Illustration

From the following particulars of the income of Shri Gordhan Das, compute the
taxable income under the head 'Income from Other Sources' for the year ended 31st
March, 2022 :
(1) He held the Deep discount Bonds of ICICI Bank worth Rs. 50,000 issued in
April, 2000. The market value of these bonds as on 31st March, 2021 and 2022 was
Rs. 54,800 and Rs. 59,900 respectively.
{2) He received rent of Rs. 10,08,000 from sub-letting of a building to a
partnersh ip firm on 1st December, 2021. He paid Rs. 6,40,000 (gross) as rent to the
landlotd of this building. He also spent Rs. 24,000 for collection of rent.
(3) He received Rs. 10,50,000 by way of first prize of a lottery of Maharas htra
Govt. on 10th January, 2022. He spent Rs. 12,000 on purchasing the tickets of various
lotteries during the previous year.
(4) N.S.C. Vlllth issue for the nominal value of Rs. 20,000 were purchase d on
1st Septembe r, 20.17, on which compound interest at 8.5% per annum at half yearly
rests is for income tax purposes assumed to have become due each year-on certificate
of Rs. 100 for the fourth year Rs. 9.77. ·
(5) Received Rs. 18,000 on withdrawal from deposits under National Savings
Scheme, 1987 on 15th December, 2021.
{6) Amount received in June, 2021 in respect of a winning in a quiz contest
organised by Doordars han Rs. 5,600.
(7) He opened Savings Bank Account with a Nationalized bank in July, 2021- and
received Rs. 5,400 as interest in January, 2022.
(8) He received Rs. 2,25,000 as rent ( after deduction of tax at source) from a
public limited company for leasing out a factory building together with furniture and
fittings on 15th Septembe r, 2021.
 Tax-Z) He is holder of ~s. 10,000 7% Capital InvestD)ent Bonds and Rs. 27,000 10%
ee Food corporation Debentures, interest on which is payable on September
30 and March, 31. '
(10) He ~ets Rs. 6,000 per month as family pension from the non- government
employer of his deceased father from the date of death of his father. He expired on
lOt~ Dece~ber, 2020 and his employer paid Rs. 80,000 as ex-gratia on this sad event
durmg previous year 2021-22.
(li) On 10th August 2021, one of his friends gave him a gift of Rs. 30,000 and
on 5th December, 2021 his another friend gave him a gift of Rs. 40,000.
Solution:
Computation of taxable Income from Other Sources of
Mr. GordhanfortheA.Y2022-23
Rs. Rs.
1. Interest accrued on Deep discount Bonds
of ICICI Bank . 5,100
2. Income from sub-letting a building:
Rent received grossed up 11,20,000
Less : Rent paid 6,40,000
Collection expenses 24,000 6,64,000 4,56,000
3. Winnings from Lottery (grossed up) . 15,00,000
4. Interest accrued on N.S.C. Vlllth issue 1,954
5. Withdrawal from National Saving Scheme 20,000
6. Winning in Quiz conte_sJ organised by
Doordarshan 5,600
7. Interest from nationalized bank on
Savi~ Bank account 5,400
8. Gift from friends 70,000
9. Rent for leasing factory building including
furniture etc. (2,25,000x 100/90) 2,50,000
10. Interest on deb,entures of Food Corporation 3,000
100
grossed up (2,700X )
90
11. Family pension 72,000
Less: Standard Deduction 15,000 57,000
Taxable income from Other Sources 23,74,054
Working Note-(i) Difference between valuation of deep discount bonds as on
31st March, 2021 and 31st March, 2022 has been considered as interest accrued on
such bonds for Qte previous year 2021-22.
(ii) Since the rent receivable from the sub-tenant Rs. 10,08,000 has been grossed
up as ~der-
~~)
( 10,08,000 X = Rs. 11,20,000
out of this amount rent payable to house owner and rent collection expenses have
been deducted.
(iii) The amount of lottery received has been grossed up as under -
 (10,50,000 X l: ) • Rs. 15,00,000
The expenses Of Purchasing [Link] lottery tickets has not bee n deducted.
(iv) Tax is deducted at source @ 10% on the . d f ,
with rawa1s rom National ~aving
Scheme, 1987, provided the payment 18 of Rs.
1

