Description

Taxation- Direct and Indirect

September 2024 Examination

 

 

Q1. How does the implementation of Goods and Services Tax (GST) resonate with the concept of ‘one nation, one tax’, and what are its implications for businesses and consumers in simplifying the indirect tax system of the country?    (10 Marks)

Ans 1.

Introduction

The Goods and Services Tax (GST) represents a significant reform in the Indian taxation landscape, epitomizing the vision of ‘one nation, one tax.’ Implemented on July 1, 2017, GST aimed to unify the sprawling patchwork of indirect taxes that had long encumbered the Indian market into a single, streamlined system. This transformation sought to dismantle the complex multi-layered tax structure, which included various state and central taxes, thereby facilitating a more transparent and accountable taxation mechanism. The adoption of GST not only promised to enhance the ease of doing business but also aimed at increasing the overall tax base and reducing the cascading effects of the previous tax structure. By consolidating numerous taxes into one, GST simplifies the tax system for both businesses and consumers, fostering a more unified market

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Q2. The following are the particulars of income of Ms. Sushmita for the previous year ended 31^st March 2023. She is employed in a private institution.

1. Basic Salary Rs.9000 p.m.
2. Bonus equal to 2 months’ salary
3. Tiffin allowance Rs. 150 p.m.
4. Entertainment allowances Rs. 120 pm
5. Employee’s contribution to RPF @ 15% of salary.
6. Employer’s contribution to RPF @ 15% of the salary.
7. Interest credited to the provident fund @ 9.5% p.a is Rs. 5600
8. She is provided with free lunch in office. The cost per meal is Rs. 30.
9. The employer has given her a small car which she uses for personal as well as official purpose. She meets the expenses of the car which is used for personal purposes.

Compute her income from salary for the assessment year 2023-24.  (10 Marks)

Ans 2.

Introduction

Computing the income from salary for Ms. Sushmita for the assessment year 2023-24 involves considering various components of her earnings and the applicable tax regulations. Salary income, as defined under the Income Tax Act, includes basic salary, allowances, perquisites, and bonuses, among other components. In this case, we need to evaluate Ms. Sushmita’s basic salary, bonuses, various allowances, contributions to the provident fund, and perquisites provided by her employer. Understanding the tax implications of each of these elements is crucial for accurately determining her taxable income. This computation will help in assessing the total income on which Ms. Sushmita will be liable to pay tax for the given financial year, ensuring compliance with the tax

 

 

Q3a. How does the Income Tax Act of 1961 elaborate on the criteria and conditions that determine the residential status of an individual for the purposes of taxation within India? (5 Marks)

Ans 3a.

Introduction

The Income Tax Act of 1961 stipulates specific criteria to ascertain the residential status of an individual, which is pivotal for tax purposes in India. Understanding one’s residential status is crucial because it determines the extent of tax liability on global income in the country. This act categorizes individuals into three statuses: Resident, Resident but Not Ordinarily Resident (RNOR), and Non-Resident, each defined by particular conditions and the duration of stay in India.

 

 

2017. b) Considering the case of Mr. Potter, a foreign national, who arrived in India for the first time on June 15, 2017. Over the financial years 2017-18, 2018-19, 2019-20, 2020-21, 2021-22 and 2022- 23 he spent 120 days, 115 days, 15 days, 191 days, 124 days, and 80 days in India, respectively. Determine Mr. Potter’s residential status for the Assessment Year 2023-2024. (5 Marks)

Ans 3b.

Introduction

To determine Mr. Potter’s residential status for the Assessment Year 2023-2024, it’s essential to evaluate his physical presence in India during the corresponding financial year and the preceding years as per the guidelines laid out in the Income Tax Act of 1961. His status impacts his tax obligations significantly, requiring a careful examination of his stay durations to ascertain if he qualifies as a Resident, Non-Resident, or Resident but Not Ordinarily Resident (RNOR).

Concept and Application

To establish Mr. Potter’s residential status for the Assessment Year 2023-2024, we need to