AUDIT & Tax


1. The term ‘Assessee” is defined under section-------------under Income Tax Act

a) Sec 2 (31)

b) Sec 2 (7)

c) Sec 2(9)

Answer: b) Sec 2(7)


2. The term “Previous year” is defined under section ------------ under Income Tax Act

a) Sec 2 (31)

b) Sec 3

c) Sec 2(9)

Answer: b) Sec 3


3. The term “Assessment year” is defined under section -------------under Income Tax Act

a) Sec 2 (31)

b) Sec 2 (7)

c) Sec 2(9)

Answer: c)Sec2(9)


4. The term “Person” is defined under section ------------ under Income Tax Act

a) Sec 2 (31)

b) Sec 2 (7)

c) Sec 2(9)

Answer: a) Sec 2(31)


5. The term “Income” is defined under section ------------ under Income Tax Act

d) Sec 2 (24)

e) Sec 2 (7)

f) Sec 2(9)

Answer: a) Sec 2(24)


6. --------------- Year is the “Previous Year” under sec 3 of Income Tax.

a) The year in which income is earned

b) The year preceding the year in which income is earned

c) The year succeeding the year in which the income is earned

Answer: a) The year in which income is earned


7. --------------- Year is the “Assessment Year” under sec 2(9) of Income Tax.

a) The year in which income is earned

b) The year preceding the year in which income is earned

c) The year succeeding the year in which the income is earned

Answer: c) The year following (next to) the previous year – The income earned

during the previous year (financial year commencing 1st April and ending 31st

March) is taxable in the immediately next financial year (Assessment Year)


8. The term “Person” includes---------------------- under sec 2(31) of Income TaxAct.

a) An individual, a Hindu undivided family, a firm, a company

b) An association of persons or a body of individuals, local authority and every

artificial judicial person.

c) Both a and b

Answer: c) Both a and b – A natural human being as well as an entity which is

given a name and formed as an artificial person under law is included under the

meaning of the term person.


9. Identify the incorrect status of person from the following:

a) DCM Ltd – an association ofpersons

b) Goodwill Orchid Cooperative Housing Society Ltd – an association of persons

c) A joint family of Mr.Y , Mrs Yand their three sons E, F and G. – a Hindu

undivided family

Answer a) - DCM Ltd –AOP is incorrect. DCM Ltd is a Company.


10. Identify the correct status of person from the following:

a) Savitribai Phule Pune University – An Artificial Juridical Person

b) Pune Municipal Corporation - An Artificial JuridicalPerson

c) Partners X and Y – a company

Answer a) – SPPU – is an artificial juridical person.

PMC is a Local Authority; Partners X and Y is a firm.


11. The term “Assessee” include--------------------under sec 2(7) of Income Tax Act

a) Any person by whom income tax or any other sum of money is payable under

the Income Tax Act

b) Any person to some refund from Income Tax Department is due

c) Both a and b

Answer: c) Both a and b – An Assessee includes every person who owes any

amount to the Income tax in any respect, or who is assessable on behalf of

other assessee and a person to whom the department owes any amount in

that assessment year.


12. From the following identify Assessee of Income Tax for the AY 20-21

a) Income Tax Liability of Mr A for PY 19-20 – Rs125/-

b) Refund pertaining to the long disputed PY 14-15, payable during 20-21 to ABC

Ltd

c) Both a andb

Answer : c) Both a and b are Assessee’s under Income Tax for the AY 20-21.


13. Identify the person who is Assessee underIncome Tax. ---------.for AY 20-21

a) AB Limited made a loss of Rs 5 Lakhs in the previous year19-20

b) Mr A, aged 75 years earned an Interest from Bank Deposit in PY19-20

c) Mst.C, aged 10 years, won a cash prize of Rupees four thousand in the dance

competition.

Answer c) AB Ltd – Assessee for the AY 20-21 because it is assessable under

Income Tax in the AY 20-21. Those persons whose Gross total taxable

income, is below the taxable limit, does not become and Assessee. Persons

who earn casual income are also notAssessee.


14. For the Assessment Year 19-20 the previous year will be ------------

a) Financial year 18-19, commencing from 1

st April 2018 and ending on 31st March

2019

b) Accounting year 18-19, commencing from 1

st January 2018 to 31st Dec 2018.

c) Accounting year 19-20, commencing from 1

st January 2019 to 30th June 2020.

