Direct Tax Amendments for May 2019/Nov 2019 Examinations - Part 2

CA Mehul Thakker 
on 30 January 2019


In continuation of earlier Article Direct Tax Amendments for May 2019/Nov 2019 Examinations - Part 1,

Answers to the Brainstorming Problems of Article 1





Practical No.

Partial Withdrawal from NPS

Opting out of NPS

1 - Suresh is an employee

Rs. 75,000

Rs. 6,60,000

2 - Suresh is a self-employed person

Rs. 2,00,000

Rs. 6,60,000


Amendment in Section 11 - Explanation 3 to section 11(1) inserted by Finance Act, 2018: Effective from A.Y. 2019-20.

Explanation 3 to section 11(1) reads as under:

For the purposes of determining the amount of application under section 11(1)(a)/(b), the provisions of section 40(a)(ia) and sections 40(3)/(3A), shall, mutatis mutandis, apply as they apply in computing the income chargeable under the head "Profits and gains of business or profession".

Effect of Amendment:

While determining the application of income for charitable trust / institution under section 11(1) (a)/(b), following provisions of the chapter PGBP shall be observed.


Section No.

Provisions in brief

40(a)(ia)

Disallowance of 30% of sum payable to a resident, on which no tax has been deducted or after deduction, has not been paid on or before the due date under section 139(1) of the Act.

40A(3)

Disallowance of expenditure in respect of which payment or aggregate payments made to a person in a day, otherwise than by an account payee cheque or draft or ECS, exceeds rupees ten thousand- subject to few relaxations given under Rule 6DD.

40A(3A)

Payment or aggregate payments made to a person in a day, otherwise than by an account payee cheque or draft or ECS,for discharge of any liability incurred by the assessee in respect of expenditure which has been allowed in earlier years and payment towards such liability exceeds rupees ten thousand – Then such payment is termed as deemed income in the year of payment -subject to few relaxations given under Rule 6DD.


Brainstorming Practical

A Charitable Public Trust provides following information:

1. It received voluntary contribution of Rs.20,00,000 during the previous year.
2. It also received contribution of Rs.5,00,000 with a specific direction that it shall form part of corpus of the trust.
3. It accumulates Rs.7,00,000 for purchase of five Ambulances and informed the Assessing Officer accordingly.
4. It spent Rs.2,30,000 for the objects of the Trust. The break-up of which is as under:

  • Rs. 22,000 cash payment for purchase of medicines on a single day.
  • Rs. 1,08,000 paid to visiting doctor by an account payee cheque but failed to deduct tax at source.
  • Rs. 1,00,000 rent, taxes, electricity and other office expenses by an account payee cheque

5. It also donated Rs. 40,000 was to PQR charitable trust having similar objects but payment was made by bearer cheque.
6. Another Rs. 20,000 was donated to XYZ charitable trust (by an account payee cheque) with a direction that it will form part of corpus of XYZ charitable trust.

Determine total income of the trust for the A.Y. 2019-20 (8 Marks)

Be ready with your answer. I will post the same in the beginning of Article-3.





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