Professional Documents
Culture Documents
5. Deduction u/s 80U in case of permanent physical disability (including blindness) allowed to:
a) Rs. 40,000
b) Rs. 50,000
c) Rs. 60,000
Tax Planning 1
7. R is provided with a rent-free accommodation owned by his employer in Delhi. The income to
be presumed under section 44AF shall be:
a) 8% of total turnover
b) 10% of total turnover
c) 5% of total turnover
8. What will be your answer if the accommodation is provided in a city having population of
3,00,000 as per 1991 census? (Refer to the question above)
a) 20% of salary
b) 15% of salary
c) 20% of salary plus excess of FRV over 50% of salary
d) 20% of salary plus excess of FRV over 60% of salary
e) 10% of salary
9. What will be your answer if tea and snacks are provided in the office after office hours?
a) Nil
b) Nil, if it is upto Rs. 50 per meal
c) Actual amount spent by the employer
10. What will be your answer if instead of tea and snacks; meal is provided in the office or
factory? (Refer to the question above)
a) Nil
b) Nil, if it is upto Rs. 50 per meal
c) Actual amount spent by the employer
11. If the assessee opts for presumptive income scheme under section 44AD or 44 AF or 44AE,
then the assessee shall:
12. If a video camera is given for the personal use of employer or any member of his household,
the value of this perquisite shall be:
a) Nil
b) 10% p.a. of the cost of the asset
c) 10% p.a. of the W.D.V. of the asset
13. In case an assessee is engaged in the business of plying hiring or leasing goods carriage,
presumption income scheme under section 44AE is applicable if the assessee is the owner of
maximum of:
a) 8 goods carriages
b) 10 goods carriages
c) 12 goods carriages
Tax Planning 2
14. As per presumptive income scheme under section 44AE, the presumed income shall be:
15. For claiming exemption under section 54G, such land, building or Plant and Machinery must
have been used by the industrial undertaking:
16. Long-term capital gain from the sale of units of equity-oriented fund shall be
17. Short-term capital gain arising for the transfer of equity shares and units of equity oriented
fund shall be taxable
18. In case of non-resident, who is carrying on shipping business, his Indian income shall be
presumed to be:
a) 5% of certain amount received
b) 7.5% of certain amount received
c) 10% of certain amount received
19. In case of compulsory acquisition, the period for investment in specified assets under section
54, 54B, 54D and 54F shall be reckoned from:
a) due basis
b) receipts basis
c) due or receipt basis at the option of the assessee
21. The legal heir of the deceased who receives family pension is allowed a standard deduction
from such family pension received to the extent of:
Tax Planning 3
22. If any income has to be clubbed under section 64, it will be clubbed under the:
23. Loss of a closely held company cannot be carried and set off unless on the last day of the
previous year in which the loss was incurred and as on the last day of the previous year in which
such loss is set off, at least:
24. Where the business of manufacturing or producing is done or in any notified specified areas
in the State of Sikkim, Himachal Pradesh, Uttaranchal or the North Eastern States then for
claiming deduction under section 80-IC, such business of manufacturing or producing should be:
25. In the above case, if manufacturing or producing, etc. is done in any area other than a
notified area in the aforesaid States, such business of manufacturing or producing an article or
thing or for an operation should be for:
26. Deduction under section 80QQB is allowed in respect of royalty income to:
27. Deduction under section 80QQB is allowed to an author of a book provided such book is of:
a) literary nature
b) scientific nature
c) artistic nature
d) literary or scientific nature
e) scientific or artistic nature
f) literary, artistic or scientific nature
28. Deduction under section 80QQB is allowed to an author of a book of literary or artistic or
scientific nature who is resident in India to the extent of:
Tax Planning 4
29. The income of a non-resident from shipping business under section 44B shall be presumed to
be 71/2% of:
30. Deduction under section 80RRB in respect of royalty on patents shall be allowed to:
a) an individual
b) an individual who is resident in India
c) an individual who is resident in India and is a patentee or co-
patentee
32. Deduction u/s 80U shall be allowed only when the assessee is suffering from a permanent
disability:
33. Where the return of income is filed after the due date specified u/s 139(1):
a) all deductions under Chapter VIA i.e. 80C to 80U will be allowable
b) all deductions under Chapter VIA i.e. 80C to 80U will not be
allowable
c) all deductions under Chapter VIA i.e. 80C to 80U excepting 80-IA,
80-IAB, 80-IB, 80-IC will be allowable
d) all deductions under Chapter VIA i.e. 80C to 80U except 80-IA
will be allowable
34. Where in respect of any assessment year there is on the part of a firm any such failure as is
mentioned in section 144, the firm shall be
a) assessed as AOP
b) so assessed that no deduction by way of any payment of interest,
salary, bonus, commission or remuneration made by such firm to any
partner shall be allowed in computing the income of the firm
chargeable under the head Business or Profession.
c) assessed in the hands of partners individually.
Tax Planning 5
35. A firm is required to file return of income as per section 139(1):
36. Where the AOP/BOI has paid tax on its income @ 30% or at a higher rate, the share of the
profit which a member gets from the AOP/BOI:
37. Where the AOP/BOI has paid tax on its income at the rate applicable to individuals, the share
of the profit which a member gets from the AOP/BOI
38. In case of non-resident, who is engaged in the business of operation of aircraft, his income
shall be presumed to be
39. Long-term capital gain which is exempt u/s 10(38) (relating to long-term capital gain on sale of
shares through stock exchange) shall
40. Choose the amount of final tax liability of R for the assessment year 2007-08:
a) 17100
b) 17442
c) 15700
d) 16014
Tax Planning 6
41. Kapil is employed by SIDBI. He receives the following emoluments/facilities during 2006-07:
His taxable income for the assessment year 2007-08 shall be:
a) 211600
b) 183800
c) 178800
d) 174800
42. R purchased a house property for Rs. 26,000 on 10-5-1962. He gets the first floor of the
house constructed in 1967-68 by spending Rs. 40,000. He died on 12-9-1978. The property is
transferred to Mrs. R by his will. Mrs. R spends Rs. 30,000 and Rs. 26,700 during 1979-80 and
1985-86 respectively for renewals/reconstruction of the property. Mrs. R sells the house property
for Rs. 11,50,000 on 15-3-2007, brokerage paid by Mrs. R is Rs. 11,500. The fair market value of
the house on 1-4-1981 was Rs. 1,60,000. Find out the amount of capital gain chargeable to tax
for the assessment year 2007-08.
a) 308100
b) 215410
c) 169527
d) 203910
43. The year in which unrecognized provident fund is converted in recognized provident fund:
44. The employer had purchased a car for Rs. 3,00,000 which was being used for official
purposes. After 2 year 6 months of its use, the car is sold to R, the employee, for Rs. 1,20,000.
The value of this perquisite shall be
a) Rs. 72,000
b) Rs. 60,000
c) Nil
d) Rs. 1,23,000
e) Rs. 1,20,000
45. What will be your answer if instead of car; the asset purchased is a computer? (Refer to the
question above)
a) Rs. 72,000
b) Rs. 60,000
c) Nil
d) Rs. 1,23,000
e) Rs. 1,20,000
Tax Planning 7
46. What will be the answer if the asset is neither car nor any computer? (Refer to the question
above)
a) Rs. 72,000
b) Rs. 60,000
c) Nil
d) Rs. 1,23,000
e) Rs. 1,20,000
47. An assessee was allowed deduction of unrealized rent to the extent of Rs. 40,000 in the past
although the total unrealized rent was Rs. 60,000. He is able to recover from the tenant
Rs.45,000 during the previous year on account of such unrealized rent. He shall be liable to tax to
the extent of:
a) Rs. 45,000
b) Nil
c) Rs. 25,000
48. If an assessee is engaged in the business of civil construction and he had opted for
presumptive income scheme under section 44 AD, the assessee shall:
49. The expenditure incurred on payment under voluntary retirement scheme shall be allowed as
deduction in
50. Total income for assessment year 2007-08 of an individual including long-term capital gain of
Rs. 60,000 is Rs. 1,40,000. The tax on total income shall be:
a) Rs. 8,800
b) Rs. 8,160
c) Rs. 7,000
51. Total income of an individual including long-term capital gain of Rs. 50,000 is Rs. 1,10,000,
the tax on total income shall be:
a) Rs. 1,020
b) Rs. 2,040
c) Rs. 2,244
52. Income derived from rubber plantation in Singapore but received in India shall be treated as:
Tax Planning 8
53. Dividend received by a shareholder from an Indian company the whole of whose income is
agricultural income shall be treated as:
54. If a firm is not evidenced by an instrument or if the partners shares are not determinate or if
the partnership deed is not submitted alongwith the return of income then such firm shall be
55. In case of AOP where the share of the members are known but none of the members has
taxable income exceeding maximum exemption limit, but one or more member is taxable at a rate
higher than the maximum marginal rate, the tax shall be charged:
56. Which of the following taxes are allowed as deduction while computing the business income
a) Wealth tax
b) Banking cash transaction tax (BCTT)
c) Fringe benefit tax (FBT)
d) Income-tax
57. For claiming exemption u/s 54G, the assessee shall acquire the new asset within:
Tax Planning 9
Source: C:\WINDOWS\TEMP\quiz-apr-tax2.html same as C:\WINDOWS\TEMP\quiz-june-
tax1.html
a) 20
b) 15
c) 10
d) 25
60. The UTI Retirement Benefit Plan offers an avenue to provide for post retirement needs of
individuals. What is the maximum permissible age for an investor to enter the scheme without
lump sum premium?
a) 42 years
b) 52 years
c) 58 years
d) 60 years
61. Pension received from a former employer is classified under the head _________.
a) Capital Gains
b) Gratuity
c) Income from other sources
d) Salaries
62. Rita would like to enhance her contribution and make an additional monthly contribution of
Rs. 5000. Is there a limit to the amount of voluntary contribution Rita can make?
63. Mohan has been an employee of a public sector undertaking for the past 25 years and is
retiring after one year. He is eligible for gratuity as per the provisions of the Payment of
Gratuity Act, 1972. His monthly salary at retirement is expected to be Rs. 20,000. The
amount of gratuity that he will receive on retirement will be ________.
a) Rs. 2,88,461
b) Rs. 3,00,000
c) Rs. 3,40,909
d) Rs. 3,75,000
Tax Planning 10
64. Mr. Roy has been an employee of a public sector undertaking for the past 25 years and is
retiring the next year. He is eligible for gratuity as per the provisions of the Payment of Gratuity
Act, 1972. He hopes to invest the proceeds along with the PF proceeds, in order to fund
his retirement. Prior to his wedding, Mr. Roy had nominated his mother to receive his
gratuity, in the event of his death. Is his wife eligible to receive the gratuity proceeds in the event
of his death?
65. Sunder is eligible for gratuity as per the provisions of the Payment of Gratuity Act, 1972. He
has been in service only for 6 years in this company, and has taken a total leave of 1
year and 2 months, because he needed prolonged medical attention after a major accident.
Which of the following is true about his gratuity entitlement?
66. Mr. Prasad is a small-scale trader in nuts. He has a welfare scheme for his few employees,
for whom he runs a small provident fund, which is yet to be recognized. He also
contributes to this fund as an employer and matches the employee's contribution. He has
encouraged his employees also to open PPF accounts to save tax and set aside funds for the
future. Mr. Prasad has called you to take a look at what he has been doing and advise him on the
choice of products for providing retirement benefits to himself and his employees. Can Mr. Prasad
open joint PPF accounts with his employees?
67. How would you classify the two retirement plans, the unrecognized provident fund and the
PPF account?
Tax Planning 11
68. Which is not the condition for getting superannuation fund approved?
69. An employee can contribute beyond ________ of his salary towards EPF but he will get tax
benefits u/s 88 only upto _________.
a) 11.33, 11.33
b) 10, 10
c) 12, 12
d) 8.33, 8.33
70. Which one of the following is a common actuarial assumption used in determining the plan
contributions needed to fund the benefits of a defined-benefit plan?
1. Investment performance
2. Employee turnover rate
3. Salary scale
4. Ratio of single versus married applicants
a) 1 and 3 only
b) 1, 2 & 3 only
c) 2 and 4 only
d) 4 only
71. As an employee Rajesh has come to you with his questions on superannuation plans/ Annuity
Plans to get more educated with current scenario. What is the maximum limit on contribution to
approved superannuation fund?
a) 2%
b) 10 %
c) 27% less contribution to Provident Fund
d) No Limit
72. Under the Employees Pension Scheme, 1995, the superannuation pension is decided on the
basis of the following:
73. Money has time value. It derives this value due to existence of several conditions. Which one
of the following is not one of the conditions contributing to the existence of this value?
Tax Planning 12
74. You have term deposits of Rs.4,00,000 with a bank. In order to meet sudden requirements for
liquidity and short-term credit, you are applying for an overdraft facility with the bank. What is the
rate of interest you will pay on this facility?
a) The bank will apply a flat rate of interest on the amount of overdraft
allowed to actually utilize.
b) The bank will apply a flat rate of interest on the amount of overdraft
allowed to you.
c) The bank will apply rate of interest linked to the term deposit
rate, on the amount of overdraft utilized.
d) The bank will apply rate of interest linked to the term deposit rate, on
the average amount of overdraft remaining unutilized from the OD
limit.
75. The Nifty has doubled since the last time you advised your client to reduce his equity
exposure. The client is annoyed. What might be the most appropriate action to take immediately?
76. A professional indemnity policy protects the insured from risk arising out of _____________.
a) Intentional misconduct
b) Misrepresentation of professional competence
c) Negligence
d) Undisclosed conflict of interest
77. Protector International is a financial services firm that specializes in investment advisory
services. In its brochure for Financial Planning services, it may state _____________.