Answer a) PY 18-19 will be the previous year for the AY 19-20.


15. Locate the Assessment year 19-20 for Mr A; who earned income from April 2018 to

November 2018 -------------.

a) 1

st April 2019 to 31st March 2020.

b) 1

st December 2018 to 30th November 2019

c) 1

st January 2019 to 31st December 2019

Answer a) 1st April 2019 to 31st March 2020. – Assessment always begins from 1

st April and ends on 31st March following the year in which the income is

earned. (Irrespective for how many months the income was earned during the

previous year).


16. Income Tax rate in the assessment year is applicable at ratesfixed by --------------------.

a) Income Tax Act

b) Relevant Annual Finance Act

c) Both a andb

Answer b) Tax Rates are revised by the Annual Finance Act every year. Tax

rates for income tax are not fixed by the income tax act but the finance minister

announces the tax rates in everybudget.


17. Income Tax is a ---------------tax on income of aperson.

a) Quarterly

b) Annual

c) Monthly

Answer c) Annual - Income tax is an annual tax – it is levied on the income

earned in the previous year starting 1st April and ending on 31st March of next year.


18. The term Income under Income Tax includes the following -----------

a) From any definite source, a periodic monetary return, in cash or kind, legal or

illegal, actually received or receivable ordue

b) Reimbursement of travelling expenses by his employer for the travelling

expenses met on duty.

c) None of the above

Answer c) From any definite source, a periodic monetary return, in cash or

kind, legal or illegal, actually received or receivable or due – Even income

earned by way of smuggling, theft, tax evasions, winnings etc is considered

as income


19. Identify income of Mr X an employee of XYZindustries

a) Mr X is provided with a domestic servant for private purpose. XYZ pays

Rs50000/- annually as salary to the domestic servant on behalf of MrX.

b) Mr X is given Servant Allowance of Rupees Twenty Thousand along with the

basic salary.

c) Both a andb

Answer c) Both a and b are to be included in the computation of total

taxable income, whether given in the form or cash or monetary benefit or

reimbursed or expense made on behalf ot the employee by the employer.


20. Income of an individual can be computed under ----------- heads under sec 14 of Income Tax

Act.

a) Four

b) Six

c) Five

Answer c) 5 heads – Salaries, house property, profits and gains from

business or profession, capital gains and other sources.


21. Net Taxable Income under Income Tax Act is Gross Taxable Income minus ------------

a) Deductions under Sec 80C to Sec 80U under chapter VIA

b) Exemptions under Sec10

c) Advance Tax/Tax Deducted at Source

Answer a) Deductions under Sec 80C to 80U. These are announced and

subject to be revised in every annual finance Act, for every assessment year.

(Individual and overall limits)


22. Which is the true statement under Income Tax Act -------------, about Agricultural

Income

a) It is exempt under Sec 10(1) from Income Tax.

b) Any (rent or revenue) derived in any form from an Agricultural land situated in

India is considered as Agricultural Income

c) Both a and b

Answer c) Both a and b – Agricultural Income is exempted and includes

income earned in any form, rent or produce etc derived from the agricultural

land.


23. Locate who will not be an Assessee for the AY 20-21

a) Refund pertaining to PY 19-20 due and net income of Rs210000.

b) Income of Rs.510000/- before deduction under Sec 80C in PY 19-20

c) Net Income of Rs220000/- of Mr C aged 66 years

Answer: c) Mr C whose income is below the threshold taxable limit – A person

will not be an Assessee if he is not assessable under Income Tax for that AY. It

is further not clear whether the income tax department has to pay him refund

or consider him as a deemed assesse. Hence option c is not an Assessee.


24 An Individual who is an Indian citizen, and has left India for employment purpose in the previous

year will be considered as “Ordinarily Resident of India” if--------------

a) He has stayed for 183 days in India during the previous year

b) He has stayed for 181 days in India during the previous year

c) He has stayed for 178 days in India during the previous year

Answer: a) He has stayed for 183 days in India during the previous year. -

According to Sec 6(1), of Income Tax Act, an Individual who stays for more

than 182 days in India will be considered as the Resident of India during that

year.


