Define Assessment year and Previous Year.

Assessment Year is the period of 12 months which starts from 1st April and ends on 31st March. For example
1st April 2011 to 31st March 2012.
Previous Year is the financial year immediately preceding assessment year. For example 1st April 2010 to 31st
March 2011 is the year in which income was earned which will be assessed or charged to tax in A.Y 2011-2012.
What does the term Person includes?
According to Section 2(31), the term Personal includes:
An Individual
A Hindu Undivided Family
A Company
A Firm
An Association of Persons or A Body of Individuals
A Local Authority
Every Artificial Person not falling under any of the preceding sub-clauses.
What are the five heads of income to calculate Total Income of the
Assessee?
Income from Salaries
Income from House Property
Profits from Business and Profession
Income from Capital Gains
Income from Other Sources
Who is a Resident and Ordinarily Resident (ROR)?
An individual is treated as Resident and Ordinarily Resident if he satisfies any one of the basic conditions and
both the following additional conditions
Basic Conditions:
He is in India for a period or periods amounting in all to at least 182 days in the relevant previous year.
He is in India for 60 days or more during the relevant previous year and has been in India for 365 days or more
during four previous years immediately preceding the relevant previous year.
Additional Conditions:
He has been Resident in India for at least 2 out of 10 previous years immediately preceding the relevant
previous year.
He has been in India for 730 days or more during 7 previous years immediately preceding the relevant previous
year.
What is Incidence of Tax in the case of Resident but Not-ordinarily
Resident?
A Resident but Not-ordinarily Resident is taxable in respect of
Income which is received or deemed to be received in India in the previous year.
Income which accrues or arises or is deemed to accrue or arise in India during the previous year.
Income which accrues or arises outside India from a business controlled or profession set up in India.
Income received outside India from a business controlled or profession set up in India.
Which incomes are deemed to have accrued or arisen in India, even if they
accrue or arise outside India?
Income from a business connection in India.
Any income which arises from any tangible property situated in India, whether movable or immovable.
Income from transfer of any capital asset situated in India.
Any salary earned in India, even if it is paid outside India.
Salary paid by Government to an Indian citizen or Indian national for services rendered outside India.
CA interview questions and answers - part 2

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7. Which incomes are exempt under sec. 10 of the Act?
Agricultural Income
Share of profit of a partner from a Firm
Amount received under a life insurance policy.
Interest, premium or bonus on specified investments.
Educational Scholarship
Payments to MPs, MLAs etc.
Income to Local Authority.
Income of a Mutual Fund.
Income of a Venture Capital Fund.
Income of Trade Union
Income of Certain Funds
Income of employees State Insurance Fund.
Capital Gains arising from the transfer of units of UTI
Dividend received from a Domestic Company.
Capital Gains due to compulsory acquisition of agricultural land.
Long term capital gains from the transfer of securities.
Occasional Incomes or Gifts.
8. Which are the main items included in Salary?
Wages
Annuity or Pension
Gratuity
Fees commission, perquisites or profits in lieu of salary or in addition to salary or wages
Advance of Salary
Payment received from the employer for the period of leave not availed.
9. Define Gratuity.
Gratuity is the amount payable by the employer to the employee as recognition for the long term association of
the employee with the employer. It may be payable by the employer in two ways:
On employees retirement.
On the death of the employee to the legal heirs of the employee.
But in both the cases the treatment will be different. The amount paid by the employer to the employee on his
retirement is taxed as Income from Salaries while the amount paid by the employer on the death of the
employee is taxed as Income from Other Sources.
10. Define Pension.
Pension is a periodical payment received by the employee from the employer after he ceases to be the
employee. It is taxed as Salary. Calculation of pension is done in two forms:
Uncommuted Pension is regular periodical pension to employee which is taxable to all kinds of employees.
Commuted Pension is a lump sum payment in lieu of periodical pension:
o If such pension is received by government employee then it is wholly exempt.
o Non government employees can avail exemption to a certain extent:
If employee is in receipt of gratuity, 1/3 of commuted value.
If not, then one half of commuted value.
11. Which employers are covered under Voluntary Retirement Scheme?
A Public Sector Company
Any other Company
An authority established under a Central or State Act
A local Authority
A Co-operative Society
A University
12. What is Provident Fund Scheme and what are its types?
Provident Fund Scheme is an employee welfare scheme. According to this a certain amount is deducted from the
salary of the employee which is referred to a Employees Contribution to PF. In some cases, the employer also
contributes as equal amount which is referred as Employers Contribution to PF. Both employees contribution as
well as employers contribution is invested. The interest earned on such investment is credited to the PF Account
of the employee.
Types of Provident Fund:
Statutory Provident Fund maintained by Government organizations, local authorities, universities and
educational institutions.
Recognized Provident Fund is the fund to which the provisions of employees Provident Fund and
Miscellaneous Provisions Act, 1952 apply.
Unrecognized Provident Fund is not recognized by the income tax authorities.