78. Which of the following is a concurrent indicator of the phase of the business cycle?
79. What is the main difference between the personal Financial Planning needs of the employed
and the self-employed?
Tax Planning 13
80. Contributions to an Unrecognized Provident Fund will result in:
A. Taxing of Interest Income earned by the employee on employer contributions
B. Employer cannot treat the PF Contribution as a deductible business expense.
C. Deduction u/s 80 C.
a) A, B & C
b) A
c) B
d) B&C
a) 1 only
b) 2 only
c) 1 & 2 only
d) 1, 2 & 3
82. The modern portfolio theory suggests that the portfolio returns can be optimized by _______.
83. The economy is going through a phase of expansion and growth. Industrial production and
profitability are high. Your client has a portfolio that is heavily invested in bonds. Which of the
following fears of the client is well founded?
84. Ram is a Financial Planner in a large firm. His wife has some large investments in the shares
of a few companies. Ram is required to offer views on almost all of these holdings to clients.
Under the Code of Ethics and Rules of Professional Conduct _______
a) Ram must disclose the fact to his client(s) so as to make them aware of
any potential conflict of interest
b) Ram has to disclose these holdings only to his employers, if required by the
firm's internal compliance rules
c) Ram need not follow any code of ethics and rules of professional conduct.
d) Ram will not violate the Code and the Rules if he does not disclose his wife's
holdings
Tax Planning 14
85. How are financing costs included in NPV and IRR calculations?
86. Which of the following are common actuarial assumptions used in determining the plan
contributions needed to fund the benefits of a defined benefit plan?
a) 1, 2, and 3 only.
b) 1 and 3 only.
c) 2 and 4 only.
d) 4 only.
87. The investment portfolio for a defined-benefit retirement plan has declined in value during a
year in which most financial market investments have incurred losses. Which one of the following
entities would be impacted most by this decline in portfolio value?
88. What is the present value of an investment that will be worth RS.10,000 in 10 years based on
an inflation rate of 4% per annum?
a) Rs. 3,855
b) Rs. 5,584
c) Rs. 6,756
d) Rs. 8,203
89. Retirement planning requires meeting the diversified needs of today’s retiree and must be
approached from several perspectives. What is the most essential retirement objective?
90. Which of the following statements concerning retirement planning for an individual are
correct?
i. The individuals disposable income can fall by the amount being saved for retirement, thus
increasing the individuals current standard of living
ii. A replacement ratio of 70 to 90 percent of the average salary for the last 3 years before
retirement is typically used.
iii. Retirement needs would have been overestimated if actual retirement occurs after the planned
retirement date
a) i, ii
b) i, iii
c) ii, iii
d) i, ii, iii
Tax Planning 15
91. __________% of Gratuity received on retirement by a Central Government employee is
taxable.
a) Ten
b) Nil
c) Twenty-Five
d) Twenty
92. The following ways to help clients overcome inadequate retirement resources are correct
EXCEPT
93. Vinay has been an employee of a public sector undertaking for the past 15 (completed) years
and is retiring on 1st December next year. His firm is not covered under the provisions of the
Payment of Gratuity Act, 1972. Amit's employer has agreed to pay him a gratuity amount of Rs.
5,00,000 on retirement. What is the tax status of this amount?
a) The gratuity paid is exempt from Income Tax only to the extent of Rs. 3,50,000.
b) The amount of gratuity payable to him cannot exceed Rs.3,50,000.
c) The Income Tax Act will only allow a maximum exemption upto 15 day's wages per
completed year of service. The rest is taxable.
94. What will be the effect in terms of buying power on today’s Rs.50000 after 15 years if inflation
is 8% p.a?
95. If the inflation rate is 4.9% and tax rate is 30%. The required rate of return to maintain the
value of an investment is___________.
a) 8%
b) 9%
c) 7%
d) 10%
96. Manish estimates his opportunity cost on investments to be 12% compounded annually.
Which one of the following is the best investment opportunity for Manish?
Tax Planning 16
97. Sachin has been investing Rs. 3500 into a mutual fund at the end of each month for the last
10 years and has been earning a compound return of 12%, consisting entirely of capital
appreciation. Does Sachin have enough money, after selling his investments to purchase his
dream home for Rs.800000?
98. Sahil, age 43, can refinance Rs. 114042 at a 20-year rate for 7% and will incur closing cost of
3% of the mortgage amount to be financed in the new mortgage balance. What will be his new
EMI on the mortgage under the circumstances to achieve his objective of no debt at retirement
(age 60)?
a) Rs. 781.49
b) Rs. 957.56
c) Rs. 980.57
d) Rs. 986.29
a) Under the Chilean Model, pension is paid to the widow of the worker
on his death.
b) Under the Chilean Model, pension is paid to the worker on
retirement.
c) Under the Chilean Model, pension is payable to the dependant
children of the deceased worker.
d) All the above.
101. Consider a portfolio of two investments viz. A & B. The sum total of volatility of A and
B respectively, represented by standard deviation of the two investments, will be equal to
the volatility of the portfolio as a whole if _________________.
a) Defined Benefit
b) Defined Contribution
c) Combination of Defined Benefit and Defined Contribution
Tax Planning 17
103. Which of the following is a correct interpretation of the Rules of Conduct pertaining to the
Ethic of Confidentiality?
104. Mr. Rajan's investment portfolio comprises Rs.2 lakh in equity, Rs.5 lakh in debt and Rs. 1
lakh in his bank current account. Over one year the returns on equity and debt are 5% and 12%.
At the end of the year to maintain his current asset allocation, he needs to _____________.
a) Do nothing.
b) He needs to move Rs, 10000/- from equity and Rs. 60000/- from
debt to cash.
c) He needs move Rs.7500/- to equity from debt and Rs. 8750/-to
cash from debt
d) He needs to invest Rs. 70000/- in debt and equity.
105. A 10 year 8.0% bond (Face Value- Rs.1000, interest payable semi-annually) maturing 6
years from today is available at a yield to maturity of 6.0%. It is likely to be priced at
_______________.
a) Rs. 1100
b) Rs. 1149
c) Rs. 1168
d) Rs. 1498
106. Raykar is an accomplished Financial Planner and is also an expert on derivatives and high
yielding bonds. He understands client requirements well and is able to come up with appropriate
portfolio restructuring ideas for clients. He believes in quickly moving clients from one investment
to another through a dynamic process of research and recommendations. What according to
the Rules relating to the Code of Ethics is the most applicable in this case?
Tax Planning 18
107. Mrs. & Mr. Arora are aged 55 and 58 years respectively. Both expect to work till they turn 65.
Their only goal is to fund their retirement. Which of the following is likely to be an appropriate
asset allocation strategy for them?
108. To determine the amount of life insurance coverage that provides a surviving spouse with a
monthly income of a given purchasing power, it is necessary to consider which of the following?
i. life expectancy ii. interest rate
iii. inflation rate iv. taxation
a) i, ii, iii
b) i, ii, iv
c) ii, iii, iv
d) i, ii, iii, iv
109. All the following statements concerning the inflation-adjusted interest rate are correct
EXCEPT
110. Which of the following is not needed to calculate the client’s target retirement fund?
a) Average annual earnings in the last 3 years before retirement
b) Estimated pension benefits during retirement
c) Costs of self-maintenance
d) Capitalization rate
112. Ahmad opens a savings account on 15 April 2000 with a deposit of RS.2,000. Thereafter,
Ahmad deposits RS.80 into the account fortnightly. The account earns interest of 8.3% per
annum, compounded fortnightly. How much will the account have on 15 April 2005?
a) RS.13,933
b) RS.14,933
c) RS.15,933
d) RS.16,933
Tax Planning 19
Solution: Calculate FV of RS.2,000
PV = RS.2,000, r = 8.3%/26, n = 5 x 26yrs. Therefore, FV = RS.3,026.7402
Calculate FV of payments
Pmt = RS.80, n = 26 x 5yrs, r = 8.3%/26. Therefore, FV = RS.12,906.2474
Total = RS.3,026.7402 + RS.12,906.2474 = RS.15,932.9876
114. Salil’s father has given him general power of attorney. What does this mean?
a) He has given Salil the right to appoint himself as the sole beneficiary of his estate
b) He has given Salil the immediate right to make decisions in all matters and
take action on his behalf
c) He has given Salil the right to make decisions in all matters and take action on
his behalf should he become incompetent
d) He has disinherited Salil, but Salil has the right to decide who will inherit his
estate
115. Mrs. Shah retired from Ace Manufacturing Co.Ltd. Mumbai on 31/12/2003. Ace is covered
under the Payment of Gratuity Act, 1972. She served for 30 years and 9 months. Ace paid her a
Gratuity of Rs.400000. Her monthly basic salary at the time of retirement was Rs.9000 p.m.and
Dearness Allowance was Rs.4000 p.m. House Rent Allowance was Rs.1500 p.m. Mrs.Shah lives
in an ownership flat. Compute: Taxable amount of Gratuity & Taxable amount of HRA
116. Mr. Sachin, aged 30, wants to retire at 45. He wants to maintain his present living standard.
He spends Rs.500000 a year. He is expected to live upto 75. Inflation is to be assumed at 5%
and expected returns are 7% p.a. What is the real rate of return?
a) 1.75
b) 1.90
c) 2.05
d) 2.15
Solution: Nominal return (N) = 7%; Inflation (I) = 5 %; Real Rate = {(1+ N)/ (1+ I)} - 1 = 1.90 %
Tax Planning 20
117. Aditi is 30 years old. She deposits 25000 at the beginning of each year in deferred annuity
scheme as a part of her retirement planning. How much will be in the account after 25 years if it
earns 9.5% compound annual interest?
a) 2474985
b) 2487216
c) 2414854
d) 2497857
Solution: Use FV function; PMT = 25000 Type = 1; n = 25; r = 9.5 %; Hence FV = Rs. 2497857
118. Sumeet, aged 25 plans to retire at age 55. His life expectancy is 75. His current annual
expenditure is Rs.250000. He estimates no reduction in his expenses post-retirement. If interest
rate is expected to be 8.5% and inflation is 5% p.a. estimate how much will he have to save per
annum in order to achieve his target, provided he does not wish to leave an estate.
a) Rs .119568
b) Rs. 125054
c) Rs. 117154
d) Rs. 120963
Solution: In order to find the quantum of saving per annum we need to find
(1) The future value of current expenditure
(2) The Present Value of the corpus required in order to fund such expenditure post-
retirement
(3) The actual quantum of savings required (PMT).
119. Mira aged 30, is interested in planning for retirement. She saves Rs. 15000 per year (at the
year end) in a bank fixed deposit earning 8.25% p.a. compounded annually until she retires at
age 58. Her life expectancy is 80 years. What will be her corpus on the date of retirement? What
is the fixed annual amount she can withdraw at the beginning of each year until age 80, in case
she wishes to exhaust her corpus completely?
a) 1348974, 87498
b) 1424894, 89458
c) 1491655, 137767
d) 1491655, 91613
Solution: Retirement corpus after 28 years, with an annual savings @ 8.25 % will be Rs
14,91,655, Post retirement, annuity due for 22 years will Rs 1,37,767
Tax Planning 21
120. Ms. Rekha is 45 years old and plans to retire at 50. Her life expectancy is 70 years.
Ms. Sushma her Financial Planner, estimates that her client will require Rs.45000 in the first
month after retirement. Inflation rate is 4% p.a. and the rate of return is 6% p.a. What will be the
savings per year required in order to meet this?
a) 1245879
b) 1478951
c) 1589420
d) 1689745
121. Mr. Ramesh retired from PTC Ltd after completing service of 29 years and 9 months. His
salary at the time of retirement was Rs 10,500 per month while the average salary drawn for the
preceding 10 months worked out to Rs 9,800 per month. The actual amount of gratuity received
by him at the time of retirement was Rs 3,25,000. Calculate the amount of gratuity exempt from
tax assuming that the provisions of Payment of Gratuity Act, 1972, cover him?
a) Rs. 1,81,730
b) Rs. 175,673
c) Rs. 2,94,000
d) Rs. 3,15,000
122. Mr. Thapar has just retired from Govt. service with a lump sum of Rs 25,85,650 as
retirement benefits in total. Currently he is 59 and life expectancy for him is 76 years. He intends
to take a world trip after 4 years, which would entail an amount of Rs 4 lakhs at current prices and
wants to buy a new car of Rs 3 lakhs immediately. Calculate what amount will be available to him
for post retirement living expenses in the beginning of every month, considering inflation @ 4.25
% and rate of return is 7.5 % p.a?
a) Rs 11,889
b) Rs 12,999
c) Rs 8,616
d) Rs 12,486
Solution: Net Retirement corpus available is Rs 18,85,650 after deducting Rs 7 lakhs (4lakhs + 3
lakhs) Inflation adjusted rate of return is 3.12 %. Monthly amount, at the beginning for next 17
years will Rs 11,889
123. Sunil is a young professional ageing 27 years, who has started investing in a ULIP of a
Insurance company. His annual contribution is Rs 60,000 in the beginning of the year. He has
opted for balanced fund looking at the bear phase of the market. He is optimistic and believes
that the market will rise and like wise interested in moving to growth fund, say after 2 years and is
considering to a protector fund option 5 years before retirement, which as per his company’s
policy is 58 years. Considering rate of return for growth fund be 12 %, balanced fund be 8 % and
protector fund be 6 %, what will be the accumulated value of the ULIP if initially, investable
amount of the contribution is 70 %, increasing by 10 % for subsequent years?
a) Rs 1,71,06,852
b) Rs 76,20,539
c) Rs 1,69,56,625
d) Rs 1,29,10,277
Tax Planning 22
Solution: Investable amount for first, second & third years would be Rs 42,000, Rs 48,000 & Rs
54,000 respectively. Rate of return for first two years would be 8 %, next 23 years would be 12 %
and for last five years would be 6 % Total accumulated amount at the retirement would be
Rs 1,29,10,277
125. ABC Ltd. is willing to prepay your Cumulative Fixed Deposit with them, without any
penalty and with all the accumulated interest (compounded half yearly). You had invested
Rs. 4000 with them 3.5 years back. If they are giving you back Rs. 4985, what is the annualized
rate of interest you have earned?
a) 6.40%
b) 3.2%.
c) 6.5%.
d) 7.2%.