25 An Individual, who is a foreign citizen, will be considered as the Ordinarily Resident of India

in the previous year if---------------------------------.

a. Has stayed for 182 days in the previous year but 368 days in the four

preceding years

b. Has stayed for 59 days in the previous year and zero days in the four preceding

years

c. Has stayed for 58 days in the previous year but 340 days in the four preceding

years

Answer: c) Has stayed for 182 days in the previous year but 368 days in the four

preceding years - According to Sec 6(1) an individual who stays in India, for not

less than 182 days in the previous year or 60 days in the previous year and more

than 365 days in India will be considered as the Resident of India for that previous

year.


26 An Individual who is not an Indian citizen nor of Indian origin will be considered as Non-

Resident of India, in that previous year if --.

a. He has stayed for 366 days in four preceding years and 59 days in the previous

year.

b. He has stayed for 366 days in the four preceding years and 61 days in the previous year

c. He has stayed for 61 days in the four preceding years and 183 days in the previous

year

Answer: a) He has stayed for 366 days in four preceding years and 59 days in the

previous year.


27 The Residential Status of the following parties can be classified into only two

categories- Resident of India and Non- Resident in the previous year

d. Company, Firm

e. Association of persons

f. Both a and b

Answer: c) Both company and Partnership firm and AOP cannot be

considered as Not Ordinarily Resident of India for any previous year


28 The Residential Status of the following parties can be classified into only two

categories- Ordinarily Resident of India and Not Ordinarily Resident of India in the

previous year

a. An Individual

b. Hindu Undivided Family

c. Both a and b

Answer: c) Both Individual and HUF can be classified into Ordinarily and Not

Ordinarily Resident of India depending on they being Nonresident of India for

more than 9 out of 10 preceding years or in 7 preceding years have not stayed in

India for at least 729 days.


29 Persons who are residents of India and ordinarily resident are chargeable to tax on -------

--------- Income

a. Which Is aroused outside India, which received or deemed to be received in

India

b. Which accrues or arises in India

c. Both a and b

Answer: c) Both a and b – According to Sec 5 of Income Tax Act, persons who

are resident and ordinarily residents are chargeable to tax on all incomes.


30 What will be the gross total income of Mr Asish who earns Rs200000/- as rent from

house property in Chennai, Rs100000/- as interest on Debentures of Relaince Power

Ltd, Rs150000/- Dividends received from shares in foreign company, Rs600000/-

worth Salary received from the foreign company in Britain, if he stays for only 60

days in India in the previous year

a) Rs 1050000/-

b) Rs 750000/-

c) Rs 300000/-

Answer: c) Rs300000/- Mr Ashish is Non Resident of India as he stays only

for 60 days in the previous year, so his taxable income in India will be only

Indian Income and foreign Income will be taxed in foreign country.


31 What will be the gross total income of Mr Rakesh who earns Rs300000/- as rent

from house property in Pune, Rs200000/- as interest on Bank Fixed Deposits,

Rs250000/- Dividends received from shares in foreign company, Rs400000/- worth

Salary received from the foreign company in Britain, if he stays for only 184 days

in India in the previous year, and was the resident of India in preceding four years.

a) Rs 1150000/-

b) Rs 650000/-

c) Rs 500000/-

Answer: a) Rs1150000/- Mr Rakesh is Resident and ordinarily resident of

India for the current previous year hence the total Income both Income from

foreign and India will be taxable in India. However he will be entitled to a relief

under Sec 90 or Sec 91 ( in respect of double tax) for Rs 650000/- which is

income from foreign country. .


32 What will be the gross total income of Mr Kishore who earns Rs360000/- as rent from

house property in Bangaluru, Rs240000/- as interest on Postal Term Deposits,

Rs250000/- Interest received from depostis in Wuhaan bank, Rs200000/- worth Salary

received from the foreign company in China, if he stays for only 182 days in India in the

previous year, and was the non - resident in India in preceding ten years and the stay

in, India, in previous 7 years was only 68 days.

a) Rs 1050000/-

b) Rs 600000/-

c) Rs 450000/-

Answer: a) Rs600000/- Mr Rakesh is Resident but not ordinarily resident of

India for the current previous year. He was not the resident in preceding 10

years and his stay in India in the previous 10 years was only 68 days so he is not

ordinarily resident for the current previous year. Therefore his gross total

income will be only Rs 600000/- and the foreign income of Rs450000/- will be

taxable in the foreigncountry.


