(a) Mrs. Y (59 years) receives ₹ 7,90,000 as basic pay and ₹ 1,18,000 as bonus during the previous year 2023 – 24. Besides, she gets ₹ 52,000 as Dearness Allowance (forming part of salary) and 4 percent commission on turnover achieved by her. During

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(a) Mrs. Y (59 years) receives ₹ 7,90,000 as basic pay and ₹ 1,18,000 as bonus during the previous year 2023 – 24. Besides, she gets ₹ 52,000 as Dearness Allowance (forming part of salary) and 4 percent commission on turnover achieved by her. During the year, turnover achieved by her is ₹ 90 lakh. The employer contributes ₹ 2,24,240 towards recognised provident fund. The amount of interest credited to provident fund on 30 November, 2023 at the rate of 10 percent comes to ₹ 40,000. She also gets child education allowance of ₹ 450 per month (for daughter) and ₹ 80 per month (for son). Cost of education is approximately ₹ 1,80,000 for two children (out of which ₹ 1,10,000 is tuition fees paid by Mrs. Y). The employer company provides 1800 cc car to her for official and private purpose and incurs the entire expenditure on running and maintenance of the car. Personal use of the car as per log book is approximately 65 percent. With effect from 1 November, 2023, she gets a driver to whom the company pays ₹ 6,000 per month. Her income from house property is ₹ 1,65,000. During the year she makes the following contributions and investments: (i) Own contribution towards provident fund ₹ 3,36,360; (ii) Insurance premium on own life ₹ 9,000 (sum assured ₹ 80,000, policy taken in December 2018); (iii) Contribution towards NSC VIII issue ₹ 11,000; (iv) Insurance premium on the life of major son (not dependent on her) ₹ 4,000 (sum assured ₹ 1,00,000); (v) Insurance premium on the life of her mother (age 80 years) dependent on her ₹ 2,000; (vi) Repayment of loan taken to purchase house property ₹ 21,000. Determine the taxable income of Mrs. Y for the assessment year 2024 – 25 under regular tax regime. Also calculate Gross Qualifying amount under Section 80 C. (20 marks)

(b) What are the conditions required for availing of additional depreciation as per the Indian Income Tax Act, 1961? Explain with a detailed example. (15 marks)

(c) Discuss in detail the important checklist points for a smooth and effective audit of non-profit making organisations. How is it different from the audit of modern day business organisations? (15 marks)

UPSC Answer Check · Accepted Answer

Begin with precise computation for part (a) allocating approximately 40% time given its 20 marks weightage, showing step-wise salary computation, perquisite valuation, and deduction workings under Section 80C. For part (b), explain conditions for additional depreciation under Section 32(1)(iia) with a detailed numerical illustration covering 20% and 35% rates. Conclude with part (c) presenting structured checklist points for NPO audit and clear differentiation from corporate audit, ensuring balanced coverage across all three components.
- Part (a): Correct computation of gross salary including basic pay (₹7,90,000), bonus (₹1,18,000), DA (₹52,000), commission (₹3,60,000), and proper valuation of car perquisite using Rule 3(2) for 1800cc with driver (₹2,400 + ₹900 = ₹3,300 pm for 5 months; ₹2,400 pm for 7 months)
- Part (a): Accurate calculation of exempt allowances (child education allowance ₹100 pm per child, restricted to actual expenditure) and taxable interest on PF exceeding 9.5% (₹2,000 taxable)
- Part (a): Correct determination of Gross Qualifying Amount under Section 80C (₹1,50,000 cap) including eligible PF contribution (₹3,36,360), LIC premium (₹9,000), NSC (₹11,000), and principal repayment (₹21,000); exclusion of ineligible items (son's premium, mother's premium)
- Part (b): Detailed explanation of five conditions for additional depreciation: new machinery/plant, manufacture/production business, installed after 31.3.2005, assessee engaged in manufacture, and used for less than 180 days in first year
- Part (b): Comprehensive numerical example showing 20% additional depreciation for assets used ≥180 days and 35% (20%+15%) for new manufacturing companies under Section 32(1)(iia) with proper year-wise computation
- Part (c): Systematic checklist for NPO audit covering registration verification, examination of bye-laws/trust deed, donor restrictions utilization, corpus fund treatment, and compliance with Section 12A/12AA/12AB and Section 80G
- Part (c): Clear differentiation between NPO audit (focus on utilization, donor intent, restricted funds, exemption compliance) and corporate audit (profitability, going concern, shareholder returns, AS compliance)

