Salary with a car, rent-free furnished accommodation, servant, hostel and tuition benefits, family pension and deductions (as set, 1961 Act, AY 2021-22)

Readings

1. Regime. He does not opt for section 115BAC, so the ordinary provisions, with all exemptions and deductions, apply. The option counts only if exercised in the prescribed manner: with the section 139(1) return by a person with no business or professional income, or on or before the section 139(1) due date by one who has such income (section 115BAC(5)).
2. Basic salary. The ₹2,00,000 a month already includes the increment given on 01.01.2020, before the previous year 2020-21, so it is ₹2,00,000 for every month of the year.
3. Accommodation. It runs from 01.02.2020 to 31.01.2021; in the previous year 2020-21 that is the 10 months April 2020 to January 2021. The refrigerator is with him for 6 of those months (August to January).
4. Capital gains of ₹7,80,000 are taken as already computed. The question does not say whether they are long-term or short-term; that does not change the taxable income here, because his other income is far more than the deductions.

Rent-free furnished accommodation

The house is taken on rent by the employer, so its value is the rent paid by the employer or 15% of salary for the period, whichever is lower (section 17(2)(i), valued under Income-tax Rules, 1962, rule 3(1), Table I, Sl. No. (2)(b)); the population of Indore matters only for a house the employer owns. Furniture adds its hire charges, and 10% a year of cost for furniture the employer owns (Income-tax Rules, 1962, rule 3(1), Table I, Sl. No. (2)(b), as substituted by the Income-tax (13th Amendment) Rules, 2009).

Salary for this purpose, for April 2020 to January 2021 (basic salary, dearness allowance forming part of retirement benefits, and the taxable allowances of those months):

Treatment of the other items

1. Basic salary and dearness allowance: taxable in full: ₹24,00,000 and ₹2,40,000.
2. Telephone allowance (fixed): a cash allowance, taxable in full: ₹60,000.
3. Car (Creta, 1591 c.c., not above 1.6 litres) used for official and personal purposes, with maintenance and the chauffeur paid by the employer: he is an employee whose salary exceeds ₹50,000 (section 17(2)(iii)(c)); the value is ₹1,800 a month for the car and ₹900 a month for the chauffeur: ₹2,700 × 12 = ₹32,400. The cost, the petrol and the wear and tear do not change the value (Income-tax Rules, 1962, rule 3(2), Table II, Sl. No. (1)(c)(i)).
4. Refreshments and beverages during working hours (₹12,400): not a perquisite. Nil (proviso to Income-tax Rules, 1962, rule 3(7)(iii): tea or snacks during working hours).
5. Servant allowance for the 10 months to 31.01.2021: a cash allowance, taxable: ₹50,000. Servant facility from 01.02.2021: a benefit provided free to an employee whose salary exceeds ₹50,000 (section 17(2)(iii)(c)), valued at its cost, ₹5,000 × 2 = ₹10,000 (Income-tax Rules, 1962, rule 3(3)).
6. Hostel expenditure allowance (₹9,000 × 3 = ₹27,000): exempt up to ₹300 a month a child for at most two children, whatever is spent: ₹300 × 12 × 2 = ₹7,200 (section 10(14)(ii)). Taxable ₹19,800 (Income-tax Rules, 1962, rule 2BB(2), Table, entry 6: inserted by CBDT Notification No. 9807 of 7 July 1995 (S.O. 617(E)) for up to two children, amount raised to ₹300 a month a child by CBDT Notification No. 11344 of 24 April 2000 (S.O. 403(E))).
7. Tuition fees paid by the employer (₹10,000 a month for each of three children): an obligation of the employee met by the employer is a perquisite (section 17(2)(iv)). There is no arrangement with the school, so nothing is exempt: ₹10,000 × 3 × 12 = ₹3,60,000 (Income-tax Rules, 1962, rule 3(5): the proviso's relief covers only education in the employer's own institution or provided because of the employment, and only where the cost does not exceed ₹1,000 a month a child).
8. Standard deduction: ₹50,000 (section 16(ia)).

Income under the head Salaries

Income from other sources

Family pension of ₹3,500 a month (₹42,000) is income from other sources, less one-third or ₹15,000, whichever is less (section 57(iia)): ₹42,000 − ₹14,000 = ₹28,000.

Deductions under Chapter VI-A

1. Clean Ganga Fund, paid through net banking (₹25,000): deductible in full for a resident (section 80G(1)(i) and (2)(a)(iiihl)).
2. Equity linked savings scheme (₹50,000) and National Savings Certificates, VIII issue (₹1,20,000): both count under section 80C (section 80C(2)(ix) and (xiii)), ₹1,70,000 in all, limited to ₹1,50,000 (section 80CCE).
3. Interest on the loan for an electric vehicle (₹1,45,000): section 80EEB (inserted by the Finance (No. 2) Act, 2019, section 25) allows the interest payable on a loan taken from a financial institution (a banking company, a bank or banking institution under section 51 of the Banking Regulation Act, 1949, or a deposit-taking or systemically important non-deposit-taking NBFC: section 80EEB(5)(b)) for buying an electric vehicle, up to ₹1,50,000, from assessment year 2020-21 (section 80EEB(1)-(2)), only if the loan was sanctioned between 1 April 2019 and 31 March 2023 (section 80EEB(3)). The question names neither the lender nor the sanction date, and does not describe the vehicle. The vehicle is read as an electric vehicle as section 80EEB(5)(a) defines it (powered only by an electric motor, its traction energy coming only from a traction battery installed in it, with an electric regenerative braking system that turns kinetic energy into electrical energy during braking), and the loan as one from such a financial institution, sanctioned in that period: ₹1,45,000. The same interest cannot then be deducted under any other provision for this or any other year (section 80EEB(4)). If the loan or the vehicle does not qualify, nothing is deducted under section 80EEB, and the taxable income is ₹41,42,675, rounded to ₹41,42,680 (section 288A).

Taxable income