Solution: (((((4985/4000)^(1/7))-1)*100)*
a) Mr. Joy was playing golf. He swings a new golf club on the fairway
and the head of the club flies off, and hit another golfer who was
standing 20 feet away.
b) Mr. Vishal takes medication that he knows makes him drowsy
and then proceeds to drive. He gets into an accident injuring the
passengers in another car.
c) Mrs. Jaya locks Ms. Rani in a room to prevent him from leaving the
building
d) Mrs. Priti experienced a sudden surge of chest pain while driving,
which causes her to lose control of her car and hit another car.
127. Any possible occurrence which may have a negative financial implication, can be plotted on
a graph with X axis measuring the frequency (low-high) and Y axis measuring the financial
impact (low-high). You can view the classification in four quadrants.
a) Quadrant I & IV
b) Quadrant I, II & IV
c) Quadrant I, III & IV
d) Quadrant III
Tax Planning 23
128. A client is concerned about the impact that inflation will have on her retirement income. The
client currently earns Rs.40,000 per year. Assuming that inflation averages 5.5% for the first five
years, 4% for the next five years and 3½% for the remaining time until retirement, what amount
must her first-year retirement income be when she retires thirteen years from now if she wants it
to equal the purchasing power of her current earnings?
a) Rs.62,550.
b) Rs.68,841.
c) Rs.70,520.
d) Rs.80,231.
Solution:
Year 1 - 5 PV = Rs.40,000
i = 5.5
N= 5
FV = Rs.52,278.40
Year 6 - 10 PV = Rs.52,278.40
i = 4.0
N= 5
FV = (Rs.63,604.67)
Year 10 - 13 PV = Rs.63,604.67
i = 3.5
N= 3
FV = (Rs.70,519.63)
129. A person aged 35 today needs RS.2 million at the age of 55 to fund his retirement expenses.
If he starts saving today, using an annual stepped-up savings method, calculate how much he
needs to save in the first year to ensure that his investment plan corresponds with his salary
growth?
(Assume that the investment rate of return is 8% per annum, inflation rate is 4% per
annum and salary growth rate is 10% per annum).
a) RS.29,992
b) RS.40,467
c) RS.24,048
d) RS.17,922
130. Ram, a 45 year old executive, earns a salary of RS.68,000 per annum. He will retire at the
age of 55, and his life expectancy is 76 years. He expects his current salary to grow by 6% per
annum. The inflation rate is expected to be 4% per annum throughout his lifetime and the
expected return on investment is 5% per annum during retirement. If Ram’s Target Replacement
Ratio (TRR) is 70% of his last drawn salary, calculate how much he needs as his retirement fund.
(Assume that salary increments are given at the beginning of each year)
a) RS.1,613,980
b) RS.1,629,499
c) RS.1,973,210
d) RS.1,992,183
Tax Planning 24
Solution:
FV of salary = RS.68,000x (1.06^10) = RS.121,777.6434
Expected expenses = 70% of RS.121,777.64 = RS.85,244.3504
Capital required for retirement : Pmt = RS.85,244.3504
i = (5% - 4%) / 1+0.04 = 0.9615
n = 21
PV = RS.1,629,499.2989
131. While determining the taxability of Gratuity, the term Salary usually includes ___________.
a) Fully exempt
b) Exempt up to a certain ceiling
c) Fully taxable
133. Your client is unsure of the meaning of the term. codicil.. A codicil is:
134. Mr. Yadav owns a small business worth Rs. 4 crore. How should life insurance be held if Mr.
Yadav is trying to benefit his minor grandson with the insurance policy?
a. 1 only
b. 3 only
c. 1 & 3 only
d. None of the above
Tax Planning 25
136. In the case of a Recognized Provident Fund, employer's contribution in excess of what
percent is taxable?
a. 12%
b. 8%
c. 10%
d. It is not taxable at all
a. 1 only
b. 2 only
c. 1 & 2 only
d. 1, 2 & 3
139. Contribution to Medical Insurance Premium enjoys a deduction upto INR _____ u/s 80 D.
a. 14000
b. 10000
c. 11000
d. 12000
a. Interest on PPF
b. Interest on Recognised EPF.
c. Interest on Bank Deposits
a. Director
b. Assessee earning over INR 50000 p.a. as Salary Income
c. Person owning more than 20% voting rights
d. All of the above
142. Since October 1, 2004, Capital Gains on the transfer of _________ are exempt from Long
Term Capital Gains .Tax subject to certain conditions.
a. Property
b. Equity Shares
c. Gold
d. Debt Mutual Funds
Tax Planning 26
143. A Testamentary Trust is affected after the ________
144. Your client Mr. Saxena expressed his intention to write his will in his own handwriting.
Such a will which is wholly in the handwriting of the testator is known as:
a. Holograph Will
b. Nuncupative Will
c. A handwritten Will is not allowed as establishing the authenticity of a
handwritten document is difficult in the court of law.
d. Lithographic Will
145. Since October 1 2004, long term capital loss on sale of equity shares can be set off against
long term capital gains to the extent of_______________.
a. NIL
b. 10 %
c. 20 %
d. 30 %
146. If a person inherits a house from his relative, the date of acquisition of the house for the
purpose of capital gains will be_________________.
a. A
b. B
c. A&B
d. Neither A nor B
148. Money has time value. It derives this value due to existence of several conditions. Which
one of the following is not one of the conditions contributing to the existence of this value?
149. An investor holds shares in a company that is not listed. Such shares would qualify as long-
term assets if held for ________.
Tax Planning 27
150. R transferred his house property to his wife under an agreement to live apart. Income from
such house property shall be taxable in the hands of:
a) R as deemed owner
b) R. However, it will be computed first as Mrs. R income & thereafter clubbed in the
hands of R
c) Mrs. R.
151. Incomes that accrue or arise outside India but are received directly into India are taxable in
case of:
a) resident only
b) both ordinarily resident and not ordinarily resident
c) non-resident
d) all the assesses
152. Salary, bonus, commission or remuneration due to or received by a working partner from the
firm is taxable under the head
a) Income from salaries
b) Income from other sources
c) Business & Profession
154. R traced a missing person and was awarded a sum of Rs. 1,00,000 although there was no
stipulation to that effect. Such receipt shall be:
155. An employee availed the exemption of leave encashment of Rs. 1,00,000 in the past. He
received from the second employer a sum of Rs. 2,50,000 as encashment of leave. He will
be entitled to exemption to the extent of:
a) Nil
b) Rs. 2,50,000
c) Rs. 2,00,000
d) Rs. 1,40,000
Tax Planning 28
156. Compensation received on voluntary retirement is exempt under 10(10C) to the maximum
extent of:
a) Rs. 2,40,000
b) Rs. 3,50,000
c) Rs. 5,00,000
157. Long-term capital gains tax rate on units of a debt-based Mutual Fund scheme is ________.
158. If rent is paid for a house situated in Delhi, the house rent allowance shall be exempt to the
maximum extent of:
a) 40% of salary
b) 50% of Salary
c) 60% of Salary
159. Vinod invests Rs. 1,50,000 in an equity oriented scheme on 1st December 2005 and
receives a dividend of Rs. 25,000 on 31st March 2006, the record date. The investment is sold on
2nd June 2006 for Rs. 1,20,000. How much short-term loss, if any, arising out of this investment
is allowable for set-off in FY 06-07?
160. In an unfortunate incident, Mr. Charan's plant catches fire and the machinery gets
destroyed. Luckily, Mr. Charan had insured the factory against fire. The WDV of the machinery
was Rs. 2,68,000 and the replacement cost Rs. 5,00,000. The Insurance Company has paid
compensation of Rs. 3 lakhs. What is the taxable amount?
161. Harish.s father has given him general power of attorney. What does that mean?
a) He has disinherited Harish, but Harish has the right to decide who will inherit his
father’s estate
b) He has given Harish the immediate right to make decisions in all matters
and take action on his behalf
c) He has given Harish the right to appoint himself as the sole beneficiary of estate
d) He has given Harish the right to make decision in all matters and take action on
his behalf should he become incompetent
Tax Planning 29
162. On 1st November 2006, Mr. Kapil, a professional cricketer, got an award of Rs. 40,000 from
his sports club for his fine performance during the season. His other taxable income is above Rs.
4 lakhs. How much amount of the award would be taxable in Kapil's hands?
a) Rs. 15000
b) Rs. 35000
c) Rs. 40000
d) Nil.
163. Mohit purchased equity shares of M Ltd. on a recognized stock exchange on 14th of April
2006. The cost of the shares was Rs. 50,000. The Securities Transaction Tax that Mohit would be
liable to pay would be _______.
a) Rs. 37.50
b) Rs. 50
c) Rs. 75
d) Nil
164. Mohan purchased units of an open-ended equity oriented scheme from the Mutual Fund
paying a total of Rs. 1,00,000. The Securities Transaction Tax that Mohan would be liable to pay
would be _______.
a) Rs. 100
b) Rs. 200
c) Rs. 50
d) Nil
165. Mr. Shah is an Indian Resident who earns some business from Mauritius. This income
is________.
A. taxable subject to credit given for tax already paid in Mauritius
B. fully Taxable
C. not taxable because India has a Double tax Avoidance treaty with Mauritius
a) A
b) B
c) C
d) None of them
a) A
b) B
c) C
d) A, B & C
167. Mr. Shyam leaves India for the first time on 15th April 2006 in order to take up
employment in China. He comes back to India on a personal visit on 10th June 2006 and
stays for 150 days in India Determine his residential status for AY 2007-08:
a. Resident
b. Non Resident
c. Resident but not Ordinarily Resident
d. Resident and Ordinarily Resident
Tax Planning 30
168. Mr. Billimoria, a chief executive of a company, finds that he had to undertake foreign tours
for the company’s work so often that he has remained out of India for as many as 300 days in FY
06-07. His residential status for previous year 06-07 would be ________.
a) Foreigner
b) Resident but not Ordinarily Resident
c) Resident in India
d) Resident Outside India
169. Vishal submits the following information for AY 2007-08. (a) Net income from salary
Rs. 2,50,000 (b) Loss from house property Rs. 10,000 (c) Bank interest Rs. 60,000. Calculate his
gross total income after taking into consideration the eligible set-off of losses.
a) Rs.2,50,000
b) Rs.3,10,000
c) Rs.2,60,000
d) Rs.3,00,000
170. Mr. Rao, an American Citizen has parents were both born in Canada and whose paternal
grandfather was born in Karachi in 1933. On 17th July 2006, he came to India to attend a
nephew.s marriage. He left India for the USA on 13th January 2007. His stay in India during the
last few years was: 2005-06 102 days, 2004-05 95 days, 2003-04 130 days, 2002-2003 40 days.
What is the residential status of Mr. Rao for A.Y. 2007-08?
a) Non Resident
b) Resident and Ordinarily Resident
c) Resident but not Ordinarily Resident
171. Consider a portfolio of two investments viz. A & B. The sum total of volatility of A and B
respectively, represented by standard deviation of the two investments, will be equal to the
volatility of the portfolio as a whole if _________________.
172. Which of the following is a correct interpretation of the Rules of Conduct pertaining to the
Ethic of Confidentiality? REPEATED EARLIER
a) A Member must when requested by the client, provide to a person authorized by the
client, all original documents prepared or received by the Member in undertaking the
advisory task
b) A Member owes to the Member’s partners or co-owners a responsibility to act in good
faith (expectations of confidentiality) only while in business together, not thereafter
c) The Member shall maintain the same standards of confidentiality to employers as
to clients
d) Under no circumstance, will any Member divulge any information or knowledge
regarding the FPSB India or its members that they may know or be exposed to
Tax Planning 31
Source Practice Test
173. Mr. Rajan a student pursuing graduation conducted home tuitions for school going students
and earned an income of Rs.108,000 in P.Y.=2007-08 and no tax or any other sum is due from
him.
a) Mr. Rajan is a “person” but not an “assessee”
b) Mr. Rajan is a “person” as well as an “assessee”
c) Mr. Rajan is deemed to be an assessee.
a) Rs. 1100
b) Rs. 1149
c) Rs. 1168
d) Rs. 1498
175. Karan wants to withdraw Rs. 1200/- at the end of each month for the next 5 years.
He expects to earn 10% interest compounded monthly on his investments. What lump sum
should he deposit now?
a) Rs. 56949
b) Rs. 58630
c) Rs. 56478
d) Rs. 59119
176. 5. Mr. Shyam has two house properties, Both are Self Occupied. The annual value_____
177. R Ltd., pays a salary of Rs. 1,50,000 to his employee G and undertakes to pay the Income
Tax amounting to Rs. 5,100 during the previous year 2006-07 on behalf of G. The gross
Salary of G shall be:
a) Rs. 1,50,000
b) Rs. 1,55,100
c) Rs. 1,55,600
a) Peace of mind
b) To avoid probate
c) To ensure property passes to intended person
d) To plan health care treatment
179. An assessee has paid life insurance premium of Rs. 25,000 during the previous year for a
policy of Rs. 1,00,000. He shall:-
Tax Planning 32
180. X purchased equity shares in Y Ltd a constituent of BSE-500 Index on Mumbai Stock
Exchange on March 1, 2005. He sold these shares on March 4,2007 at a loss of Rs 10,000. He
wants to set off the loss against other long-term capital gains of Rs 15000 during the year.
Both purchase and sale transactions were entered into on a
recognized stock exchange. Whether such set-off is permissible?
