Taxation of Perquisites Quiz
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Questions and Answers

Which of the following perquisites is NOT taxable according to court decisions and regulations?

  • Sum payable to a retirement fund
  • Transport facility provided by a private employer
  • Payment of annual premium on personal accident policy (correct)
  • Refreshments provided during working hours (correct)

Which perquisite received outside India is exempt from taxation?

  • Privilege ticket orders by Indian railways
  • Perquisites allowed by the government for services rendered abroad (correct)
  • Transport facilities provided by government in India
  • Medical facilities provided by the employer

What type of accommodation is considered a non-taxable perquisite?

  • Housing allowance given to employees
  • Rent free accommodation provided by a private company
  • Furnished residence provided by a corporate employer
  • Rent free official residence provided to a high court judge (correct)

Which of the following falls under recreational facilities and is exempt from taxation?

<p>Facilities extended to all employees generally (D)</p> Signup and view all the answers

Which of the following expenditures by an employer is tax-exempt?

<p>Amount spent on refresher courses for employees (A)</p> Signup and view all the answers

How is the salary due on the 1st of the next month classified for tax purposes?

<p>Taxed in the previous financial year (B)</p> Signup and view all the answers

What is the initial monthly salary of an employee in the grade of Rs. 12,200-300-17,400-500-19,400?

<p>Rs. 12,200 (A)</p> Signup and view all the answers

What annual increment does an employee receive after reaching a salary of Rs. 17,400 in the grade system?

<p>Rs. 500 (B)</p> Signup and view all the answers

If an employee's salary is fixed at Rs. 14,400 in the grade of Rs. 12,000-300-15,000-500-18,000, when will they reach a salary of Rs. 15,000?

<p>After two years (B)</p> Signup and view all the answers

In what scenario can an employee receive a salary that is set above the initial grade level?

<p>Upon joining at a higher level (C)</p> Signup and view all the answers

What amount did Mr. Surendra receive as arrears of salary in respect of 2018-19?

<p>Rs. 10,000 (A)</p> Signup and view all the answers

If Mr. Surendra has a monthly salary of Rs. 5,000 due at month-end, how much salary is subject to tax if he receives a month’s salary in advance?

<p>Rs. 60,000 (D)</p> Signup and view all the answers

What is the effective date for the basic salary of Mr. Surendra?

<p>May 1, 2022 (C)</p> Signup and view all the answers

What is the maximum amount of exemption according to the guidelines?

<p>Rs. 5,00,000 (D)</p> Signup and view all the answers

How is the average pay calculated for a monthly paid workman prior to retrenchment?

<p>For the last three calendar months (D)</p> Signup and view all the answers

What is a characteristic of Statutory Provident Fund?

<p>Administered by the government. (D)</p> Signup and view all the answers

How is the employer's contribution to a Recognized Provident Fund taxed?

<p>Taxed only if it exceeds 12% of basic salary. (D)</p> Signup and view all the answers

In the given example, what was Mr. Omkar's retrenchment compensation actually received?

<p>Rs. 2,60,000 (A)</p> Signup and view all the answers

What happens to the interest credited during a year in a Recognized Provident Fund if the rate is above 9.5%?

<p>Only the excess amount is taxable. (A)</p> Signup and view all the answers

What is included in the definition of wages?

<p>All allowances including dearness allowance (C)</p> Signup and view all the answers

According to the guidelines, what does 'retirement compensation' refer to?

<p>Any amount received as compensation by an employee (A)</p> Signup and view all the answers

Which of the following statements about Unrecognized Provident Fund is correct?

<p>Interest on employee contributions is taxable upon retirement. (C)</p> Signup and view all the answers

What is the least amount used for determining the exemption u/s 10 (10b)?

<p>Retrenchment compensation received (A)</p> Signup and view all the answers

What is true for an employee's contribution to any Provident Fund during employment?

<p>It is added to gross taxable salary. (A)</p> Signup and view all the answers

Which type of Provident Fund is not recognized by the income tax department due to non-compliance?

<p>Unrecognized Provident Fund (B)</p> Signup and view all the answers

For how many years of service does Mr. Omkar qualify in the example provided?

<p>30 years and 5 months (C)</p> Signup and view all the answers

What amount is calculated from Mr. Omkar's service to determine the exemption?

<p>Rs. 2,25,000 (D)</p> Signup and view all the answers

What kind of payment related to a Statutory Provident Fund is exempt from taxation?

<p>Lump sum amount at retirement. (D)</p> Signup and view all the answers

What defines allowances in the context of employment?

<p>Fixed amounts paid for personal expenses. (C)</p> Signup and view all the answers

What portion of an employer's contribution to a recognized provident fund is taxable as salary when it exceeds a certain limit?

<p>15% of basic salary (B)</p> Signup and view all the answers

How much of the commuted pension received by a non-government employee is exempt from tax?