33 Locate who will not be an Assessee for the AY 20-21

a. Refund pertaining to PY 19-20 due and net income of Rs210000.

b. Income of Rs.510000/- before deduction under Sec 80C in PY 19-20

c. Net Income of Rs220000/- of Mr C aged 66 years

Answer: c) Mr C whose income is below the threshold taxable limit – A person

will not be an Assessee if he is not assessable under IncomeTax for that AY.


34 If an individual or his parents or his grandparents are born in India after or before

Independence, he is said to be ----------------

a. Person of Indian Origin

b. Indian Citizen

c. Resident of India

Answer: c) Person of Indian Origin. Even if the parent or Grandparents are

born in India, but the Individual is born in another country still he will be

termed as the person of Indian origin.


35 The following is the correct criteria to identify a resident of India for an Individual

a. Must stay in India for more than 60 days in the PY

b. Must stay in India for more than 365 days in preceding four years

c. Must stay in India for more than 182 days in India, in the PY

Answer: c) Must stays in India for more than 182 days in India, in the PY


36 If a person is the resident of India, in aPY----------

a. He can still be the resident of other Country in the PY

b. He cannot be the resident of any other country in thePY

c. None of the above

Answer: a) He can still be the resident of other Country in the relevant PY.

The Income Tax Rules of other Country may be different and so he may also

be the Resident of the other Country.


37 The Residential status of Ms. Pooja who got transferred to New York from Mumbai,

and stayed in New York for 189 days in the PY is--------.

a. Resident but not ordinarily resident of India

b. Resident but ordinarily resident of India

c. Non Resident ofIndia

Answer: a) Non Resident of India – because her stay in India is less than 182

days, the current PY.


38 Ms. Rita left India, for attending a seminar and thereafter foreign tour on 18th

April

2020. Was forced to stay back in the foreign country and could not return back to

India for the whole year. What is her residential status for the PY19-20

a. Resident but not ordinarily resident of India

b. Resident but ordinarily resident of India

c. Non Resident of India

Answer: b) Resident but ordinarily resident of India – For the PY 19-20, she

was in India for all 365 days. Her residential status for PY 20-21 will be

nonresident.


39 Mr. James a British citizen came to India for 195 days on 6th

Feb 2019. Find his residential status forPY18-19

a. Resident but not ordinarily resident of India

b. Resident but ordinarily resident of India

c. Non Resident ofIndia

Answer: c) Non Resident of India for PY 18-19 since he stayed for less than

182 days in India during the PY 18-19 (6th Feb to 31st March)


40 Tata Motors have their business unit in Africa, and around 40% of share of profit is

from the African unit, what is the residential status of Tata Motors for PY 19-20

a. Resident but not ordinarily resident of India

b. Resident but ordinarily resident of India

c. Resident of India

Answer: c) Resident of India - Company cannot have ordinarily or not

ordinarily status it can only be Resident or Nonresident.


41 An individual who is a resident will become resident and ordinarily resident if ------------

a. He has been resident in India at least 2 out of 10 preceding years and

stayed in India for at least 730 days in preceding 7years

b. He has been the resident in India for 3 out of 10 preceding 10 years

c. He has been in India for 765 days in preceding 7 years

Answer: a) For the Resident but ordinarily resident both the conditions need to

be satisfied.


42 A Company other than an Indian Company shall be considered as a Resident

if ---------

a. Control and management of the company are wholly in India

b. Control and management of the company are wholly outside India

c. Control and management of the company are partly in India and partly

outside India

Answer: a) To find the residential status under Sec 6(3); of a company other

than a Indian Company, the control and management of the company should be

wholly in India to consider the company to be Indian resident.


43 An Indian Company shall be considered as a Resident if ---------------------------

a. Control and management of the company are wholly in India

b. Control and management of the company are wholly outside India

c. Control and management of the company are partly in India and partly

outside India

Answer: a) In all the above cases an Indian Company the status is always as

a resident only. A company of Indian Origin or a company which is

registered in India whether controlled and managed from India or outside is

always has considered as Indian resident


44.Income from Salary includes ---------------

a) Monetary and non-monetary benefits due from employer toemployee

b) Monetary and non-monetary benefits paid to employee by the employer

c) Monetary and non-monetary benefits paid by partnership firm to its partners

Answer: c) Monetary and non-monetary benefits due from employer to

employee -. Basic Pay, allowances, perquisites


45.Mr. Mohan working with Mohit Appliances & Co, receives Rupees 625000/- as salary and

the employer has deducted Rs62500/- towards TDS but not yet remitted to Income Tax

Authority. Find the amount of salary which Mr. Mohan has to fill in his return. An amount of

Rs6500/-Interest on 5 years Tax Saver FD has accrued in the current PY.

a) Rs 6,25,000/-

b) Rs 6,99,000/-

c) Rs 6,31,500/-

Answer: a) Rs. 6,99,000/- The total amount due, received and deducted

will have to be included in the return.


