PRACTICE MANUAL Intermediate (IPC) Course PAPER : TAXATION Part - I : Income-tax [As amended by the Finance Act, 2013] Assessment Year 201-15 [Relevant for May, 201 & November, 201 Examinations] VOLUME II BOARD OF STUDIES THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA i
This Practice Manual has been prepared by the faculty of the Board of Studies. The objective of the Practice Manual is to provide teaching material to the students to enable them to obtain knowledge and skills in the subject. Students should also supplement their study by reference to the standard text books. In case students need any clarifications or have any suggestions to make for further improvement of the material contained herein, they may write to the Director of Studies. All care has been taken to provide interpretations and discussions in a manner useful for the students. However, the Practice Manual has not been specifically discussed by the Council of the Institute or any of its Committees and the views expressed herein may not be taken to necessarily represent the views of the Council or any of its Committees. Permission of the Institute is essential for reproduction of any portion of this material. THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA All rights reserved. No part of this book may be reproduced, stored in retrieval system, or transmitted, in any form, or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior permission in writing from the publisher. Revised Edition : August, 2013 Website : www.icai.org E-mail : bos@icai.in ISBN No. : Price : Published by : The Publication Department on behalf of The Institute of Chartered Accountants of India, ICAI Bhawan, Post Box No. 7100, Indraprastha Marg, New Delhi 110 002. Typeset and designed at Board of Studies. Printed by : ii
A WORD ABOUT PRACTICE MANUAL The Board of Studies has been instrumental in imparting theoretical education for the students of Chartered Accountancy Course. The distinctive characteristic of the course i.e., distance education, has emphasized the need for bridging the gap between the students and the Institute and for this purpose, the Board of Studies has been providing a variety of educational inputs for the students. Bringing out a series of subject-wise Practice Manuals is one of the quality services provided by the Institute. These Practice Manuals are highly useful to the students preparing for the examinations, since they are able to get answers for all important questions relating to a subject at one place and that too, grouped chapter-wise. Income-tax constitutes Part I of Intermediate (IPC) Paper : Taxation. Volume II is the Practice Manual of Part I: Income-tax, which is divided into ten chapters in line with Volume I, namely, the Study Material on Income-tax. This will help the students to correlate the Practice Manual with the Study Material and facilitate in complete revision of each chapter. This Practice Manual has been prepared on the basis of the provisions of law as amended by the Finance Act, 2013, and applicable for A.Y.201-15. In this edition of the Practice Manual, all the questions have been adapted and answered on the basis of the provisions of income-tax law as amended by the Finance Act, 2013, which are relevant for the A.Y. 201-15, being the assessment year applicable for students appearing in May, 201 and November, 201 examinations. This Practice Manual contains a wide range of questions on income-tax and includes questions set at the past examinations at PE-II, PCC & IPCC levels as well as other important questions. Solving questions in the Practice Manual would, therefore, facilitate in thorough understanding of the provisions discussed in Volume I, i.e., the Study Material. In this edition of the Practice Manual, Key Points have been included at the beginning of each chapter, which would aid the students in answering the questions and solving the problems contained in that chapter. It would also facilitate quick revision of the chapter. The Practice Manual also contains a matrix showing the topic-wise distribution of examination questions to make the students aware of the weightage given to the various chapters in the examination. The Practice Manual will serve as a useful and handy reference guide while preparing for Intermediate (IPC) Examination. It will guide the students to improve their performance in the examinations and also help them to work upon their grey areas and plan a strategy to tackle problems in income-tax. For further clarification/guidance, students may send their queries at priya@icai.in Happy Reading and Best Wishes! iii
CONTENTS Chapter Chapter Heading Page No. PART I : INCOME TAX 1 Basic Concepts 1.1 1.9 2 Residence and Scope of Total Income 2.1 2.20 3 Incomes which do not form Part of Total Income 3.1 3.16 Heads of Income.1.175 1: Income from Salaries.1.0 2: Income from House Property.1.61 3: Profits and Gains of Business or Profession.62.116 : Capital Gains.117.161 5: Income from Other Sources.162.175 5 Income of other Persons included in Assessee s Total Income 5.1 5.1 6 Set-off and Carry Forward of Losses 6.1 6.21 7 Deductions from Gross Total Income 7.1 7.16 Computation of Total Income and Tax Payable.1.106 9 Provisions concerning Advance Tax and Tax Deducted at Source 9.1 9.17 10 Provisions for filing of Return of Income 10.1 10.12 iv
Paper : Taxation Statement showing topic-wise distribution of Examination Questions along with Marks Chapter Term of Examination Total Nov 2009 May 2010 Nov. 2010 May 2011 Nov. 2011 May 2012 Nov 2012 May 2013 Marks Q M Q M Q M Q M Q M Q M Q M Q M PART-I : INCOME TAX 1 Basic Concepts 7(a)(ii) 0.5 2 Residence and 3 10 2(a)(i) 6(a)(i) 2(a) 26 3.25 Scope of Total Income 3 Incomes which do not form Part of Total Income (c) (b) 2(a)(i) (a)(ii) Avg. Marks 1(b) 5 21 2.625 Heads of Income 6(a) 7(a)(iii) 12 2.5 2(a) 7(a) 3(a) 36.5 1 2 3 Income from Salaries Income from House Property Profits and Gains of Business or Profession 7(a)(i) 5(a) 2(b) 6 7(a)(iii) 2(a)(iii) 1 1.75 2(a) 6 6(a) 7(a)(iii) 6(a) 2(a)(ii) 1(a) (a) 7(a)(i) 5 6(a) (a) 7(a)(ii) 67.375 v
5 Capital Gains 2(c) (b) Income from Other Sources 5 Income of other Persons included in Assessee s Total Income 6 Set-off and Carry Forward of Losses 7 Deductions from Gross Total Income Computation of Total Income and Tax Payable 9 Provisions concerning Advance Tax and TDS 10 Provisions for filing of Return of Income 6 2(b) 6 2(a)(ii) 1(b) 5 5(a) 3(a) 3(a) 3(a) 7(a)(iii) 6(a) 69.625 2(a) 6 7(a)(ii) 6(a)(ii) 1 1.75 (d) 3 10 1(a) 5 2(a)(ii) 5(a) 2(a) 5(a) 33.125 1(a) 5 (a) 5(a) (a) 3 5.375 1 16 1 16 3(a) 3(a) 1(b) 5 1(a) (a) 5(a) 1 10 1(a) 10 1(a) 10 91 11.375 (a) (a) (a)(i) 7(a)(ii) 7(a)(i) 7(a)(i) 2 3 (c) 7(a)(i) 7(a)(iii) 2(a)(i) 7(a)(ii) 20 2.5 Note: Q represents question numbers as they appeared in the question paper of respective examination. M represents the marks which each question carries. The question papers of all the past attempts of IPCE/Intermediate (IPC) Examinations can be accessed from the BOS Knowledge Portal on the Institute s website www.icai.org vi