<p>90% (C)</p> Signup and view all the answers

Leave encashment received while in service is classified as what for tax purposes?

<p>Taxable (B)</p> Signup and view all the answers

What is V's gross salary for the assessment year 2022-23 if M pays a salary of Rs. 2,50,000 and undertakes to pay Rs. 49,980 in income tax on his behalf?

<p>Rs. 2,99,980 (B)</p> Signup and view all the answers

What is the gross salary for M, who was employed in the grade of Rs. 15,000-400-17,000-500-22,000, for the assessment year 2022-23?

<p>Rs. 22,000 (D)</p> Signup and view all the answers

How is M's gross salary calculated if he received an advance of Rs. 20,000 against his salary of Rs. 10,000 p.m. on 1-3-2021 for assessment year 2022-23?

<p>Rs. 1,40,000 (B)</p> Signup and view all the answers

What deduction can a government employee take for entertainment allowance if they receive Rs. 50,000 as salary and Rs. 12,000 as entertainment allowance, with actual expenditure of Rs. 3,000?

<p>Rs. 3,000 (B)</p> Signup and view all the answers

What is the exempt amount for Mr.X's taxable salary?

<p>Rs. 25,000 (C)</p> Signup and view all the answers

What is the deduction for entertainment allowance if Mayank receives Rs. 5000 as salary and Rs. 300 as dearness allowance along with Rs. 500 entertainment allowance?

<p>Rs. 300 (A)</p> Signup and view all the answers

What is the taxable amount after exemptions for Mr.X?

<p>Rs. 12,500 (A)</p> Signup and view all the answers

When is the salary for March 2021 taxable according to the due basis?

<p>In the previous year 2022-23 (A)</p> Signup and view all the answers

What is the total monthly salary Mr.X receives from XYZ Ltd, excluding perquisites?

<p>Rs. 70,000 (D)</p> Signup and view all the answers

What is the taxable value of the rent-free furnished accommodation provided by Mr.X's employer?

<p>Rs. 2,56,000 (A)</p> Signup and view all the answers

What was the total amount Mr.X received as gratuity?

<p>Rs. 1,20,000 (B)</p> Signup and view all the answers

How much pension does Mr.X receive from the Government starting June 2022?

<p>Rs. 3,000 (D)</p> Signup and view all the answers

Which of the following emoluments is NOT mentioned for Mr.X during his time at the Government?

<p>Bonus (A)</p> Signup and view all the answers

Flashcards

Salary tax calculation

Salary tax is calculated based on the date the salary is due, not when it is paid.

Salary Due Date

The date on which salary is scheduled to be paid.

Grade-based salary

A salary structure where employees receive regular increments over time within a pre-specified range.

Annual Increment

A regular increase in salary provided annually, often based on a salary grade.

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Salary arrears

Salary owed for a period past the due date.

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Wage in the previous-year

The total salary credited for a financial year.

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Salary Advance

Salary received earlier than the actual due date.

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Taxable Salary

The portion of salary subject to income tax calculations within a financial year.

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Tax-exempt employee perks (India)

Certain benefits provided by employers to employees are not subject to taxation in India, as per various acts/decisions and circulars.

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Employer-provided residence (judge)

Free housing provided to judges of High Courts or the Supreme Court by the employer (government) is exempt from tax.

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Employee transport (concessional)

Employers in passenger or goods transport offering transportation to employees at a reduced/free cost are exempt.

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Employee meal allowance (subsidized)

Employers can provide subsidized lunches or dinners to employees without it being considered taxable income, within limits.

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Employee training/development perks

Costs incurred by employers for employee training, including accommodation, are not taxable.

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Statutory Provident Fund

A provident fund established and managed by the government, offering tax-free benefits.

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Recognized Provident Fund

A provident fund set up by a private employer and approved by the income tax department, offering tax benefits with specific rules.

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Unrecognized Provident Fund

A private provident fund without government recognition, subject to certain tax liabilities.

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Employer's Contribution (Statutory P.F.)

Contributions made by the employer to a statutory provident fund are tax-free.

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Employee's Contribution (All P.F.)

Employee contributions to any type of provident fund (statutory, recognized, or unrecognized) are included in their taxable income.

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Interest on P.F. (Statutory & Recognized)

Interest credited on statutory or recognized provident funds is tax-free within the specified limits.

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Interest on Unrecognized P.F.

Interest earned on an unrecognized provident fund is considered income from other sources and is taxable.

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Lump Sum Payment (Unrecognized P.F.)

When an employee receives a lump sum payment from an unrecognized provident fund, their contribution and interest are taxed under Section 17(3).

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Retrenchment Compensation

Money paid to an employee when they are laid off due to company restructuring or economic reasons.

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Exemption Limit

The maximum amount of retrenchment compensation that is not taxed.