46.Mr. Kaustub, who retired in 2018, shifted to Tokyo. He was an employee in Tokyo and

receiving Salary. Additionally he also was paid pension from Indian Company. Which

Income will be taxable in India, under the head Salary?

a) Both amount of salary in Tokyo and the pension from Indian Company.

b) Pension will be taxable in India under the head Income from Salary

c) None of the above

Answer: b) Pension arising and payable out of Indian company only can

be taxed under the head salary.


47.Mr. Kamlesh is a Government Employee earning a salary of Rs680000 pa; for the PY 18-

19. He received an amount of Rs120000/- as additional pay pertaining to PY16-17 in the

FY 18-19. What will the total income of Mr. Kamlesh if his income from other sources

is Rs180000/- for PY 18-19.

a) Rs. 840000/-

b) Rs. 980000/-

c) Rs. 680000/-

Answer: b) Rs 980000/- Salary pertaining to previous years but received

during the year which was not due in the previous year will be taxable in the year it is

received.


48.Mr. receives a gross salary of Rs50000/- per month. In the PY 19-20, the salary of February

and March 2020 was paid in the month of May 2020. Find the total taxable salary of Mr

X for the AY 20-21

a) Rs 600000/-

b) Rs 500000/-

c) Rs 100000/-

Answer: a) Rs 600000/- Salary has to be the amount due and not the amount

actually received.


49.Mr. Y is given Rs 6000 pm as additional amount along with basic salary for the purpose

of meeting the cost of travel between the office and his residence. Rs 72000/- should be

shown as------------------

a) Perquisite

b) Allowance

c) Bonus

Answer: b) Allowance – Allowance refers to any additional amount given

regularly to meet some specific expenditure.


50.Mr. Z working in XYZ ltd, along with the salary was offered accommodation at a

concessional rate. The compensation can be termed as ------------------ under the head

income from salary

a) Allowance

b) Bonus

c) Perquisite

Answer: c) Perquisite – Any benefit which not in cash but in kind can be

termed as a perk or perquisite. Rent free accommodation, or accommodation at a

concessional rate is an example of aperquisite.


51.“Salary” includes Basic pay + DA (part forming for retirement benefit) + commission at

fixed % in the calculation of --------------------

a) Rent free accommodation

b) House Rent Allowance

c) None of the above

Answer: b) HRA – for the purpose of calculating HRA salary includes

Basic pay plus Dearness Allowance plus fixed percentage of commission.


52.Salary for the purpose of Entertainment allowance includes-------------

a) Basic Pay

b) Basic Pay + DA + fixed % ofCommission

c) Basic Pay + DA + Bonus + Commission + All taxable Allowances

Answer: a) 20% of the Basic Pay only is considered for deduction for

Government Employees.


53.Salary for the purpose of employer’s contribution to RPFincludes-------------

a) Basic Pay

b) Basic Pay + DA + fixed % of Commission

c) Basic Pay + DA + Bonus + Commission + All taxable Allowances

Answer: b) Basic Pay + DA + fixed % of Commission – 12% of Salary is

exempt for employer’s contribution to RPF. Salary will include Basic

Pay plus part of Dearness Allowance forming the part of retirement benefit

plus fixed percentage of commission.


54.Employer’s contribution to the following --------------- provident fund can be exempted

upto 12% ofSalary

a) Recognized

b) Unrecognized

c) Public provident fund

Answer: a) Recognized Provident Fund (RPF) – Contribution made to RPF

by the employer is exempted upto 12% ofsalary.


55.Employer’s contribution to the following --------------- provident fund is fully exempt

from tax

a) Recognized

b) Unrecognized

c) Statutory

Answer: a) Statutory provident fund – Usually Government as an employer and

selected other companies have to statutorily contribute to statutory provident

fund. Entire contribution made by the central Government to such contributions

is fully exempt from tax.