Dimension	Weight	Max marks	Excellent	Average	Poor
Demand-directive understanding	15%	7.5	Demonstrates precise understanding of three distinct directives: 'calculate' for part (a) with complete numerical workings, 'explain with example' for part (b) showing both conditions and illustration, and 'discuss' for part (c) with analytical depth; maintains appropriate weightage across 20-15-15 mark distribution	Addresses all three parts but with uneven treatment; either over-emphasizes calculation in (a) at expense of explanation in (b), or provides superficial coverage of NPO audit checklist in (c); directive verbs partially understood	Misinterprets core demands—treats (a) as purely theoretical without computation, omits numerical example in (b), or fails to differentiate NPO from corporate audit in (c); significant imbalance in mark-weighted coverage
Content depth & accuracy	30%	15	Computationally flawless in (a) with correct perquisite valuation (car ₹32,700, driver ₹4,500), proper 80C aggregation (₹3,77,360 limited to ₹1,50,000), and accurate taxable income; part (b) covers all five statutory conditions with correct rates (20%/35%); part (c) identifies 8+ specific NPO audit checkpoints	Minor computational errors in salary components or 80C eligibility (e.g., including mother's premium incorrectly); part (b) misses one condition or miscalculates depreciation rates; part (c) provides generic audit points without NPO-specific focus	Major errors in perquisite valuation (wrong car engine capacity rate), incorrect 80C inclusion of ineligible items, fundamental misunderstanding of additional depreciation conditions, or confused NPO-corporate audit distinction
Structure & flow	20%	10	Presents three clearly demarcated sections with internal sub-structuring: (a) shows Gross Salary → Net Salary → Gross Total Income → Deductions → Taxable Income sequence; (b) separates conditions from illustrated computation; (c) uses tabular comparison for audit differences	All parts addressed but with inconsistent formatting—computation lacks clear sub-headings, explanation merges conditions with example causing confusion, or NPO audit points presented as unstructured paragraphs	Disorganized presentation with mixed components across parts, missing working notes, absence of clear final answers, or failure to separate the three distinct questions creating examiner difficulty
Examples / case-law / data	20%	10	Part (b) provides self-contained detailed numerical example with asset-wise cost, date of acquisition, days of use calculation, and year-wise depreciation schedule showing normal + additional depreciation; part (c) references relevant ICAI guidance on NPO audit and cites specific sections (12A, 80G)	Part (b) gives simplified example without complete depreciation schedule or omits days-of-use calculation; part (c) mentions sections without elaborating specific compliance requirements or audit program references	No numerical illustration in (b) despite explicit demand, or example with fabricated rates; part (c) entirely lacks statutory references or professional guidance citations
Conclusion & analytical edge	15%	7.5	Concludes part (a) with precise taxable income figure and 80C GQA; part (b) summarizes strategic tax planning through additional depreciation timing; part (c) offers critical insight on emerging challenges in NPO audit (online donations, FCRA compliance) and governance expectations	Provides final answers without synthesis; part (c) restates differences without forward-looking perspective on NPO accountability or regulatory changes	Missing final computed figures, no concluding observations on any part, or abrupt termination without demonstrating integrated understanding of tax computation, depreciation policy, and audit methodology

(a) Mrs. Y (59 years) receives ₹ 7,90,000 as basic pay and ₹ 1,18,000 as bonus during the previous year 2023 – 24. Besides, she…

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