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Average Pay Calculation

Calculating the average wages earned by an employee over a specific period before their retrenchment (monthly, weekly, or daily).

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Exemption Calculation

Determining the amount of retrenchment compensation that is exempt from taxes by comparing the actual amount received, the maximum exemption limit, and the amount calculated based on average pay and years of service.

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What is considered 'Wages' for tax purposes?

All remuneration in money, including allowances, employer-provided amenities, and travel concessions. Bonuses, employer contributions to benefit schemes, and gratuity are excluded.

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Retrenchment Compensation Exemption under Section 10 (10b)

A specific exemption for retrenchment compensation provided under section 10 (10b) of the Income Tax Act.

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What is 'Continuous Service'?

The period an employee has worked for the same company without any breaks.

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Retirement Compensation Exemption under Section 10 (10c)

An exemption for retirement compensation received by employees of public sector companies, provided by the Income Tax Act.

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Taxable Salary (India)

The portion of salary subject to income tax calculations in India. It's calculated by subtracting the exempt amount from the total salary received.

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Exempt Amount (India)

A portion of salary not subject to taxation. This includes certain allowances and benefits.

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Due Basis (Salary)

The date on which salary is considered due for tax purposes, regardless of when it's actually paid. This helps determine the financial year for tax calculation.

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Salary Calculation (India)

Salary is calculated based on the due date. For example, salary due in March 2021 is taxed in the previous year (2022-23).

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Furnished Accommodation (Tax)

The value of rent-free furnished accommodation provided by an employer is considered taxable income to the employee.

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Medical Insurance Premium (Tax)

The value of medical insurance premiums paid by the employer is taxable income to the employee.

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Pension (Tax)

Pension received from the government is considered taxable income in the financial year in which it is received.

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Leave Salary (Tax)

Leave salary received for accumulated leave is considered taxable income when it is received.

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Taxable Provident Fund Contribution

The portion of an employer's contribution to a recognized provident fund exceeding a certain percentage of the employee's basic salary is considered taxable income.

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Commuted Pension Exemption

Non-government employees who receive a commuted pension along with gratuity are exempt from paying tax on that portion of the pension.

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Leave Encashment Taxability

Leave encashment received while still employed is considered taxable income.

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Employer-Paid Income Tax

When an employer pays income tax on behalf of an employee, the employee's gross salary for tax purposes includes the amount of tax paid by the employer.

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Grade-Based Salary Calculation

A salary structure with a defined grade system where the salary increases at regular intervals based on the employee's performance and time served in the grade.

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Salary Advance Impact

Salary advances received by an employee are counted as part of the employee's gross salary for the relevant financial year.

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Delayed Salary Payment

Salary received after the due date, regardless of the reason for delay, is counted as income for the relevant financial year.

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Pension Income Inclusion

Pension received from a previous employer is included in the gross salary for the current employer, creating a combined income for tax purposes.

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Study Notes

Shivaji University, Kolhapur

  • Centre for Distance and Online Education
  • Advanced Accountancy Paper-III (Taxation)
  • M.Com. Part-I, Semester-I
  • Implemented from Academic Year 2023-24
  • In accordance with National Education Policy 2020

Subject Matter for Paper-III

  • Income from Salary (Section 15-17)

    • Taxability of Income from salary
      • Who is taxable?
      • When is Salary Taxable? (Basis of Charge) [S.15]
      • Legal Provisions
      • Comments
    • What is included in Salary? [S.17(1)]
      • Definition
      • Perquisites
      • Profit in Lieu of Salary
      • Provident Fund
      • Allowances
    • Exemptions [S.10]
      • Leave Travel Concession [S.10(5)]
      • Gratuity [S.10(10)]
      • Commutation of Pension [S.10(10AA)]
      • Encashment of Leave Salary [S.10(10A)]
      • Retrenchment Compensation [S.10(10B)]
      • Retirement Compensation [S.10(10C)]
      • Tax on Perks Paid by Employer [S.10(10CC)]
      • Payment from Statutory/Public P.F. [S.10(11)]
      • Payment from Recognized P.F. [S.10(12)]
    • Deductions from Salary
      • Standard Deduction [S.16(ia)]
      • Entertainment Allowance [S.16(ii)]
      • Professional Tax [S.16(iii)]

  • Income from Business or Profession, Income from House Property, Capital Gains, and Income from other sources (Of individuals only)

  • Deductions Under Chapter VI A (Computation of Total Income and Liability of individual Only)

  • Clubbing of Income, Set-off and Carry Forward of Loss, E-Filing of Return, E-Payment of Tax

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M. Com. Part-I Advanced Accountancy Paper-III (Taxation) PDF

Description

Test your knowledge on the taxation of perquisites and salary increments in India. This quiz covers rules around taxable and non-taxable perquisites, salary classifications, and employer expenditures. Perfect for students or professionals looking to deepen their understanding of tax regulations.

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