56.The following amounts, pertaining to S t a t u t o r y Provident Fund are fully exempt from

tax.

a) Employer’s contribution to Statutory Provident Fund.

b) Interest credited to SPF, Lump sum amount payable on retirement.

c) Both a and b

Answer: c) Both a and b. - It is EEE – amount contributed, interest earned

on it and the maturity amount all are exempt in the hands of employee.


57.An Employer does not contribute to the following------------------ provident fund for his

employees

a) Recognized or Unrecognized Provident Fund

b) Public Provident Fund

c) Statutory Provident Fund

Answer: c) Public Provident Fund – An employer can contribute to

Recognized or unrecognized provident fund. Government Employers contribute

to Statutory Provident Fund. Any person whether and employee or otherwise can

contribute a maximum of Rupees One lakh fifty thousand pa. in a PPF.


58.The maximum amount of exemption an Government Employee can avail for

Entertainment Allowance p.a is---------------

a) Rupees Five Thousand

b) 20% of Basic Pay

c) Actual amount of Allowance spent for Entertainment purpose

Answer: b) Rupees Five Thousand only- maximum of the above three is

exempt for entertainment allowance restricted to Government Employees

only.


59.Mr. X working in Reliance Industries along with Basic pay and other allowance also

received Rs1000/- pm for entertainment expenses. How much of entertainment

allowance can he exempt under his salary. He spent Rupees Five thousand towards

entertainment in theyear.

a) Rupees Twelve Thousand

b) Nil

c) Rupees Five Thousand

Answer: b) Nil – There is no exemption for non-Government Employees.


60.An employee can claim exemption on transport allowance upto a maximum of -----------

----- pa.

a) Rupees Nineteen Thousand Two Hundred

b) Rupees Nine Thousand Six Hundred

c) Nil

Answer: c) Nil – Exemption on Transport Allowance is disallowed as

employees can claim Standard Deduction under Sec 16(i)


61.Mr. Z working in a private organization was given education allowance of Rs 400 per

month per child for his three children. Maximum amount he can claim exemption for

children education allowance is------------.

a) Rupees Two Thousand Four Hundred p.a.

b) Rupees Four Thousand Eight Hundred p.a.

c) Rupees Three Thousand Six Hundred p.a.

Answer: c) Rupees Two Thousand Four Hundred p.a - Rs100 per month

per child for a maximum of two children is only exempted.


62.Mr. Fernandes an employee of a semi- Government firm received Hostel allowance of

Rs 15000/- for his three children. What amount of exemption can he claim under hostel

expenditure allowance?

a) Rupees Fifteen Thousand p.a

b) Rupees Seven Thousand Two Hundred p.a

c) Rupees Ten Thousand Eight Hundred p.a

Answer b): Rupees Seven Thousand Two Hundred p.a - Maximum of Rupees

Three Hundred per month per child for a maximum of two children.


63.Following are examples of fully Taxable Allowances

a) Servant Allowance, Tiffin Allowance, Fixed Medical Allowance.

b) Child Education Allowance, Hostel Expenditure Allowance

c) None of the above

Answer a): Servant, Tiffin, Medical Allowances are fully taxable. There is no

exemption on these allowances. The amount needs to be included in the

salary.


64.XYZ Limited had a practice of distributing a silver medal worth Rs . 4999/- to its

employees on the occasion of Diwali. How would Mr. X include the same in the

computation of his income.-------------------

a) Not include in the computation of Income under any head.

b) Will include under the Head Income from Other Sources

c) Will include under the Head Income from Salaries as a perquisite.

Answer a): Gifts made in kind not exceeding Rs. 5000/- (total amount of all gifts not

exceeding in the previous year) are exempt and not taxable, in the hands of the employee.


65.XYZ Limited had a practice of distributing a Gift Cheque (bearer) worth Rs . 4001/- to

its employees on the occasion of Marriage. How would Mr. X include the same in the

computation of his income.-------------------

a) Not include in the computation of Income under any head.

b) Will include under the Head Income from Other Sources

c) Will include under the Head Income from Salaries as a perquisite.

Answer a): Gifts made in kind not exceeding Rs. 5000/- (total amount of all

gifts not exceeding in the previous year) are exempt and not taxable, in the hands of

the employee. Mr.X has received a bearer cheque; which is equivalent to cash. Any

amount paid in cash will form a part of salary. Hence Mr. X has to include it as

perquisite under the head Income fromSalary.


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