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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