employer's EPF contribution:** Rs. 2,40,000 (12% of Basic Salary). This is within 12% limit, so **not taxable** under S. 17(1)(vi).
**4. Aggregate Employer's Contribution check (Sec 17(2)(vii)):** Total employer contribution (EPF + NPS) = Rs. 2,40,000 + Rs. 2,00,000 = Rs. 4,40,000. This is less than Rs. 7,50,000, so **no additional amount is taxable** as perquisite.
**5. House Rent Allowance (HRA):** Under the New Tax Regime, HRA exemption is **not allowed**. So, the entire HRA received is taxable. Taxable HRA = Rs. 3,00,000.
**6. Leave Travel Allowance (LTA):** Under the New Tax Regime, LTA exemption is **not allowed**. So, the entire LTA received is taxable. Taxable LTA = Rs. 50,000.
**Computation:**
Basic Salary: Rs. 20,00,000
Add: Employer's contribution to NPS (S. 17(1)(viii)): Rs. 2,00,000
Add: Taxable HRA: Rs. 3,00,000
Add: Taxable LTA: Rs. 50,000
**Gross Salary:** Rs. 20,00,000 + Rs. 2,00,000 + Rs. 3,00,000 + Rs. 50,000 = **Rs. 25,50,000**
Less: Standard Deduction: (Rs. 75,000) (New Tax Regime standard deduction)
**Income chargeable under the head Salary (before Chapter VI-A deductions): Rs. 24,75,000**
Easy Sub-question 3
If Ms. Priya were a government employee, what would be the maximum percentage of her salary that her employer could contribute to NPS which would be allowed as a deduction under Section 80CCD(2) in both old and new tax regimes?
A10%
B12%
✓14%
D15%
💡 As per the chapter text under "National Pension Scheme" deductions:
"Deduction u/s 80CCD(2) – upto 10% of the salary for private sector employees 14% for Government employees" (Old Tax Regime)
"Deduction u/s 80CCD(2) – upto 14% of the salary for private sector employees 14% for Government employees" (New Tax Regime)
The text clearly indicates 14% for Government employees in both regimes.
Medium Sub-question 4
Calculate Ms. Priya's 'Income chargeable under the head Salary' for FY 2024-25 if she opts for the **Old Tax Regime**.
ARs. 22,90,000
✓Rs. 23,40,000
CRs. 24,00,000
DRs. 20,70,000
💡 **1. Basic Salary:** Rs. 20,00,000
**2. Employer's NPS contribution:** Rs. 2,00,000 (10% of Basic Salary, taxable under S. 17(1)(viii)).
**3. Employer's EPF contribution:** Rs. 2,40,000 (12% of Basic Salary). This is within 12% limit, so **not taxable** under S. 17(1)(vi).
**4. Aggregate Employer's Contribution check (Sec 17(2)(vii)):** Total employer contribution (EPF + NPS) = Rs. 2,40,000 + Rs. 2,00,000 = Rs. 4,40,000. This is less than Rs. 7,50,000, so **no additional amount is taxable** as perquisite.
**5. House Rent Allowance (HRA):**
- HRA received: Rs. 3,00,000
- Exemption (least of):
a) HRA received: Rs. 3,00,000
b) Rent paid (Rs. 3,60,000) - 10% of Basic Salary (Rs. 2,00,000) = Rs. 1,60,000
c) 50% of Basic Salary (for Mumbai) = Rs. 10,00,000
- Least is Rs. 1,60,000.
- **Taxable HRA:** Rs. 3,00,000 (Received) - Rs. 1,60,000 (Exempt) = Rs. 1,40,000.
**6. Leave Travel Allowance (LTA):** Rs. 50,000. The text states "Allowed" for Old Tax Regime, implying exemption is possible. However, without specific travel details to claim exemption, it is considered **fully taxable** for calculation purposes in this scenario.
**Computation:**
Basic Salary: Rs. 20,00,000
Add: Employer's contribution to NPS (S. 17(1)(viii)): Rs. 2,00,000
Add: Taxable HRA: Rs. 1,40,000
Add: Taxable LTA: Rs. 50,000
**Gross Salary:** Rs. 20,00,000 + Rs. 2,00,000 + Rs. 1,40,000 + Rs. 50,000 = **Rs. 23,90,000**
Less: Standard Deduction: (Rs. 50,000)
**Income chargeable under the head Salary (before Chapter VI-A deductions): Rs. 23,40,000**
Easy Sub-question 5
Ms. Priya's employer makes an aggregate contribution of Rs. 4,40,000 (EPF + NPS) to her retirement funds. As per the Income Tax Act, what is the maximum aggregate employer's contribution to EPF, NPS, and Superannuation Fund that is exempt from being treated as a perquisite in the employee's hands?
ARs. 1,50,000
BRs. 2,50,000
✓Rs. 7,50,000
DRs. 10,00,000
💡 As per section 17(2)(vii) of the Income Tax Act, the aggregate of employer’s contribution to a recognised provident fund (EPF), National Pension Scheme (NPS), and an approved superannuation fund to the extent to which it exceeds Rs. 7,50,000 in aggregate will be taxed as salary income (perquisite). Therefore, contributions up to Rs. 7,50,000 are exempt from being treated as a perquisite. Ms. Priya's employer's aggregate contribution of Rs. 4,40,000 is well within this limit.
About this content: These practice questions are based on the
NISM-Series-X-B: Investment Adviser (Level 2) Certification Examination Workbook
published by the National Institute of Securities Markets (NISM), Mumbai.
NISM is a SEBI-established institution. Questions cover Retirement Products with verified answers and explanations.
BullWiser is an independent exam preparation platform — not affiliated with NISM or SEBI.
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