Solution: Loss under the head . Capital gains (i.e. short term or long term capital loss)(Sec 74)
181. Mr. Navnit is working as a manager in private sector bank. His remuneration consists of a
consolidated salary of Rs25, 000 per month plus an HRA of Rs10, 000 per month. He stays in a
rented accommodation paying a rent of Rs 6, 000 per month. Calculate the amount of HRA
exempt from tax _______.
a) Rs.1, 20,000
b) Rs.42, 000
c) Rs.48, 000
d) Rs.72, 000
182. X, a lady received the following gifts during the year ending march 31,2007: Rs 30,000
from her elder sister, Rs 50,000 from the daughter of her elder sister on 01-Feb-2007 and
Rs 1,25,000 from various friends on the occasion of her marriage on 10-March-2007.
Calculate the amount of gift taxable in the hands of X.
a. Rs 30,000
b. Rs 1,25,000
c. Rs 1,75,000
d. Rs 50,000
Solution: For P.Y 2006-07,Sum of money received without consideration on or after September
1, 2004 is not taxable upto Rs 25,000, provided it has been received by a relative defined u/s
56(2)(v)
183. Within two years of purchase of his flat, Vaibhav entered into an agreement to sell the same
to Mihir for Rs. 8,00,000. Vaibhav had bought the flat for Rs. 5,50,000. Mihir pays Vaibhav
earnest money of Rs. 50,000 in respect of the transaction with the balance money payable
within a month. However, for some unavoidable reason, Mihir could not make the rest of the
payment and in terms of the agreement between the two, Vaibhav forfeited the earnest money
paid. Subsequently, within a month Vaibhav sold the flat to another buyer for Rs. 9,00,000.
Compute Vaibhav's taxable income under capital gains.
Tax Planning 33
Solution: In computing cost of acquisition, where any capital asset was, on any previous
occasion, subject to negotiations for its transfer, any advance or other money received and
forfeited by the assessee in respect of such negotiation is to be deducted from the cost for
which the asset was acquired [Sec 51].
184. Ram has a house property whose Municipal Valuation is Rs.140000 whereas the fair rent
of the house is Rs.160000 and Standard Rent is Rs.145000. Rakesh has paid municipal taxes of
Rs.14000. Based on the above data, answer the following: If actual rent receivable is Rs.180000,
find the Gross Annual Value of the property is
a) 180000
b) 145000
c) 140000
d) 166000
185. Ram has a house property whose Municipal Valuation is Rs.140000 whereas the fair rent of
the house is Rs.160000 and Standard Rent is Rs.145000. Rakesh has paid municipal taxes of
Rs.14000. Based on the above data, answer the following: If actual rent receivable is Rs.130000,
the GAV is _______________.
a) 145000
b) 130000
c) 129000
d) 114000
186. Ram has a house property whose Municipal Valuation is Rs.140000 whereas the fair
rent of the house is Rs.160000 and Standard Rent is Rs.145000. Rakesh has paid municipal
taxes of Rs.14000. Based on the above data, answer the following: If the annual rent of property
is Rs.180000 and Unrealized Rent is Rs.60000, the GAV is_____________.
a) 145000
b) 180000
c) 120000
d) 131000
187. For the Previous Year 05-06, XYZ Ltd., a domestic company, pays an interim dividend in
October 2006 of 15% and a final dividend of 40%. The distribution tax is payable on _________.
188. Munir borrowed Rs.20,00,000 @ 9% p.a. on 1/10/1998 for construction of a house property
which was completed on 30/09/2003. The loan is still not repaid in full. What is the amount of
deduction on account of pre-construction interest for AY 2004-05 that he can avail of Rs. ______
a) 162000
b) 810000
c) 30000
d) 1,80,000
Tax Planning 34
189. Munir borrowed Rs.20,00,000 @ 9% p.a. on 1/10/1998 for renovation of a house property
which was completed on 30/09/2003. The loan is still not repaid in full. If this property was self
occupied then deduction on interest paid on borrowed capital is restricted to Rs.____________.
a) 150000
b) 30000
c) 162000
d) 810000
190. Munir borrowed Rs.20, 00,000 @ 9% p.a. on 1/10/1998 for construction of a house
property which was completed on 30/09/2003. The loan is still not repaid in full. If the
property was let out, the deduction on borrowed capital for AY 2004-05 would be__________.
a) 150000
b) 30000
c) 342000
d) 810000
191. ABC Ltd. is willing to prepay your Cumulative Fixed Deposit with them, without any penalty
and with all the accumulated interest (compounded half yearly). You had invested Rs. 4000 with
them 3.5 years back. If they are giving you back Rs. 4985, what is the annualized rate of interest
you have earned?
a) 6.40%
b) 3.2%.
c) 6.5%.
d) 7.2%.
193. Mr. Das is an NRI working for a company in Dubai. The company desires to credit his
monthly salary to his NRE account in India. Then such salary ________.
194. Speculation loss can be carried forward for the maximum of:
a. 8 years
b. 10 years
c. 4 years
Tax Planning 35
195. In case an assessee is engaged in the business of retail trade, presumptive income scheme
is applicable if the total turnover of such retail trade of goods does not exceed:
a. Rs. 10 lakhs
b. Rs. 30 lakhs
c. Rs. 40 lakhs
d. Rs. 50 lakhs
196. A house property whose fair rent is Rs. 1,20,000 is neither let out nor self occupied
throughout the previous year. Its annual value shall be:
a. Rs. 1,20,000
b. Nil
198. In case of an individual, any income by way of interest on any money standing to his credit in
a Non-Resident (External) Account in any bank in India shall be—
a. exempt
b. fully taxable
c. exempt upto Rs. 13,000
199. R is entitled to a watchman allowance of Rs. 600 p.m. for the security of his residence. He
pays Rs. 500 p.m. to the watchman employed by him. The taxable allowance shall be:
200. R is provided with a rent free accommodation owned by his employer in Delhi. The value of
this perquisite shall be:
a. 20% of salary
b. 15% of salary
c. 20% of salary plus excess of FRV over 50% of salary
d. 20% of salary plus excess of FRV over 60% of salary
e. 10% of salary
201. Where after depositing the amount under capital gain scheme, the individual assessee has
died, the amount lying in the capital gain scheme:
Tax Planning 36
202. Long-term capital gain on sale of equity shares and units of an equal oriented fund shall be:
203. Where the total income of the AOP/BOI, whose none of the members has income exceeding
maximum exemption limit nor any member is taxable at a rate higher than maximum marginal
rate, is less than Rs. 1,00,000:
a. the AOP/BOI shall not be liable to pay any tax and the share of the profit of the
member from AOP/BOI shall not be included in their respective total income
b. the AOP/BOI shall not be liable to pay any tax and the share of the profit of
the member from AOP/BOI shall be included in their respective total
income
c. the AOP/BOI will be liable to tax at the maximum marginal rate
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204 If the asset of a particular block is acquired and put to use during the previous year for less
than 180 days, the assessee shall be entitled to depreciation:
a. at normal rate
b. at 50% of normal rate
205. What will be your answer in the above case if the asset is acquired by the electricity
company which is claiming depreciation on straight line method?
a. at normal rate
b. at 50% of normal rate
c. proportionate period for which it is put to use.
206. Where a part of block of assets is sold for a price more than the opening W.D.V plus cost of
asset acquired during the year, if any, the assessee shall be subject to:
a. balancing charge
b. short-term capital gain
c. short-term or long-term capital gain depending upon the period after which the
block is transferred
207. Where a part of the block of asset is sold for a price less than the opening W.D.V. plus cost
of assets, if any, acquired during the year, the balance amount shall be treated as:
208. Where the entire block is sold for a price less than the opening W.D.V. and cost of asset, if
any, acquired during the previous year, the balance amount shall be treated as:
a. terminal/balancing depreciation
b. short-term capital loss
c. written down value
d. short-term or long-term capital loss depending on the period
Tax Planning 37
209 Transfer of capital asset in the scheme of demerger shall not be regarded as transfer for the
purpose of capital gain if:
210. Securities transaction tax paid by the seller of shares and units shall
212. Where the capital asset became the property of the assessee in any mode given under
section 49(1), the cost of acquisition of such assets shall be:
a. the market value of the asset as on the date of acquisition by the assessee
b. cost for which the previous owner of the property acquired it
c. nil
213 If the shares are acquired on conversion of debentures, the cost of acquisition of such share
shall be:
214. If the goodwill of a business, right to manufacture or produce, tenancy rights, route permit or
loom hours is acquired before 1-4-1981, the cost of acquisition of such asset shall be:
215. As per the I.T.Act, the cost of acquisition of Bonus Shares acquired before 01-4-1981 may
be taken as _________
a) Nil
b) Nil or Market value of the shares as on 01-04-1981
c) Nil or Market value of the shares as on the date of allotment
d) Nil or Face value of the shares as on the date of allotment
e) None of the above
216. If the bonus shares are acquired on or after 1-4-1981, the cost of acquisition of such shares
shall be:
Tax Planning 38
217. The cost of acquisition of the right shares to a person who purchased the right to acquire the
share from the existing shareholder shall be:
218. If any advance money received by the assessee in any earlier occasion of transfer, which
could not materialize, is forfeited, such money shall:
219. If advance money forfeited is more than the cost of acquisition of the assets, the excess
amount shall:
220. If there is a transfer of asset which is not revocable during the life time of the transferee,
income arising from such asset shall be included in the income of:
a. transferor
b. transferee
c. transferee till his death and thereafter in the hands of the transferor
221. Where an individual has substantial interest in a concern, there shall be included in his total
income any remuneration paid by such concern to:
222. For amount subscribed to National Saving Scheme 1992, the individual shall be allowed
deduction u/s 80C for amount deposited:
a. in his name only
b. his name or in the name of the spouse
c. his name, in the name of spouse or in the name of any child.
223. For claiming deduction u/s 80C, the individual shall make the payment for Jeevan Dhara or
Jeevan Akshay Scheme in:
224. If the assessee is engaged in the business of growing and manufacturing of rubber, the
agricultural income in that case shall be:
Tax Planning 39
225. If the assessee is engaged in the business of growing and curing of coffee, the agricultural
income in that case shall be:
226. A firm assessed as firm shall be entitled to deduction on account of interest on capital or
loan paid to the partner
227. The deduction of interest & remuneration subject to restriction u/s 40(b) shall be allowed to
the firm if the partnership is
a. evidenced by an instrument
b. oral
c. oral or evidenced by an instrument
230. As per section 139(1), an individual other than a senior citizen or a woman shall have to file
return of income if:
Tax Planning 40
232. Deduction under section 80C for tution fee shall be allowed if such fee is paid to:
a. any university, college, school or other educational institution situated within India
or outside
b. any university, college, school or other educational institution situated within India
233. Deduction under section 80C for tution fee shall be allowed for the purposes of:
234. Deduction under section 80C in respect of tution fee is allowed to:
a. an individual only
b. an individual or HUF
c. any assessee
235. Deduction under section 80C in respect of term deposit shall be allowed if the term deposit
is for a period:
236. W.D.V. of block of 15% as on 1-4-2006 is Rs. 5,00,000. An asset amounting to Rs. 1,00,000
was acquired on 1-11-2006 and put to use on 1-12-2006. During the previous year 2006-07 a part
of the block (other than the new asset) is sold for Rs. 5,40,000. The depreciation to be allowed for
this block shall be:
a. Rs. 9,000
b. Rs. 4,500
c. Rs. 5,000
237. If in the above case, this part of the block is sold for Rs. 4,80,000 instead of Rs. 5,40,000,
the depreciation allowed shall be:
a. Rs. 10,500
b. Rs, 18,000
c. Rs. 9,000
238. What will be your answer in case of (i) above if the part of the block sold includes the new
asset acquired during the year.
a. Rs. 9,000
b. Rs. 4,500
c. Rs. 5,000
Tax Planning 41
239.Where a shareholder of an amalgamating company gets the shares of the amalgamated
company in lieu of the shares held by him in an amalgamating company, the cost of acquisition of
such shares shall be:
240. If an assessee discontinues the life policy before the premium of 2 years have been paid
then:
241. If a member, participating in the ULIP Plan, terminates his participation or ceases to
participate by reason of non payment of his contribution, before making deduction for 5 years,
then:
a. no deduction shall be allowed in respect of the amount paid in the previous year
of termination
b. besides what is mentioned in (a), the aggregate deduction allowed in the past
years shall be deemed to be the income in the previous year in which
membership is terminated
c. besides what is mentioned in (a), the cases of the past years in which deduction
was allowed shall be reopened and tax shall be recomputed and the balance tax
payable shall be so payable for these relevant years
242. An employee who was not entitled to gratuity, got 30% of his total pension commuted in the
past. He wishes to commute another 25% of his total pension in the previous year. He shall be
allowed exemption to the extent of:
a. Nil
b. 20%
c. 25%
243. Municipal valuation of the house is Rs. 1,00,000 whereas the fair rent of house property Rs.
1,20,000 and standard rent is Rs. 1,10,000; actual rent received or receivable is Rs. 1,40,000;
municipal taxes paid 10%. The annual value in this case shall be:
a. Rs. 90,000
b. Rs. 1,00,000
c. Rs. 1,30,000
Tax Planning 42
244. An asset which was acquired for Rs. 5,00,000 was earlier used for scientific research. After
the research was completed, the machinery was brought into the business of the assessee. The
actual cost of the asset for the purpose of inclusion in the block of asset shall be:
a. Rs. 5,00,000
b. nil
c. market value of the asset on the date it was brought into business
245. R had been using an asset for his business and its W.D.V. as on 1-4-2006 was
Rs. 3,50,000. He sold this asset to G for Rs. 5,00,000 and G leased back this asset to R. The
market value of this asset on the date of sale was Rs. 4,00,000; in this case, the actual cost of
this asset to G for charging depreciation shall be.
a. Rs. 5,00,000
b. Rs. 3,50,000
c. Rs. 4,00,000
246. During the previous year an assessee has incurred loss from his business amounting to
Rs. 1,10,000 whereas his income from house property is Rs. 1,00,000. The assessee in this case
can carry forward:
247. Where the assessee or his wife or her husband or dependant parents or any member of the
family of HUF is a senior citizen and the medical insurance premium is paid to effect or keep in
force an insurance in relation to him or her, the deduction allowed shall be:
a. Rs. 10,000
b. Rs. 15,000
c. Rs. 20,000
Source: Tax & Estate Planning Questions from PDF File (Sample Questions)
a. A
b. B
c. A, B & C
d. B&C
Tax Planning 43
250. Sec. 88 B provides a rebate of up to _____ % in respect of tax payable in respect of senior
citizens. (1 Mark)
a. 25
b. 50
c. 75
d. 100
251. Mr. Arora has three children. He will be entitled to a maximum rebate of Rs.____ u/s 88.
(1 Mark)
a. 12000
b. 36000
c. 24000
d. NIL
252. Ram has a house property whose Municipal Valuation is Rs.140000 whereas the fair rent of
the house is Rs.160000 and Standard Rent is Rs.145000. Rakesh has paid municipal taxes of
Rs.14000. Based on the above data, answer the following: If the annual rent = Rs.180000 and
unrealized rent = Rs.60000, the Net Annual Value is ______________ (4 Marks)
a. 145000
b. 131000
c. 160000
d. 180000
Solution: The GAV is Rs.145000. Taxes paid = Rs.14000. Therefore Net Annual Value =
Rs.131000.
