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P1: Compute deduction u/s 80C available to X for the PY 2016-17:

	Case 1	Case 2
Life insurance premium paid for his married daughter to LIC. Late fees also paid 2,000 not included. (sum assured Rs. 50,000)	8,000	3,000
Life insurance premium paid for his father to LIC (sum assured Rs.1,00,000)	4,000	3,000
Life insurance premium paid on his self life to LIC on 1-4-2017	6,000	2,000
Mr. X is also pursuing M.Com. from Delhi University. Tuition fee paid	13,000	10,000
Tuition fees of his child Shiv studying in Harvard, USA	10,000	5,000
Tuition fees of his daughter studying in Holy Cross, India	8,000	9,000
Tuition fees of his son Master Om studying in DPS, India. (donation of Rs. 5,000 was also given )	90,000	5,000
Tuition fees of his son Master Krishna studying in Xaviers, Delhi (Also purchased books worth Rs. 3,000 for Master Krishna)	56,000	13,000

Solution

Computation of deduction u/s 80C

	Case 1	Case 2
Life insurance premium paid for his married daughter to LIC	5,000	3,000
Life insurance premium paid for his father to LIC	N.A.	N.A.
Life insurance premium paid on his self life to LIC on 1-4-2017	N.A.	N.A.
Tuition fees for her daughter studying in Holy Cross, India	Nil	9,000
Tuition fees of Master Om studying in DPS, India.	90,000	Nil
Tuition fees of Master Krishna studying in Xaviers, Delhi	56,000	13,000
Total	1,51,000	25,000
Deduction allowed u/s 80C (cannot exceed 1,50,000)	1,50,000	25,000

P2: Compute deduction u/s 80C available to X from the following informations:
1. Own contribution towards the statutory provident fund.
2. Life insurance premium paid on self life — to American life insurance company in USA.
3. Fixed deposit in Canara Bank for 5 years. (Specified)
4. LIP paid by employer on behalf of employee.
5. Subscription to units of Mutual Fund to be invested in development of infrastructure.
6. Un-recognised Provident Fund.
7. Tuition Fees for three children (Rs.10,000/- per child).
8. Interest of Rs. 7,000 has accrued to him on old National Savings Certificate purchased in past years.
9. Purchased equity linked saving scheme of UTI.
10. Repayment of loan to LIC for purchase of new residential house property.
11. Subscription to equity shares of power company.
12. Contribution to National relief bond.
13. Purchased Kisan Vikas Patra.
14. Deposits in Post Office (CTD) Scheme.
15. Mr. Z has paid a sum of Rs. 65,000 as tuition fees to a university in Australia. The amount deductible under
Section 80C is Rs.

Ans: (1) allowed (2) not allowed (3) allowed (4) first added to gross salary and then deduction allowed (5) allowed (6) not allowed (7) Rs. 20,000 allowed (8) first added to other sources and then deduction allowed u/s 80C. (9)
allowed (10) allowed (11) allowed (12) not allowed (13) not allowed (14) allowed. (15) Nil

P3: Basic Salary Rs. 2,00,000. Interest on NSC VIII issue Rs. 60,000. Other Income Rs. 50,000. Determine the taxable income.
Ans: 2,50,000.

P4: The employer takes life insurance policy on life of Mr. X. Insurance premium of Rs. 2,000 falls due on
15-3-2017. Insurance premium paid is Rs. 1,500 on 1-4-2017 and Rs. 500 on 17-3-2017. Explain its adjustment.
Ans: 2,000 shall be added in PY 16-17. Deduction u/s 80C allowed is Rs. 500 in PY 16-17 and Rs. 1,500 in PY 17-18.

P5: Basic Salary Rs. 2,00,000. The employer takes life insurance policy on life of Mr. X. Insurance premium of
Rs. 1,20,000 falls due every year on 31-3-2017 for 10 years. Insurance premium paid is Rs. 80,000 on 31-3-2017 and Rs. 1,60,000 on 1-4-2017. Other Income Rs. 1,00,000. Determine the taxable income for the AY 2017-18.
Ans: 3,40,000.

P6: Miss Gunjan is the designer in the Sophisticated Ltd., Delhi. She furnishes following particulars of her
income. Determine the taxable income.

a. Net salary Rs. 80,000 after deduction of tax at source Rs. 4,000, contribution to recognised provident fund
Rs. 9,000, Rs. 2,000 for life insurance premium and rent of bungalow @ 5% of basic salary. Commission on sales Rs. 40,000.
b. She resides in the bungalow of the company.
c. Employer’s contribution to recognised provident fund is Rs. 7,000 and the interest credited to the recognised
provident fund @ 13% amounted to Rs. 16,250.
d. The company paid income-tax penalty of Miss Gunjan Rs. 1,200.
e. Other Income Rs. 50,000.

f. She also contributes 25% of sum assured as life insurance premium. Sum assured Rs. 1,60,000.

Ans: 1,84,580 [BS 1,00,000+ Comm 40,000+ Accom 16,000+Er’s 0+ Int 4,375+ Penalty 1,200=Sal 1,61,580 +
OI 50,000 = GTI 2,11,850–27,000= 1,84,580]

P7 : One of life insurance policy was matured. The sum assured was Rs. 1,60,000 and amount received on maturity was Rs. 1,62,850. It is said Rs. 1,60,000 is exempt whereas bonus received Rs. 2,850 is taxable. True or False.

Ans : False, both maturity amount and bonus amount is exempt from tax if remaining conditions are satisfied.

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FAQs on P1 to P7 in Page 11 - Taxation - Income Tax for assessment (Inter Level)

1. What is taxation?

Ans. Taxation refers to the process of levying and collecting taxes by the government on individuals, businesses, or other entities. It is a means of generating revenue to fund public services and programs.

2. How does taxation work?

Ans. Taxation works by imposing taxes on various sources of income, such as salaries, profits, or property. The government determines the tax rates and rules, and individuals or businesses are obligated to pay the specified amount based on their income or property value.

3. What are the different types of taxes?

Ans. There are several types of taxes, including income tax, sales tax, property tax, corporate tax, and value-added tax (VAT). Each type of tax is imposed on different sources of income or transactions.

4. How does taxation affect the economy?

Ans. Taxation plays a crucial role in the economy as it affects the distribution of income, government spending, and incentives for economic activities. Tax policies can influence investment, consumption, and overall economic growth.

5. What are some common tax deductions and credits available to individuals?

Ans. Some common tax deductions and credits for individuals include deductions for mortgage interest, student loan interest, medical expenses, and contributions to retirement accounts. Tax credits may be available for childcare expenses, education expenses, and renewable energy investments.

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Nov 16, 2024 Last updated

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