Question

eston 2
P (51 years) is in the service of A Ltd. since 1980. He dies on January 31, 2020. The following information
is available:
Basic Salary: Rs. 40,000 per month, dearness allowance: Rs. 12,000 per month (40% of which is included
for the purpose of determining retirement benefit); transport allowance: Rs. 7,600 per month (out of which
only Rs. 600 is used for the journey between office and residence; the remaining amount is not spent); and
entertainment allowance: Rs. 2,000 per month. He contributes 15% of basic salary towards recognised
provident fund and A Ltd. also makes a matching contribution. Interest is credited at the rate of 9.5% on
April 28, 2019.
1
2.
- 3.
4.
5.
After the death of P, his legal heir (Mrs. P) gets the following payments from A Ltd.:
Salary for the month of January, 2020
Family Pension: Rs. 20,000 per month
Encashment of leave standing to the credit of P on January 31, 2020: Rs. 2,40,000 (as per service rules
P is entitled for 45 days leave for each year of service)
Provident fund balance: Rs. 3,90,000
Gratuity: Rs. 2,60,000 (P is not covered by the Payment of Gratuity Act, 1972, nor is there any agreement
with employer to receive gratuity)
P was a doctor. He used to run a small clinic near his residence which was discontinued after the death
of P. His income from the clinic for the period April 1, 2019 to January 31, 2020 was Rs. 79,000.
After the discontinuation of the clinic, Mrs. P recovered some of the outstanding bills issued by P
(amount recovered during February 1, 2020 to March 31, 2020: Rs. 3,76,000). Mrs. P does not have
any other income. On March 30, 2020, Mrs. P withdrew Rs. 5,40,000 being the balance in account of
P in National Savings Scheme, 1987.
Assuming that salary, allowances and pension become "due" on the last day of the month, find out-
Who will be chargeable to tax in respect of the aforesaid receipts?
Net income and Tax Liability for the assessment year 2020-21.
a.
b.​

Answer 1

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