253. Ram has a house property whose Municipal Valuation is Rs.140000 whereas the fair rent of
the house is Rs.160000 and Standard Rent is Rs.145000. Rakesh has paid municipal taxes of
Rs.14000. Based on the above data, answer the following: If Ram used the house for his own
residential purpose the GAV of the house will be_______. (4 Marks)
a. 145000
b. NIL
c. 180000
d. 131000
254. The maximum amount of income, which is not chargeable to income tax in case of a male
(current age 45 years) is ____________
a) Rs.110000
b) Rs.100000
c) Rs.145000
Tax Planning 44
257. Ms.Suvarna started her “Suvarna Fashions” on 15-06-2007, Name the Previous Year (P.Y.)
& Assessment Year (A.Y.)
a) P.Y. 15-06-2007 to 31-03-2008 & A.Y. 01-04-2008 to 31-03-2009
b) P.Y. 15-04-2007 to 31-03-2008 & A.Y. 01-04-2008 to 31-03-2009
c) P.Y. 01-04-2007 to 31-03-2008 & A.Y. 01-04-2008 to 31-03-2009
258. With reference to meaning of “Income”, answer whether the following is/ are True
1) A “Capital Receipt” is EXEMPT unless specifically made taxable under the Act.
2) A “Revenue Receipt” is always TAXABLE unless specifically exempted under the Act.
a) Only 1 is True
b) Only 2 is True
c) Both 1 & 2 are True
259. The rates of income tax are not specified in the Income Tax Act, but are laid down by the
“Finance Act” every year
a) The statement is True
b) The statement is False
c) Only 1 & 2
d) Only 2 & 3
e) All of the above
261. Mr. Edward paid Rs.2 Lakhs as Income Tax from his Salary income for PY=2007-08, he
contends that since this Rs.2 Lakhs is an expense for him, he wants to claim it as allowable
expense.
a) Tax paid is not allowed as an expense since such tax is a statutory liability
b) Tax paid is not allowed as an expense but Interest paid on the borrowing will be allowed
as an allowable expense
c) Tax paid is not allowed as an expense since such tax is paid by every one
262. In case of an “individual assessee”, Surcharge @ 10% is applicable only if the “Total
Income” exceeds Rs.10 Lakhs
a) True
b) False
c) None of the above
263. Dr. Shilpi is leaving India on 31-12-2007 to stay with her spouse in USA and has no plans to
come back, during the said period (1-4-2007 to 31-12-2007) her income from profession was
Rs.1,55,000.
a) Income of the P.Y. 2007-08 will be assessed in the A.Y. 2008-09 as “Regular
assessment”
b) Income of the P.Y. 2007-08 will be assessed in the P.Y. 2007-08 as “Accelerated
Assessment”
c) Income of the previous year is assessed in the same year as “Income Escaping
Assessment”
Tax Planning 45
Source Practice Test 2
264. Premium paid by Mr. Rajesh (age 43 years) to LIC for Critical Illness Rider is eligible for
deduction under ________
265. With reference to set off & carry forward of losses under the I.T.Act, state which is/are True
i. Short Term Capital Loss can be set off against Short Term Capital Gain as well as
Long Term Capital Gain
ii. Short Term Capital Loss can be set off only against Short Term Capital Gain
iii. Long Term Capital Loss can be set off against Short Term Capital Gain as well as Long
Term Capital Gain
iv. Long Term Capital Loss can be set off only against Long Term Capital Gain
266. As per the I.T.Act, if Annual Premium paid is more than 20% of Sum Assured, then ____
a) Such Premium is fully eligible for deduction u/s 80 C upto maximum of Rs. 1 Lakhs and
only the Maturity Value, Surrender Value is fully exempt u/s 10(10D).
b) Such Premium is eligible for deduction u/s 80 C upto maximum of Rs. 1 Lakhs but only
to extent of the first 20% of the Sum Assured but Maturity Value, Surrender Value is not
exempt u/s 10(10D) with the exception of only Death Benefit.
c) None of the above
267. If any advance money is received by the assessee in any earlier occasion of transfer, which
could not materialise, if forfeited, such money shall ________
Tax Planning 46
268. With reference to receipt, accrual/due of Income, answer whether the following is/ are True
i. Income is said to be received when it reaches the assessee
ii. When the right to receive the income becomes vested in the assessee , income is said
to accrue or arise.
iii. Salary accrues every day but since paid at the end of the month, it becomes due on the
last day of the month
a) only i is True
b) only ii & iii are True
c) all are true
269. With reference to Sec 80-C of the I.T.Act, answer whether the following is/ are True
i. Amount invested in Sec 80-C eligible investments would be allowed as a deduction
irrespective of the fact whether or not such investments are made out of income
chargeable to tax.
ii. Amount invested in Sec 80 C eligible investments would be allowed as a deduction
only if such investments are made out of income chargeable to tax.
a) Only i is True
b) Only ii is True
c) Both i & ii are True
270. With reference to “Income from Salary”, answer whether the following is/ are True
i. Any sum to be charged as “Income from Salary” the requisite criteria is there should be
an “Employer-Employee Relationship”
ii. Salary is taxable on due basis/ receipt basis whichever is earlier
iii. Bonus is taxable on receipt basis only
a) Only i is True
b) Only ii & iii are True
c) All are True
271. With reference to “Perquisites”, answer whether the following is/ are True
i. Reimbursement of medical expenses by employer upto Rs.15,000 incurred by
employee on medical treatment of himself of his family member is not a perquisite for the
employee.
ii. Premium paid by employer on Health Insurance of the employee or his family member
under any scheme approved u/s 80-D is not a perquisite for the employee.
iii. Premium paid by employer on Life Insurance of the employee or his family member is
a perquisite for the employee.
a) Only i is True
b) Only ii & iii are True
c) All are True
272. As per Sec.10(10), Gratuity is payable by the Employer to the Employee only when the
employee has served for a continuous period of 5 years except due to Death and Permanent
Disability.
a) The statement is True
b) The statement is False
Tax Planning 47
273. With reference to Sec 64 (Clubbing of Income), answer whether the following is/ are True
i. Clubbing Provision is applied only to clubbing of Income
ii. Clubbing Provision is not applied to clubbing of Losses
iii. Clubbing Provision is applied BOTH to clubbing of Income as well as clubbing of
Losses
a) Only i is True
b) Only iii is True
c) Both i & ii are True
274. With reference to Deduction u/chapter VI-A, answer whether the following is/ are True
i. Amount deductible u/s 80-C is equal to:- 100% of “qualifying investment” or Rs.1 Lakh,
whichever is lower
ii. The maximum amount deductible under Sec.80-C, Sec.80-CCC & Sec.80-CCD cannot
exceed Rs. 1 Lakh as laid down u/s 80-CCE
iii. Contribution to Public Provident Fund (PPF) is allowed as a deduction u/s 80-C
subject to a maximum limit of Rs.70,000
a) Only i is True
b) Only ii & iii are True
c) All are True
275. With reference to Deduction u/chapter VI-A, answer whether the following is/ are True
The deduction u/s 80-C for the relevant P.Y. is disallowed and deduction claimed in the past is
withdrawn in the following cases:-
276. With reference to “Residential Status” u/s 6, answer whether the following is/ are True
i. Residential status is to be determined for every P.Y. as it may change from year to year
ii. Residential status is different from citizenship
iii. Residential status is important in deciding whether foreign income of a person is
taxable or not
a) Only i is True
b) Only ii & iii are True
c) All are True
Tax Planning 48
278. Mr. Ramesh Rane has satisfied the “basic conditions” of Residential Status and has been a
resident in India for 2 out of 10 years immediately preceding the P.Y. and he has been in India for
a period of 730 days during the 7 years immediately preceding the P.Y. What is his “Residential
Status” under the I.T.Act.
a) Resident in India
b) Resident & Ordinarily Resident
c) Resident but not Ordinarily Resident
279. Mr. Rohan earned Rs.5 Lakhs from an illegal source, The I.T. Officer wants to include it as
her “Income from Profession” and tax it accordingly.
a) Yes, the I.T.O action is acceptable, since Income (Legal/Illegal) is included
in “Income”u/s 2(24)
b) No, the I.T.O action is un-acceptable, since only Income from a Legal source is
included in “Income” u/s 2(24)
c) Yes, the I.T.O action is un-acceptable, since Income (Legal/Illegal) is included in
“Income” u/s 2(24) but it should be taxed as “Income from Other Sources”
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280. A person leaves India permanently on 15-11-2006. The assessment year for income earned
till 15-11-2006 in this case shall be:
a) 2005-06
b) 2006-07
c) 2007-08
282. During the previous year, the employee was reimbursed Rs.24,000 as medical expenses
incurred by him, which includes Rs.7,000 spent in Govt. hospital. The taxable perquisite in this
case shall be:
a) Rs.9,000
b) Nil
c) Rs.2,000
d) Rs.24,000
283. For claiming exemption under section 54, the assessee should purchase residential
property:
Tax Planning 49
284. For claiming exemption under section 54, the assessee should construct the residential
property within:
286. R was born on 5th April, 1995 in India & he later on took the citizenship of U.S.A. Neither his
parents nor his grand parents were born in divided/undivided India. R in this case shall be:
a) citizen of India
b) person of India origin
c) a foreign national
287. R was born in England, his parents were born in India in 1951. His grand parents were born
in South Africa. R shall be:
288. A subsidy received from the Tea Board by an assessee carrying on business of growing and
manufacturing tea for re-plantation or replacement of tea bushes is:
a) taxable
b) exempt
289. A is entitled to Children education allowance @ Rs. 80 p.m. per child for 3 children
amounting Rs. 240 p.m. It will be exempt to the extent of:
290. R is entitled to Hostel expenditure allowance of Rs. 600 p.m. for his 3 children @ Rs. 200
per child. The exemption in this case shall be:
Tax Planning 50
291. There is a surcharge on income tax if the total income of the assessment year 2007-08 of an
individual or HUF exceeds:
a) Rs. 1,00,000
b) Rs. 10,00,000
c) Rs. 8,50,000
292. R is entitled to a transport allowance of Rs. 1000 p.m. for commuting from his residence to
office and back. He spends Rs. 600 p.m. The exemption shall be:
293. R is entitled to Rs. 6,000 as medical allowance He spends Rs. 4000 on his medical
treatment and Rs. 1000 on the medical treatment of his major son not dependent on him. The
exemption in this case shall be:
a) Rs. 4,000
b) Rs. 5,000
c) NIL
295. A has two house properties. Both are self- occupied. The annual value:
297. If an assessee carries on any scientific research related to his business, he shall be allowed
deduction u/s 35 on account of:
a) revenue expenditure
b) capital expenditure
c) both revenue and capital expenditure
d) both revenue and capital expenditure excepting expenditure incurred on acquisition
of land.
298. Certain revenue and capital expenditure on scientific research are allowed as deduction in
the previous year of commencement of business even if these are incurred:
Tax Planning 51
299. Where a scientific research asset is sold without having been used for other purpose then
the sale price to the extent of the cost of the asset already allowed as deduction in the past shall
treated as:
a) business income
b) short-term capital gain
c) long-term capital gain
d) long-term or short-term capital gain depending upon the period for
which such asset was held.