2,500 or more. Therefore grossing up

has been done by multiplying 100/90,
(v) Interest from Savings Banlt, Ac co~ t ,of .
a Banlt 18 never grossed up. The
amount of income for this purpose 18 not ngn
ificant.
(vi) Interest of 7% Capital Investment Bonds
is exempted.
(vii) As the debentures of Food corpor,tio
n are tax free, its interest has been
. l ,
grossed up by multip ying 100
90 ·
(viii) Family Pension is taxable for tho recipie
nt. Standard deduction is allowed
from it (@ 33!-% or Rs. 15,000 whichever is
3 less.
(ix) After the death of his father, cx-gratia pay
ment received from his employer
is exempted.
(x) The total of both the gifts Rs. 70,000 exc
eeds Rs. 50,000. Hence whole of the
amount of Rs. 70,000 is taxable.
Illustration
Shri Girish is employed as a lecturer in Udaip
year 2021-22 he received Rs. 78,800 as sala ur University. During the previous
ry and Rs. 17,280 as dearness allowance.
He is a member of Statutory Provident Fun
d to which he contn'butes 10% of his
basic pay. University contributes 12%·. The
det
received by him during the previous year 202 ailed particulars of other incomes
1-22 are as un der -
(i) He worked as invigilator for 9 days in an·
Institute in May, 2021 and received Rs. 4,50 examination conducted by the C.A.
0 as his remuneration for the same in
July, 2021.
(ii) He received answer books from thre
received Rs.45,000 as his remuneration. He e Universities for assessment and
had never thought to get this .assignment
from one of these Universities.
(iii) He had written some books on Statistics
year in April, 2021 he received Rs:- 2,25,000 and Economics. Du ring the previous
·as· his royalty from these books.
(iv) He has some shares in an Indian com
pany on which his-income is Rs. 70,000
as dividend on 1st July, 2021. Company gets
50% of its total income from agriculture.
Bank charged Rs. 960 as commission for coll
ecting dividend.
(v) He had deposited certain money with Bar
Bank in F.D. Accounts. On 1-10-2021 he rec oda Bank and with Punjab National
eived Rs. 37,800 (after deduction of tax
at source) and Rs. 35,400 as interest from the
se accounts respectively.
(vi) In August, 2021 he received Rs. 17,500
spent Rs. 1,000 in purchasing the Lottery Tic from Rajasthan State Lotteries. He
kets of various States.
(vii) He received Rs. 7,500 as interest from
Post Office Fixed Deposit Account.
(viii) In November, 2021 he received Rs.
interest on the amount of compensation pay 8,000 from the State Government as
able for acquisition of land.
(ix) During the previous year 2021-22 Mr. Gir
ish had the following securities:
(a) Rs. 25,000 8% Debentures of a compan
y. (Unlisted)
(b) Rs. 18,000 6% Debentures of a company
Listed at Bombay Stock Exchange.
(c) Rs. 15,000 5% Madras Port Trust Loan.
 (d) Rs. 16,000 10% Relief Bonds.
(e) Rs. 15,000 8% Savings (Taxable) Bonds, 2003.
Interest on all the above mentioned Recurities is paid on 1st Septembe r and 1st
Mar~h by account payee cheque only. He paid 3% as collection charges for interest
to his bankers. The debenture s in each case are issued by such company in which
the public are substantially interested. '
Compute Gross Total Income of Shri Girish for the Assessment Year 2022-23.
SoluUon : Computation of Gross Total Income or Sbrl Girlsh
for the Assessment ~ar 2022·23
1. Income from Salary Rs. Rs.
Basic Salary 78,800
Dearness allowance 17,280
96,080
Less : Standard Deduction 50.000
Taxable Income from Salary 46,080
2. Income from Other Sources : Rs.
lnvigilation remunera tion 4,500
Examinership remuneration 45,000
Royalty (grossed up) 2,50,000
Dividend income (Grossed) 70,000
Interest from Punjab National Bank 42,000
Interest from Baroda Bank 35,400
Lottery Income (Grossed) 25,000
Interest from P.O. F.D. Account 7,500
Interest on Compensation from Government 8,000
Interest on Securities
on 8% Debentur es (Unlisted) 2,000
on 6% Debentur es (Listed) 1,080
on 5% Port Trust Loan 750
on 8% Savings (Taxable) Bonds 1,200
4,92,~30
Less : (i) Bank Commission @ 3% on
Rs. 4,955 149
(ii) Deductio n @ 50% in respect of
interest on compensation 4,000 4,149 4.88,281
Gross Total Income 5,34,361