CA interview questions and answers - part 3

Part 1 Part 2 Part 3 Part 4 Part 5 Part 6
13. What do you understand by Superannuation Fund? How is it taxed?
Superannuation fund is an employee welfare scheme which is usually applicable in case of very senior
employees. When the employee ceases to be the employee, employees contribution, employers contribution
and the interest thereon is paid to the employee and in case of death of the employee to the legal heirs of the
employee.
The tax treatment in case of an Approved Superannuation Fund is as below:
Employees contribution to the superannuation fund is eligible for rebate under Sec 80C of the Act.
Employers contribution to the superannuation is exempt from tax.
Interest on the accumulated balance in the superannuation fund is exempt from tax.
The amount paid to the employee in lieu of or in commutation of an annuity on his retirement on or after the
specified age or on his becoming in capacitated prior to such retirement is exempt from tax.
The amount paid by way of refund of contribution to the legal heirs on the death of the beneficiary is also
exempt from tax.
14. List down the allowances that are fully taxable.
Dearness Allowance
City Compensatory Allowance
Medical Allowance
Lunch Allowance
Servant Allowance
Family Allowance
Warder Allowance
Overtime Allowance
Family Allowance
15. What are the special allowances which are exempt to the extent
amount received or the amount spent?
Travel on tour or on transfer
Ordinary daily charges incurred on account of absence from normal place of duty
Conveyance allowance granted to meet the expenditure incurred on conveyance, performance of duties,
provided free conveyance is not provided by the employer.
Expenditure incurred on a helper in the performance of duties.
The academic, research and training pursuits in educational and research institutions.
Purchase or maintenance of uniform for wear during the performance of duties.
16. What is the criterion for exemption of H.R.A?
Exemption of H.R.A depends upon the following:
Salary of the employee,
House Rent Allowance,
Rent paid by the employee,
The place where the house is taken on rental basis.


17. Which perequisites are exempt from tax in the hands of employees?
Tea or other non alcoholic beverages and snacks provided during the office hours.
Free meals provided by the employer during the office hours provided that the value per meal does not exceed
Rs. 50.
Amount spent for training the employees and amount spent by the employer as fees for sending the employee
to refresher courses.
Annual premium paid by the employer for the accident insurance policy taken by the employer in the name of
the employee.
The amount of telephone bills of the employee reimbursed by the employer.
Any recreational facility provided by the employer to a group of employees is exempt from tax.
18. On what conditions deductions will be allowed from Income from other
sources?
Any expenditure incurred for earning the income which is included under the head income from other sources will
be allowed as a deduction from such income provided that the following conditions are satisfied:
The expenditure should not be capital expenditure
The expenditure should not be personal expenditure
The expenditure must have been incurred exclusively for earning the income chargeable under the head
income from other sources.
There should be a clear relationship between expenditure incurred and the income earned.


CA interview questions and answers - part 5

Part 1 Part 2 Part 3 Part 4 Part 5 Part 6
19. What type of income is included under the head of Income from other
sources?
Bank Interest
Interest on deposits with the companies
Interest received on delayed refund of income tax
Interest on Loan
Insurance commission
Agricultural income received from a land situated outside India
Sitting fees received by a director for attending board meetings
Remuneration received by a Member of Parliament
Family Pension - The amount of pension received by the legal heirs of a deceased employee.
Interest on Income Tax Refund
20. Differential between Short term Capital asset and Long term Capital
asset.
Short term capital assets are those assets which are held by an assessee for not more than 36 months,
immediately prior to its date of transfer. But in the following cases an asset help for not more than 12 months is
treated as short term capital asset:
Equity or Preference shared in a company.
Securities listed in a recognized stock exchange in India.
Units of UTI
Units of a mutual fund specified under sec 10(23D)
Long term capital assets are those assets which are held by an assessee for more than 36 months.