300. Where the sale price in the above case exceeds the cost of acquisition of such asset, such
excess shall be treated as:
a) business income
b) short-term capital gain
c) long-term capital
d) short-term or long-term capital gain depending upon the period for
which such asset was held
301. Brought forward unabsorbed capital expenditure on scientific research can be carried
forward:
302. Surcharge in case of an individual or HUF for assessment year 2007-08 is payable at the
rate of:
a) 2.5% of the income-tax payable provided the total income exceed Rs. 10,00,000
b) 10% of the income-tax payable provided the total income exceeds
c) 5% of the income-tax payable if the total income exceeds Rs. 10,00,000
303. If any amount is donated for research, such research should be in the nature of:
304. If donation is made for scientific or social on statistical research, such research:
305. Where a capital asset, other than certain urban agricultural land, is compulsorily acquired,
then the capital gain shall arise in the previous year:
a) of compulsory acquisition
b) in which full consideration is received
c) in which part or full consideration is received
Tax Planning 52
306. In the case of compulsory acquisition, the indexation of cost of acquisition or improvement
shall be done till the:
a) be capital gain
b) not be any capital gain
c) be a short-term capital gain
311. Where a company purchases its own shares there will be capital gain to the2:
a) company
b) shareholder
c) neither to the company nor to the shareholder
d) both to the company and the shareholder
312. For claiming exemption under section 54, the assessee should transfer:
313. Surcharge in case of a firm for assessment year 2007-08 is payable at the rate:
Tax Planning 53
314. In the above case, the residential house property should be transferred:
a) before 36 months
b) after 36 months
c) after 12 months
315. A business loss can be carried forward and set off in the subsequent assessment year when
the business on account of which this loss has arisen:
a) is continued in the assessment year in which the such loss is set off
b) is continued or not
c) is continued for any part of the previous year
316. Deduction under section 80DD in respect of maintenance including medical treatment of
dependant being a person with disability shall be allowed to:2
a) any assessee
b) an individual or HUF
c) an individual or HUF who is resident in India.
318. Deduction under section 80DD in case of dependant with severe disability shall be allowed.
319. Deduction u/s 80DDB in respect of medical treatment for specified ailment or disease is
allowed to:
a) any assessee
b) individual or HUF
c) individual or HUF who is resident in India
320. Deduction under section 88DDB shall be allowed for medical treatment of specified ailment
or disease of:
321. Deduction under section 80DDB shall be allowed for a sum of:
Tax Planning 54
322. In case the assessee or dependant relative is a senior citizen then the deduction under
section 80DDB shall be allowed for a sum of:
324. No person other than individual or HUF can be "resident but not ordinarily resident in India":
a) True
b) False
325. Deduction under section 80E in respect of interest on loan taken for higher education shall
be allowed to:
326. Deduction under section 80E shall be allowed in respect of amount paid by way of interest
on loan taken from:
a) any person
b) financial institutions
c) financial institutions or approved charitable institution
327. For claiming deduction of interest u/s 80E loan should be taken for doing:
328. The deduction u/s 80E is allowed for payment by way of interest on loan to the extent of:
a) Rs. 25,000
b) Rs. 40,000
c) any amount
329. Deduction under section 80E for payment by way of interest on loan is allowed for:
a) 5 years
b) 8 years or till the interest is paid whichever is earlier
c) 10 years
d) 8 years
Tax Planning 55
330. If the assessee uses its own agricultural produce for the purpose of manufacturing certain
products other than tea, rubber or coffee the cost of such agricultural produce for the purpose of
computing business income of manufacturing shall be:
331. If an assessee uses the agricultural produce grown by him for his own consumption then:
a) Rs. 50,000
b) On the first 75,000 of book profits - 90% of book profits or Rs. 50,000
whichever is more, on the next Rs. 75,000 of book profits 60% and
on the balance book profits 40%.
c) On the first 1,00,000 of book profits - 90% of book profits or Rs.
50,000 whichever is more, on the next 1,00,000 of book profits 60%
and on the balance book profits 40%.
333. A firm carrying on business shall be entitled to deduction on account of any remuneration to
working partner to the maximum extent of:
a) Rs. 50,000
b) Rs. 50,000 or 90% of the first 75,000 of book profits, whichever is
more, 60% of the next Rs. 75,000 book profits & 40% of the balance
book profits
c) Rs. 50,000 or 90% of the first 1,00,000 of book profit, 60% of the
next 1,00,000 of book profit and 40% of the balance book profits
334. In case of AOP whose members include a foreign company, and their shares are unknown,
the tax shall be charged:
335. An income under the head capital gain to a trade union is:
a) exempt
b) taxable
Tax Planning 56
336. In case of AOP whose members are other than foreign company, and whose shares are
known, but the total income of any of its member exceeds the maximum exemption limit, tax to
the AOP shall be charged:
337. Municipal valuation of the house is Rs. 1,20,000, fair rent is Rs. 1,40,000 standard rent is
Rs. 1,30,000 whereas actual rent received or receivable is Rs. 1,25,000; municipal taxes paid are
40,000. The annual value in this case shall be:
a) Rs. 1,00,000
b) Rs. 85,000
c) Rs. 90,000
338. Fair rental value of a house is Rs. 1,50,000, standard rent Rs. 1,20,000, actual rent Rs.
1,30,000. Municipal taxes paid during the previous year for the past 7 years is Rs.1,40,000. The
annual value shall be:
a) Rs. 20,000
b) Nil
c) (-) 10,000
339. If the income of a business before claiming revenue expenditure on scientific research is
Rs. 50,000 and the revenue expenditure incurred on scientific research related to the business of
the assessee is Rs. 80,000, then Rs. 30,000 shall be:
a) business loss
b) unabsorbed revenue expenditure on scientific research
c) none of these two
340. If the income of a business before claiming capital expenditure on scientific research is Rs.
50,000 and the capital expenditure incurred on scientific research related to the business of the
assessee is Rs. 80,000, then Rs. 30,000 shall be
a) business loss
b) unabsorbed capital expenditure on scientific research
c) none of these two
341. In case of compulsory acquisition, if enhanced compensation is received then for purpose of
computation of capital gain the cost of acquisition and cost improvement in that case shall be
taken as:
a) nil
b) cost of acquisition or cost of improvement which was in excess of
initial compensation earlier received
c) none of these
Tax Planning 57
342. R has sold 2000 14% debentures of Rs. 100 each to his wife for Rs. 90,000. The market
value of debentures on the date of transfer was Rs. 1,80,000. In this case, interest income to be
included in the total income of R shall be:
a) Rs. 12,600
b) Rs. 28,000
c) Rs. 14,000
d) Rs. 25,200
343. An assessee has incurred Rs. 1,00,000 on the cultivation of agricultural produce. 50% of the
produce has been sold for Rs. 1,10,000 and the balance 50% has been used by the assessee for
his self-consumption, the agricultural income in this case shall be:
a) Rs. 10,000
b) Rs. 60,000
c) Rs. 1,20,000
344. R a person of Indian origin visited India on 2-10-2006 and plans to stay here for 185 days.
During 4 years prior to previous year 2006-07, he was in India for 750 days. Earlier to that he was
never in India. For assessment year 2007-08, R shall be:
345. Mrs. R, wife of R who is employed in G LTD went for by pass surgery in England alongwith
her husband. Expenses on medical treatment of wife and stay outside India of wife and R
amounted to Rs.7,00,000 as against Rs.6,50,000 permitted by RBI. The travel expenses
amounted to Rs.1,50,000. All expenses were reimbursed by the employer. Assume the gross
salary and income from other sources of the employee are Rs.1,40,000 and Rs.40,000
respectively. The taxable perquisite in this case shall be:
a) Rs. Nil
b) Rs. 50,000
c) Rs. 2,00,000
d) Rs. 1,50,000
a) exempt
b) taxable
c) included in total income for rate purposes
347. A car of 1500 cc is provided by the employer to the employee whose salary is Rs.20,000 per
month. The car in used by him partly for official and partly for his personal purposes. The
expenses of running and maintenance for official purpose is met by the employer and the
expenses of running and maintenance for private use is met by employee himself. The valuation
of this perquisite shall be:
a) Nil
b) Rs. 1,200 p.m.
c) Rs. 400 p.m.
Tax Planning 58
348. An employer has provided a motorcar of 1.5 litre capacity to his employee, which the
employee is allowed to use for official purpose and for travelling from office to residence and
back. The expenses of running and maintenance of Motor Car are met by the employer. The
value of this perquisite shall be
349. R is provided with a car of 1.6 litre capacity by the employer along with driver. The expenses
of running and maintenance of car are met by R himself. Besides using the car for official
purposes, R uses the car for his personal purposes also. The valuation of the perquisite of car
shall be
a) Nil
b) Rs. 12,000
c) Rs. 8,000
d) Rs. 10,400
350. R Ltd., paid Rs. 1,10,00,000 during the previous year 2005-06 for acquiring the
telecommunication rights which were effective for 11 years. It commenced the business of
operating the telecommunication service with effect from previous year 2006-07. R Ltd. shall be
entitled to a deduction of:
351. R had acquired a licence to operate telecommunication service in the previous year 2004-05
for Rs.2 crores and its life was 10 years. During the previous year
2006-07 it has sold the licence for Rs. 150,00,000. It shall be allowed a deduction under section
35ABB during the previous year 2006-07 to the extent of:
a) Rs. 20 lakhs
b) Rs. 10 lakhs
c) none of these
352. Where a closely held company gives an loan/advance to a shareholder who has 10% voting
power in the company or to concern in which such shareholder has 20% share in case such
concern is a non company assessee or has substantial interest (20% voting power) in case it is a
company then loan/advance so paid shall be deemed divided to the extent of:
a) exempt
b) taxable
c) included in total income for rate purposes
d) Exempt upto Rs. 2,000 p.m.
Tax Planning 59
354. Entertainment allowance in case of Government employee is:
a) fully exempt
b) fully taxable
c) exempt upto certain limits mentioned in section 16(ii)
d) first included in full in gross salary and thereafter deduction allowed
from gross salary under section 16(ii)
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355. The maximum amount on which income-tax is not chargeable in case of firm is:
a) Rs. 50,000
b) Rs. 30,000
c) Rs. 60,000
d) Nil
356. Venture capital company or venture capital fund are given exemption from income-tax for:
357. R an employee, owns a car which he uses for his private as well as official purposes. The
expenses of running and maintenance of the car is met by the employer. The perquisite shall
358. R is an employee of Indian Oil Corporation Ltd. He is provided with free gas for his personal
purposes by the employer. The value of this perquisite shall be:
a) Nil
b) 61/4% of the salary
c) manufacturing cost per unit
d) market rate of gas
359. R owns a house in which he lives. His employer reimburses to him the electricity bill
amounting to Rs. 5,000. It shall be a perquisite for:
360. The employer provides free facility of watchman Sweeper and Gardner to his employees. It
will be a perquisite for:
Tax Planning 60
361. R Ltd. owns a house which has been provided to its employee along with the Gardner. The
Gardner salary paid shall be:
a) fully exempt
b) exempt upto 12% of salary
c) exempt upto 10% of salary
363. Expenditure incurred on prospecting, etc. of minerals shall be allowed as deduction in:
a) 5 equal instalments
b) 10 equal instalments
c) full
364. In case the assessee follows mercantile system of accounting, bonus or commission to the
employee are allowed as deduction on:
a) due basis
b) payment basis
c) due basis but subject to section 43B.
365. Expenditure incurred on family planning amongst the employees is allowed to:
a) any assessee
b) a company assessee
c) an assessee which is a company or Cooperative Society
366. The maximum amount on which income-tax is not chargeable in case of a co-operative
society is:
a) Rs. 50,000
b) Rs. 30,000
c) Nil
d) Nil
367. Capital expenditure incurred on family planning amongst employees of the company
assessee is allowed as deduction:
a) in full
b) 5 equal instalments
c) in 10 equal instalments
368. Deductions under section 37(1) shall be allowed of those expenditure which are of:
a) revenue nature
b) capital nature
c) both revenue and capital nature
Tax Planning 61
369. Interest on capital of or loan from partner of a firm is allowed as deduction to the firm to the
extent of:
a) 18% p.a.
b) 12% p.a. even if it is not mentioned in partnership deed
c) 12% p.a. or at the rate mentioned in partnership deed whichever is
less.
370. Deduction under section 40(b) shall be allowed on account of salary/remuneration paid to:
a) any partner
b) major partner only
c) working partner only
a) any assessee
b) any assessee owning an industrial undertaking
c) an individual or HUF owning an industrial undertaking.
a) a transfer
b) compulsory acquisition by law
c) sale
374. For claiming exemption u/s 54D, the assessee should purchase and/or construct another
land and building within:
375. If the new land and building acquired for claiming exemption u/s 54D, is transferred within 3
years, then there will be:
Tax Planning 62
376. Exemption under section 54EC shall be available to:
a) any assessee
b) individual only
c) individual or HUF
d) company assessee only
a) True
b) False
378. Exemption under section 54EC shall be available for transfer of:
381. For claiming exemption under section 54EC, amount to the extent of the capital gain should
be invested:
382. For claiming exemption under section 54EC, the amount to the extent of capital gain should
be invested within six months from the date of transfer in:
Tax Planning 63
384. Winning from lotteries, cross word puzzles, horse races & other races, card game, etc. are
casual income & hence:
a) fully exempt
b) exempt upto Rs. 5,000
c) fully taxable
385. As per section 64(1A) income accruing to a minor shall be clubbed in the income of:
a) father
b) mother
c) father or mother at their option
d) a parent whose income before this clubbing is greater
386. Loss from derivate trading in shares can be carried forward for:
a) 8 years
b) 10 years
c) 4 years
389. R a citizen of India left India for U.S. on 16-8-2006 for booking orders on behalf of an Indian
company for exporting goods to U.S. He came back to India on 5-5-2007. He had been resident
in India for the past 10 years. For assessment year 2007-08, R shall be:
a) any assessee
b) a company
c) a company or a firm
391. The valuation of the perquisite in the above case shall be:
Tax Planning 64
392. R Ltd. provides the facility of cook to its employee for which it paid Rs. 1,000 p.m. as salary
to the cook. The valuation of this perquisite shall be:
a) Rs.120 p.m.
b) Rs.1,000 p.m.
c) Rs.60 p.m.
393. The Gardner, Sweeper and the watchman are employed by the employee but their salary of
Rs.500 p.m. per person is paid by the employer. The valuation of this perquisite shall be:
a) Rs.4,320
b) Rs.18,000
c) Rs.1,960
395. In case the property is owned by co-owners and it is let out, income from such property shall
be computed:
a) capitalized
b) treated as revenue expenditure
c) either capitalized or treated as revenue expenditure.