Working Note-(i) If interest on fixed deposit account of a customer exceeds

Rs. 40,000, then the bank dedt..cts tax at source from such interest under section
194(A). Since the Punjab National Bank has deducted tax at source on this very
ground, hence interest from Punjab National Bank has been grossed up.
(ii) Accordin g to section 58 (4) deduction in respect of expenditu re or allowance
can not be allowed in connection with income of lottery, crossword puzzles etc. Hence
deduction has not been given in respect of expenditure incurred in purchasin g the
lottery tickets of various states.
The lottery income has been grossed up as under :
100
17,500 X
70
= Rs. 25,000
 ("') A th income from royalty exceeded Rs. 30,000,
tax was deducted at source
from ~\lch sroy~ty income. Hence it has been grossed
up.
(iv) Interest of 10% Relief Bonds is exempted.
(v) Dividend income from Indian companies has bee
n fully taxable.
(vi) Interest of both listed and [Link] debentures
~oes not [Link]. 5,000 but
the public are substantially interested m these com
panies. Hence ~ax has not been
deducted at source on interest of debentures of
these companies. The amount
received by bank is Rs. 4,955 ie. Rs. 2,000 + R~.
1,080 + Rs. 675 + Rs. 1,200.
(vii) In respect of interest on com~ensatto~ or
deduction of a sum equal to 50% of such income enhanced com~ensation, a
ts allowed under Section 57(iv).
Illustration
From the following particulars submitted by Shree
Guru Charan Singh compute
his taxable income from different sources for the
Assessment year 2022-23.
(1) As the Director of Haryana Glass Works he rece
ived Rs. 6,000 p.m. as salary
and Rs. 5,400 per annum as Entertainment Allowan
ce. The facility of a 1.8 litre (c.c.)
motor car has been provided by the company, expe
nses of which for personal use
are borne by him. He uses this car for company's
purposes also. He himself drives
the car. The written down value of the car is Rs.
60,000.
(2) As the Director of Punjab Banlc, he received
Rs. 5,000.
(3) Income received from agricultural land in ~ep ai
from a piece of land in Amritsar which)s not app Rs. 10,000. Income received
urtenant to a house and has been
let out for storing coal Rs. 3,600. Inconie from land
given on rent for holding market
Rs. 2,000. He incurred expenses amounting to Rs.
1,000 in respect of these incomes.
(4) Received a scooter worth Rs. 25,000 and Rs. 10,0
in r~spect of winnings from a lottery. 00 in cash in March, 2022
(5) During the previous year interest received on
deposits with the Co-operative
Land Mortgage Banlc Rs. 2,000. Interest received
from a Co-operative Society of
which he is member Rs. 1,500, interest received on
(Recurring Deposit) Rules,1970 Rs. 600 and he ·a1so deposits under the Post Office
received Rs. 400 from Post Office
Saving Banlc Accoup.t.
(6) Dividends received from William Chemicals Ltd.
a foreign company Rs. 2,000.
The foreign company deducted Rs. 400 by way of
tax at source.
(7) On 1st April, 2021 the amount of consideration
received on the sale of house
property, which was purchased in 2007-08 was Rs.
1,45,800. The cost of acquisition
of this house was Rs. 18,000. The expenses incurred
in respect of its sale were Rs.
1,500 for brokerage, Rs. 2,500 for stamps and regi
stration, and Rs. 300 for lawyer's
fees. Cost inflation index for the year 2007-08 is 129.
(8) During the previous year Mr. Guru Charan
Singh had the following
securities -
(i) Rs. 16,000 10% Tax free Debentures of Malwa
Textiles.
(ii) Rs. 36,000 10% Tax free Debentures of Sugar Mill
company listed at Indore
Stock Exchange.
(iii) Rs. 22,000 7% Capital Investment Bonds.
(iv) Rs. 45,000 10% Tax free Calcutta Port Trust
Bonds. -
Interest in each case is paid by account payee cheq
ue on 31st December annually.
He has paid 2% commission to his bankers for real
isation of interest.
(M.D.S.U. B. Com. 1998)
SoluUon: Computation of Shrl Guru Charan Slngh's 'Iamble
Income/or the A. Y. 2022-23
Rs. Rs.
1. Capital gains : 1,45,800
Sale price of house property
44,233
Less : (i) Cost of acquisition
· Indexed cost of acquisition
(18,000 X 317 + 129) 42,000
4,300 48.533
(ii) Cost of transfer 97,267
Taxable amount of Long Term Capital gain
2. Income from Other Sources :
Salary and Entertainment allowance as
Director (77,400 X ~~) 86,000
10,800
Value of car facility
5,000
Director's Fees from Punjab Bank
10,000
Income from Agricultural land in Nepal
Income from land let out for coal Storing 3,600
Income from land used for markets 2,000
Winning from Lottery 50,000
Interest on Deposit with the Land Mortgage Bank 2,000
Interest from co-operative society 1,500
Interest on Deposit- under
P.O. (Recurring Deposit) Rule~ 1970 600
Dividends on shares from Foreign company 2,400
1,73,900
1,000
Less : Expenses incurred
1,72,900
Interest on Securities :
On Debentures of Malwa
Textiles (grossed) 1,778
On Debentures of Sugar Mill
company (grossed) 4,000
On Calcutta Port Trust Bonds
(grossed) 5,000
10,778
Less : Bank commission (9,700X2%) 194 10,584 1,83,484