397. Interest on money borrowed for acquiring an asset by a existing concern for expansion of
the existing business, pertaining to a period prior to the date on which the asset is put to use is to
be:
a) capitalized
b) treated as revenue expenditure
c) either capitalized or treated as revenue expenditure at the option of
the assessee till the asset is put to use.
398. Interest on money borrowed for the purpose of acquiring a capital asset pertaining to the
period after the asset is put to use is to be:
a) capitalized
b) treated as revenue expenditure
c) either capitalized or treated as revenue expenditure
399. Expenditure incurred on purchase of animals to be used by the assessee for the purpose of
carrying on his business & profession is subject to:
a) depreciation
b) deduction in the previous year in which animal dies or become
permanently useless
c) nil deduction
Tax Planning 65
400. R, a citizen a India is employed on an Indian ship. During the previous year 2006-07 he
leaves India for Germany on 15-9-2006 for holidays and returned on 1-4-2007. He had been non-
resident for the past 3 years. Earlier to that he was permanently in India. For assessment year
2007-08, R shall be:
401. The business income of a company assessee before claiming Rs. 60,000 being 1/5th capital
expenditure on family planning is Rs. 40,000. The balance Rs. 20,000 shall be treated as:
a) business loss
b) unabsorbed expenditure on family planning
c) none of these
402. The business income of a company before claiming Rs. 60,000 being revenue expenditure
on family planning is Rs. 40,000. The balance Rs. 20,000 shall be treated as:
a) business loss
b) unabsorbed expenditure on family planning
c) none of these
403. New assets acquired for claiming exemption u/s 54, 54B or 54D, if transferred within 3
years, will result in:
404. Unutilized amount deposited under capital gain scheme for claiming exemption u/s 54D shall
be treated as
405. Deduction under section 80-IA for enterprise engaged in the business of providing
telecommunication, etc. shall be allowed for:
a) 10 years @ 100%
b) first 5 assessment years @ 100% and 30% for the subsequent 5 assessment years
c) first 5 assessment years @ 100% and 30% in case of a company and 25% in case of
non-company assessees for the subsequent 5 assessment years
406. Deduction under section 80-IA for enterprise engaged in the business of telecommunication
shall be allowed for:
a) first 5 assessment years @ 100% and for the next 5 assessment years @ 30%
starting from the assessment year in which it starts providing telecommunication
services
b) first 5 consecutive assessment years @ 100% and subsequent 5 consecutive
assessment years 30% out of 15 years being with the year is which enterprises starts
providing telecommunication services
c) first 5 consecutive assessment years @ 100% and subsequent 5 consecutive
assessment years 30% out of 20 years being with the year is which enterprises starts
providing telecommunication services
Tax Planning 66
407. Deduction u/s 80-IB in respect of an industrial undertaking established in a backward state
or district of category A shall be allowed:
409. Deduction under section 80-IB in respect of a hotel located in a hilly area or rural area or a
place of pilgrimage shall be allowed to the extent of:
410. Deduction under section 80-IB in respect of specified hotel or other hotel shall be allowed if
the commencement of business taken place any time between:
a) 1-4-1995 to 31-3-1999
b) 1-4-1997 to 31-3-2001
c) 1-4-1997 to 31-3-2002
411. R Ltd., is an Indian company whose entire control and management of its affairs is situated
outside India. R Ltd., shall be:
a) resident in India
b) non-resident in India
c) "not ordinarily resident in India"
412. Deduction of any hotel other than specified hotel established in any area other than Delhi,
Mumbai, Chennai and Calcutta shall be allowed to the extent of:
413. R gifts Rs.5,00,000 to his wife who invested the same in the partnership business. Mrs. R
receives Rs.1,45,000 as her share of profits from such firm. In this case amount to be clubbed in
the income of R shall be:
a) Rs.1,45,000
b) Rs.10,000 after giving maximum exemption of Rs.1,35,000 to Mrs. R
c) Nil
Tax Planning 67
414. An employer provides free facility of gas electricity etc. to his employee, which he uses partly
for official and partly for his personal purposes. The actual amount spent by employee is
Rs.10,000 and the salary of the employer is Rs.2,00,000. The valuation of this perquisite shall be:
a) Rs.10,000
b) Rs.6,250
c) proportionate amount for personal use.
415. The business income of a company assessee before claiming deduction of revenue and
capital expenditure is Rs.6,00,000. The revenue and capital expenditure incurred during the year
are Rs.7,00,000 and Rs.10,00,000 respectively. The unabsorbed expenditure on family planning
in this case shall be:
a) Rs. 3,00,000
b) Rs.11,00,000
c) Rs.2,00,000 and Rs.1,00,000 shall be business loss
416. Loan & advance paid by the closely held company to its shareholder having 10% voting
power in the ordinary course of money leading business shall:
417. R. has gifted Rs. 10,00,000 to his wife on 1-4-2003. The wife invested the above sum as
capital contribution to the firm where she is a partner and earned interest every year. The total
capital of Mrs. R as on 1-4-2006 including 3 years interest was Rs. 15,00,000. During the year
she earned Rs. 2,70,000 as interest on such capital balance. The income to be clubbed in the
hands of R shall be:
a) Rs. 2,70,000
b) Rs. 1,80,000
c) Nil
418. Deduction under section 80-IA for any undertaking or enterprises engaged in development
of infrastructure facility shall be allowed @ 100% for 10 consecutive assessment years out of:
a) 15 years beginning with the year in which undertaking or the enterprise develops
or begins to operate any infrastructure facility.
b) 20 years beginning with the year in which undertaking or the enterprise develops
or begins to operate any infrastructure facility.
c) 20 years beginning with the year in which undertaking or the enterprise develops
or begins to operate any infrastructure facility other than port, airport, inland port
or inland water ways and out of 15 years for such port, airport, inland port or
inland waterways.
Tax Planning 68
420. If a company declares dividend out of agricultural income, such dividend declared by the
company shall be:
a) exempt in the hands of the shareholder but dividend tax will be payable by the
company
b) not be subject to any income tax, either in the hands of company or the
shareholder
c) included in the total income of the shareholder
421. If there is change in the constitution of the firm due to retirement, death, etc. of the partner
then the brought forward loss of the firm shall
422. Income arising from the transfer of units of the Unit Trust of India or of mutual fund covered
under section 10(23D) shall:
a) be exempt
b) not be exempt
423. In case of AOP/BOI where the share of the members are known but none of the members
has taxable income exceeding maximum exemption limit, nor any member is taxable at a rate
higher than the maximum marginal rate, the tax shall be charged:
424. A borrowed Rs. 5,00,000 @ 12% p.a. on 1-4-2002 for construction of house property which
was completed on 15-3-2006. The amount is still unpaid. The deduction of interest for previous
year 2006-07 shall be:
a) Rs. 60,000
b) Rs. 96,000
c) Rs. 1,80,000
d) Rs. 2,40,000
425. What shall be the amount of deduction if the house is completed on 2-4-2007 (Refer to the
question above)
a) Rs. 60,000
b) Rs. 96,000
c) Rs. 2,40,000
d) Rs. 1,08,000
426. A borrowed a sum of Rs. 5,00,000 @ 12% p.a. on 1-4-1997 for construction of a house
which was completed on 15-3-2002. What shall be the amount of deduction allowed on account
of interest for the assessment year 2007-08:
a) Rs. 96,000
b) Rs. 60,000
c) Rs. 1,08,000
Tax Planning 69
427. What shall be the deduction if the loan is repaid on 31-8-2006: (Refer to the question
above)
a) Rs. 60,000
b) Rs. 1,08,000
c) Rs. 25,000
428. If the marriage of the parents does not subsist, the income of the minor child shall be
clubbed in the income of:
a) father
b) parent who maintains the child
c) father or mother whose income is higher
429. Any sum received under a Life Insurance Policy including bonus shall be exempt:
430. Any pension received by an individual or family pension received by any member of his
family where such individual is in the service of Central or State Government and was awarded
Parmvir Chakra, Mahavir Chakra or Vir Chakra or any other notified gallantry award shall be:
a) exempt
b) taxable
431. An assessee has borrowed money for purchase of a house & interest is payable outside
India. Such interest shall:
a) be allowed as deduction
b) not be allowed on deduction
c) be allowed as deduction if the tax is deducted at source
C:\WINDOWS\TEMP\quiz-tax-class-test1.html
432. _________ is not an exempt income u/s 10 of the Income Tax Act, 1961
a) Deduction
b) Exemption
c) Rebate
d) None of the above
Tax Planning 70
434. Section 36 deals with __________________ tax deduction
a) Wealth
b) Inheritance
c) Income
d) Corporate
a) Listed
b) Unlisted
c) Both A and B
d) Foreign
a) Individual assesses
b) Hindu Undivided families
c) Corporate entities
d) Both A and B
437. The maximum deduction allowed u/s 80 D for a non-senior citizen is Rs. ____
a) 5000
b) 10000
c) 15000
d) 20000
439. ______________ are not Persons under the Income Tax Act, 1961
a) Minors
b) Individuals
c) Temples and Trusts
d) Partnership Firms
440. In respect of capital assets acquired by the assessee before 01-04-1981, he is allowed to
opt either the purchase cost or the market value as on 01-04-1981 in case of _______
441. Part I of Schedule I of the Finance Act, 2006 has given rates of income tax for the
assessment year:
a) 2006-07
b) 2007-08
c) 2008-09
Tax Planning 71
442. Part II of Schedule I of the Finance Act, 2006 has given the rates of tax deductible at source
for the financial year:
a) 2005-06
b) 2006-07
c) 2007-08
444. Income that accrues or arises outside India from a business controlled from India is taxable
in case of:
a) resident only
b) not ordinarily resident only
c) both ordinarily resident and not ordinarily resident
d) non-resident
e) all the assessees
445. Income that accrues or arises outside India and also received outside India is taxable in
case of:
a) resident only
b) not ordinarily resident
c) both ordinarily resident and not ordinarily resident
d) none of the above
447. R traced a missing person and was awarded a sum of Rs. 1,00,000 although there was no
stipulation to that effect. Such receipt shall be:
a) fixed commission
b) commission if it is a fixed percentage on turnover
c) none of these two
a) exempt
b) taxable
c) partially taxable
Tax Planning 72
450. Scholarship received by a student to meet the cost of education is:
a) casual income
b) fully taxable
c) fully exempt
a) whole of India
b) whole of India except Jammu & Kashmir
c) whole of India except Sikkim
d) whole of India except Jammu & Kashmir and Sikkim
453. Finance Bill becomes the Finance Act when it is passed by:
454. Incomes mentioned u/s 10 of the IT Act, 1961 are ____ in the computation of Gross Total
Income
a) Taxed at a flat rate
b) Excluded
c) Included
d) Used for rate purpose only
455. An award of Rs.1,00,000 was announced for tracing a missing person. R traced the person
and received the award amount. Such receipt shall be
a) casual income
b) fully exempt
c) fully taxable
456. Scholarship received by a student was Rs. 1,000 p.m. He spends Rs.8,000 for meeting the
cost of education. The balance Rs.4,000 is:
a) taxable
b) a casual income
c) exempt
457. R who was working with another company joined the present employer w.e.f. 1-5-2006 at a
Salary of Rs.10,000 p.m. His salary becomes due on first of next month. He was also entitled to a
pension of Rs.4,000 p.m. from his former employer. His gross salary for assessment year 2007-
08 shall be:
a) Rs. 1,10,000
b) Rs. 1,58,000
c) Rs. 1,48,000
Tax Planning 73
458. The Govt. of India announced increase in the D.A on 15-3-2006 with retrospective effect
from 1-5-2002 and the same were paid on 6-4-2006. The arrears of D.A shall be taxable in the
previous year:
a) 2005-06
b) 2006-07
c) in respective previous years to which these relate
459. An employee is covered under Payment of Gratuity Act, 1972. Salary for purpose of
calculating 15 days salary for each completed year of service shall be:
460. An employee is covered under Payment of Gratuity Act, 1972. Salary for the above purpose
shall:
461. An employee is covered under Payment of Gratuity Act, 1972. If the employee has
completed service of 16 years 6 months and 5 days, the number of completed year shall be taken
as:
a) 16 years
b) 17 years
c) 16 years 6 months and 5 days.
462. An employee is covered under Payment of Gratuity Act, 1972. If he has completed exactly
16 years and 6 months, the completed year shall be:
a) 16 Years
b) 17 Years
c) 16 Years and 6 months
463. An employee is covered under Payment of Gratuity Act, 1972. For purpose of computing 15
days’ salary, the number of days in a month shall be taken as:
a) 30 days
b) 26 days
c) 31 days
464. The Income tax Act defines Senior Citizens as those aged above ___________
a) 65
b) 70
c) 50
d) 54
Tax Planning 74
465. An employee is covered under Payment of Gratuity Act, 1972. The maximum exemption of
gratuity shall be:
a) Rs. 2,40,000
b) Rs. 2,50,000
c) Rs. 3,50,000
d) 20 months Salary
466. An employee is neither a Government employee nor covered under Payment of Gratuity Act,
1972. Salary for purpose of calculating half month shall be taken as:
467. An employee is neither a Government employee nor covered under Payment of Gratuity Act,
1972. Salary for the above purpose:
468. An employee is neither a Government employee nor covered under Payment of Gratuity Act,
1972. If the employee has completed 16 years and 8 months of service, the number of completed
years shall be taken as:
a) 17 years
b) 16 years
c) 16 years and 8 months
469. An employee is neither a Government employee nor covered under Payment of Gratuity Act,
1972. The maximum exemption of gratuity shall be:
a) Rs. 2,40,000
b) Rs. 2,50,000
c) Rs. 3,50,000
d) 20 months Salary
470. R, who claimed the exemption of gratuity in the past to the extent of Rs. 2,50,000, was
entitled to the gratuity from the present/second employer amounting to Rs. 2,00,000 in the
previous year 2006-07. R shall be entitled to exemption to the maximum extent of:
a) Rs. 2,00,000
b) Nil
c) Rs. 1,00,000
471. R worked with a previous employer for 3 years but was not entitled to any gratuity. He
worked with the present employer for 8 years and 7 months. The completed years of service for
calculating exemption of gratuity shall be taken as:
a) 11 years
b) 8 years
c) 9 years
d) 12 years
Tax Planning 75
472. R has taken a house property on lease for 15 years from G and let out the same to S.
Income from such house to R shall be taxable as:-
473. What shall be the answer if R had taken it on lease for 10 years (Refer to the question
above)
a) Income under the head other sources
b) Income from house property as R is the deemed owner
474. R gifted his house property to his married minor daughter. The income from such house
property shall be taxable in the hands of:
a) R as deemed owner
b) R. However, it will be first computed as minor daughters income
& clubbed in the income of R income of married minor daughter
475. Immovable property must be held for minimum of ________ years in order to qualify as a
Long Term Capital Asset
a) Three
b) One
c) Two
d) Four
476. R is a member of house building Cooperative Society who is the owner of flats constructed
by it. One of the flats is allotted to R. The income from such house property shall be taxable in the
hands of:
a) co-operative society
b) R as deemed owner
477. 2% Education Cess is only applicable to assessees in the highest Tax Bracket.
a) False
b) True
c) Applicable only to those in the highest bracket and with income above Rs.8.5 lakhs
d) Applicable only to those in the highest bracket and claiming rebate u/s 88 B or 88 C
a) Trustee
b) Beneficiary
c) Executor
d) Testator
Tax Planning 76
480. The Presiding Deity of a Hindu Temple is
481. Assessee is always a person but a person may or may not be an assessee.
a) True
b) False
482. Dr. Rana saved Ms. Vrushali from dying, after paying his professional fees, she gifted him a
Honda City Car. The I.T. Officer wants to include the market value of the car as income of Dr.
Rana as his “Income from Profession” and tax it accordingly.
a) Yes, the I.T.O action is acceptable, since both Income in Cash or Kind is included in
“Income” u/s 2(24)
b) No, the I.T.O action is un-acceptable, since only Income in Cash is included in “Income”
u/s 2(24)
c) Yes, the I.T.O action is acceptable, since both Income in Cash or Kind is included in
“Income” u/s 2(24) but it should be taxed as “Income from Other Sources
483. Mr. Rajendra P. Chitale (CA) is the Senior Partner of “M/s M.P.Chitale & Co.” (Chartered
Accountants), during the P.Y.=2007-08, he received the following from the firm:-
Salary = Rs. 4,00,000
Interest on Capital Contribution = Rs.1,00,000
Performance Bonus = Rs. 10,00,000
Commission as a percentage of Profit = Rs.8,00,000
484.. Ms. Vrushali during her working career with M/s Hindustan Lever Ltd. received Rs. 2,70,000
as Gratuity in Dec’2005 as per “The Payment of Gratuity Act, 1972”. Later on again during her
working career with M/s Nirma Ltd. received Rs. 3,32,000 as Gratuity in May’2007 as per “The
Payment of Gratuity Act, 1972”. Find out the taxable gratuity
a) Nil
b) Rs. 2,52,000 is Taxable as Income From Salary
c) Rs. 3,32,000 is Taxable as Income From Salary
Tax Planning 77
485. Ms. Rachana Data Sheet for P.Y.=2007-08 depicted the following: -
She works for “Prestige College of Economics” of Mumbai,
Her Basic Salary is Rs. 15,000 per month, DA = 50% of Basic
Her college pays HRA of Rs.2800 per month
Her parents are staying with her in her own flat in Mumbai.
Compute her HRA amount taxable as Salary after factoring in the HRA exemptions u/s 10(13A)
a) Rs.33,600
b) Rs 6,600
c) Rs. 5,800
486. The employer of Ms. Suvarna contributed to “Recognised Provident Fund”(RPF) 18% of her
salary and also credited interest @ 12%.
a) Full contribution of the employer and interest is not an income for Ms. Suvarna
b) Full contribution of the employer and interest is exempt for Ms. Suvarna since it’s a
“RPF”
c) Both Employer contribution more than 12% of salary & interest more than 9.50 % will
be taxed as “Deemed Income” in Ms. Suvarna hands
487. Ms. Maggi resident of Goa (Owns a Flat in Goa) is working for “M/s Wipro BPO” in
Mumbai and stays in a rented flat paying a rent of Rs.5,000 per month, Her Salary per month is :-
Basic Rs.15,000, DA is 20% of Basic, CCA is 20 % of Basic and HRA is 50% of Basic.
Compute her HRA amount taxable as Salary after factoring in the HRA exemptions u/s 10(13A)
a. Rs. 80,400
b. Rs.51,600
c. Rs.55,200
488. Mr. Edward was born in 1975 in India. His Parents were born in India in 1950 while his grand
parents were born in England. He was residing in India till 15-03-2005. Thereafter he migrated to
England and took the citizenship of England on 15-3-2007. He visited India during P.Y. 2007-08
for 90 days.Find out his “Residential Status”
a) Non Resident
b) Resident and Ordinarily Resident in India
c) Resident but Not Ordinarily Resident In India
489. Mr. Michael Mathias purchased 100 Debentures of Reliance Industries Ltd. (Listed on Debt
Market-NSE) on 01-04-1991 and on 30-06-2007 he sold the same through NSE. He contends
that since his holding period is more than 1 year he can avail the benefits of indexation of his
acquisition cost.
Tax Planning 78
490. Mr. Mohan Data Sheet for P.Y.=2007-08 depicted the following :-
Owns a Flat in Mumbai (Mortgaged with HDFC Bank against loan for the said flat) which
he has given on rent for the P.Y.
Municipal Value = Rs. 4,90,000
Fair Rent for the FY = Rs. 5,10,000
Standard Rent as per the “Rent Control Act” = Rs.5,30,000
Actual Rent per month for the F.Y. = Rs. 47,000
Flat was let out for 11 months out of 12 months
Flat was vacant for 1 months out of 12 months
Municipal Taxes paid by Mohan = Rs.50,000
Outstanding Interest on Home Loan = Rs.1,85,000
Home Insurance Premium paid by the Owner = Rs.5,000
Ground Rent paid by the Owner = Rs.10,000
As a Tax Planner compute his Taxable “Income From House Property” (Sec.22 to Sec.27)
a) Rs. 1,74,800
b) Rs. 1,76,900
c) Rs.1,41,900
491. Mr. Chintan Data Sheet for P.Y.=2007-08 depicted the following :-
Purchased a House for Rs.1,20,000 in 1975
Constructed First Floor in January 1981 at Rs. 1,50,000
Constructed Second Floor in May 1982 at Rs.2,50,000
Fair Market Value of the House as on 01-04-1981 is Rs. 7,50,000
The House was Sold in July 2007 for Rs.55,00,000
Brokerage on Sale was 2%
Cost Inflation Index (CII) :- FY 1981-82 = 100, 1982-83 = 109,
(CII) :- FY 2006-07 = 517, 2007-08 = 538
As a Tax Planner compute his “ Long Term Capital Gain/ (Capital Loss)” (Sec.45 to Sec.55)
a) Rs.1,21,055
b) Rs. 6,85,945
c) Rs.4,95,245
492.Mr. Jitendra Apte Data Sheet for P.Y.=2007-08 depicted the following :-
Purchased a House for Rs.5,20,000 in May 1983
Gifted the House to his son Paras in May 1998.
The House was Sold in June 2007 by Paras for Rs.15,00,000
Brokerage on Sale was 2%
Cost Inflation Index (CII) :- FY 1983-84 = 116, 1998-99 = 351, 2007-08 = 538
As a Tax Planner of Paras compute his “ Long Term Capital Gain/ (Capital Loss)” (Sec.45 to
Sec.55)
a) Rs.6,72,963
b) (Rs.9,41,724)
c) Rs.7,02,963
Tax Planning 79
493. Mr. Andrew D’souza (31 years) Data Sheet for P.Y.=2007-08 depicts the following:-
Income from Salary = Rs.2,50,000
Income from House Property = Rs.5,50,000
Income from Business = Rs. 3,50,000
Income from Short Term Capital Gains = Rs.75,000
Income from Other Sources = Rs.50,000
Paid Rs.15,000 as premium for Kotak Term Insurance (No Riders)
Invested Rs.10,000 in Fidelity Tax Advantage Fund (ELSS)
Invested Rs.5,000 in Fidelity Equity Fund
Paid Rs. 1,00,000 in Public Provident Fund A/c maintained with SBI
As a Tax Planner compute the “Tax Payable” at the tax rates applicable for A.Y. 2008-09
a) Rs.3,39,966
b) Rs. 3,43,299
c) Rs.3,41,600
494. Mrs. Smita D’souza (29 years) Data Sheet for P.Y.=2007-08 depicts the following:-
Income from Salary = Rs.5,50,000
Income from Other Sources = Rs.50,000
Paid Rs.15,000 as premium for LIC Endowment Policy (No Riders)
Invested Rs.30,000 in HDFC Long Term Advantage Fund (ELSS)
Invested Rs.55,000 in Fidelity Equity Fund
Paid to New India Assurance for Health Insurance =Rs 20,000
As a Tax Planner compute the “Tax Payable” at the tax rates applicable for A.Y. 2008-09
a) Rs. 1,14,330
b) Rs. 1,09,180
c) Rs. 1,10,725
a. Trust
b. Society
c. Company
d. All of the above
a) Birthday gifts
b) Marriage gifts
c) PIN Money
d) All of the above
e) None of the above
497. Co-owners of the building equally sharing the rental income will be assessed as:
a) Association of persons
b) HUF
c) Individuals
d) Will not be taxed.
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498. Which of the following statement is true:
504. As per Sec 115A royalty received by a foreign company from Government in pursuance of
st st
and agreement made after 31 March 1976 but before 1 June, 1997 is charged at : -
(a) Normal.
(b) 30%.
(c) 20%.
(d) 10%.
505. Income of FIIs in the form of short-term capital gains from transfer of securities is charged at
:-
(a) 30%.
(b) 20%.
(c) 10%.
(d) None of the above.
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506. Under section 115E, NRIs are required to pay tax on long terms capital gains from the
transfer of assets other than specified assets at : -
(a) Company
(b) Partnership firm
(c) Society
(d) All of the above
(a) NRIs
(b) OCBs
(c) Both (a) and (b)
(d) None of the above
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513. Interest is freely repatriable in case of : -
515. Steve Waugh while on a cricket tour in India, earned the following income during the
previous year 2005-06 :
Rs.
Participation in cricket 10,00,000
Advertisement on TV 5,00,000
Article in newspaper 1,00,000
Lottery income 50,000
Other income 45,000
(a) 10%
(b) 20%
(c) 30%
(d) Normal rates
516. The following Question is based on the previous question. Find below the information for
your reference
Steve Waugh while on a cricket tour in India, earned the following income during the previous
year 2003-04 :
Rs.
Participation in cricket 10,00,000
Advertisement on TV 5,00,000
Article in newspaper 1,00,000
Lottery income 50,000
Other income 45,000
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517. Steve Waugh while on a cricket tour in India, earned the following income during the
previous year 2005-06 :
Rs.
Participation in cricket 10,00,000
Advertisement on TV 5,00,000
Article in newspaper 1,00,000
Lottery income 50,000
Other income 45,000
(a) Nil
(b) Rs. 5,000
(c) Rs. 15,000
(d) None of the above
518. Choose the amount of final tax liability of R for the assessment year 2007-08:
Rs.
Share of profit from PFAAs 40,000
Income from salary (Computed) 2,00,000
Receipt of accumulated balance in PPF 80,000
Lottery income (gross) 7,000
(A) 17100
(B) 17442
(C) 15700
(D) 16014
519. Mr. Shelar in April 2007 transferred Rs.1,00,000 from his Business Income to his spouse
Bank A/c which was converted in a FD in the name of Mrs Suvarna(spouse) fetching @ 10% p.a.
For A.Y.=2008-09, The I.T. officer clubbed u/s 64, Rs.10,000 (interest for one year) in Mr.
Shelar Income Tax Return and accordingly taxed him Rs. 2,000/- (20% tax bracket) and told Mr.
Shelar to pay the same which Mr. Shelar claimed that since he has turned bankrupt he can’t pay
the same.
a) Yes, the I.T.O is right in his demand and Mr. Shelar will pay the tax u/s 64
b) Yes, the I.T.O is right in his demand but now Mrs. Suvarna will pay the tax u/s 65
c) No, the I.T.O is wrong in his demand since as per sec 65, Mr. Shelar will pay tax as per
the tax bracket of Mrs. Suvarna
520. Tea and snacks are provided to employees in the office during office hours. The value of this
perquisite shall be: (Refer to the question above)
a. Nil
b. Nil, if it is upto Rs. 50 per meal
c. Actual amount spent by the employer
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521. The employer gives a gift (in kind) on the marriage of the son of the employee. Gift so made
shall not be perquisite if the value of the gift is:
a. Rs. 6,000 or less
b. Below Rs. 5,000
c. Rs. 10,000 or less
d. Below Rs. 10,000
e. any amount
522. What will be your answer if the gift is made to the employee on the silver jubilee of the
company? (Refer to the question above)
523. The employer has given a lap top computer for the personal use of the employee. The value
of this perquisite shall be:
a. Nil
b. 10% p.a. of the cost of the asset
c. 10% p.a. of the W.D.V. of the asset
524. What will be your answer if this laptop is given for the personal use of the son of the
employee? (Refer to the question above)
a. Nil
b. 10% p.a. of the cost of the asset
c. 10% p.a. of the W.D.V. of the asset
Tax Planning 85