Working Note- (i) The assessee is only a director in Haryana Glass Works and
not an employee. Therefore, salary, allowances and perquisites received by him are
taxable under the head 'Income from other sources'. Deduction sh~l not be given in
respect of entertainment allowance. Though the assessee is only director of the
company and not an employee, yet the valuation of car facility has been done at Rs. 900
per month according to the provisions applicable to the employees of the company.
If any remuneration, entertainment allowance, fees or commission payable to a
director exceeds Rs. 30,000, then tax at source is deducted @ 10%. Hence salary and
amount of en~ertainment allowance of Rs. 77,400 .received as director of Haryana
Glass Works has been grossed up.
 (ii) The gross amount of winnings from lottery has been calculated as under :

[Rs. 25,000 +Rs. 10,000] x ;~ .. Rs. 50,000

(iii) Interest of Post Office Saving Bank Account is exempt upto Rs. 3,500.
(iv) Interest of Capital Investment Bonds is exempted.
(v) The interest of debentures of Sugar Mill Cnmpany and interest of Calcutta ·
Port Trust Bonds have been grossed up by multiplying the net amount by 100/90. The
interest of debentures of Malwa Textiles has also been grossed up by multiplying it
by 100/90. Though the debentures of Sugar Mill Company ~e listed and the interest
also does not exceed Rs. 5,000, but these are tax-free, hence their interest has been
grossed up.
(vi) Commission to Bank has been given on the actual amount realised by bank.
The amount realised by bank is Rs. 1,600 + Rs. 3,600 + Rs. 4,500 = Rs. 9,700.
Hence 2% of Rs. 9,700 has been deducted. .
(vii) Tax is not deducted at source from the amount of interest paid by
Co-operative Land Mortgage Bank and · co-operative society. Therefore interest
received from these has not been grossed up.
(viii) Indexed cost of acquisition has been deducted in respect of long term capital
.
gauL
(ix) The tax deducted at source by a foreign company shall be includ~d in the
income of the assessee and shall be allowed relief under section 90 or 90A or 91 in
respect of payment of double tax. This relief shall be allowed at the time of compu~
the tax liability. ~ ,