Income from Salaries, Income Tax, Individuals

Perquisites – Multiple choice questions and answers

1.   No perquisite will arise in the hands of an employee on account of provision of rent-free accommodation to the employee by his employer.

(a)True                                                                 (b)False

Correct answer : (b)

Justification of correct answer :

Value of perquisite arising on account of provision of rent-free accommodation to the employee by his employer will be charged to tax in the hands of the employee. Value of perquisite will be computed in the manner prescribed in this regard. Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer : The statement given in the question is false, hence, option (a) is not correct.

2.   The value of perquisite in the hands of Government employee in respect of rent free unfurnished accommodation provided by the employer will be the of such accommodation.

(a)Licence fee                                                   (b) Fair rent

(c)Municipal rent                                              (d) Actual rent

Correct answer : (a)

Justification of correct answer :

The value of perquisite in the hands of Government employee in respect of rent free unfurnished accommodation provided by the employer will be the licence fee of such accommodation. Thus, option (a) is the correct option.

Comment on incorrect answer : The value of perquisite in the hands of Government employee in respect of rent free unfurnished accommodation provided by the employer will be the licence fee of such accommodation. Thus, options (b), (c) and (d) giving incorrect items are not correct.

3.   Value of perquisite in respect of unfurnished accommodation in the hands of a non-Government employee will be computed on the basis of population of the city in which the accommodation is provided and the nature of the accommodation, i.e., whether the accommodation is owned by the employer or is taken on rent by the employer.

(a)True                                                                 (b)False

Correct answer : (a)

Justification of correct answer :

Value of perquisite in respect of unfurnished accommodation in the hands of a non- Government employee will be computed on the basis of population of the city in which the accommodation is provided and the nature of the accommodation, i.e., whether the accommodation is owned by the employer or is taken on rent by the employer?

Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

4.   Value of perquisite in respect of unfurnished accommodation in the hands of a non-Government employee will be computed as follows : (accommodation owned by the employer):

Population of the city (based on 2001 Census ) where the property is located

Value of perquisite

Not exceeding 10 lakhs

15% of the salary

Exceeding 10 lakhs but not exceeding 25 lakhs

10% of the salary

Exceeding 25 lakhs

7.5% of the salary

(a)True                                                                 (b)False

Correct answer : (b)

Justification of correct answer :

Value of perquisite in case of accommodation owned by employer will be computed as follows :

Population of the city (based on 2001 Census ) where the property is located

Value of perquisite

Not exceeding 10 lakhs

7.5% of the salary

Exceeding 10 lakhs but not exceeding 25 lakhs

10% of the salary

Exceeding 25 lakhs

15% of the salary

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer : The statement given in the question is false, hence, option (a) is not correct.

5.   Value of perquisite in respect of unfurnished accommodation in the hands of a non-Government employee will be lower of the following : (accommodation leased by the employer)

  • Rent of the accommodation paid or payable by the employer;or

    • 15% of the salary.

  • True                                                               (b)False

Correct answer : (a) Justification of correct answer :

Value of perquisite in case of accommodation leased by employer will lower of the following:

  • Rent of the accommodation paid or payable by the employer;or

    • 15% of the salary.

Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

6.   Value of perquisite in respect of provision of accommodation in a hotel will be lower of the following :

  • 24% of salary paid or payable;or,

    • Actual charges paid or payable by the employer to such hotel, for the period during which such accommodation is provided in the previous year.

  • True                                                               (b)False

Correct answer : (a)

Justification of correct answer :

Value of perquisite in respect of provision of accommodation in a hotel will be lower of the following :

  • 24% of salary paid or payable;or,

    • Actual charges paid or payable by the employer to such hotel, for the period during which such accommodation is provided in the previous year.

Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

7.    Nothing shall be charged to tax in respect of accommodation provided by the employer in a hotel(on transfer of the employee)for a period not exceeding days (in aggregate) during the previous year.

(a)15                                                                      (b)20

(c)30                                                                      (d)45

Correct answer : (a)

Justification of correct answer :

Nothing shall be charged to tax in respect of accommodation provided by the employer in a hotel (on transfer of the employee) for a period not exceeding 15 days (in aggregate) during the previous year. Thus, option (a) is the correct option.

Comment on incorrect answer : In the above case nothing shall be charged to tax if the duration does not exceed 15 days. Thus, options (b), (c) and (d) giving incorrect number of days are not correct.

8.  Taxable value of perquisite in the hands of the employee in respect of provision of rent free furnished accommodation will be computed as follows:

Particulars

Amount (Rs.)

Value of accommodation considering accommodation as unfurnished

XXXX

accommodation

 

Add : Value of furniture

XXXX

Value of furnished accommodation

XXXX

(a)True                                                                 (b)False

Correct answer : (a)

Justification of correct answer :

Taxable value of perquisite in the hands of the employee in respect of provision of rent free furnished accommodation will be computed as follows :

Particulars

Amount (Rs.)

Value of accommodation considering accommodation as unfurnished accommodation

  XXXX

Add : Value of furniture

 XXXX

Value of furnished accommodation

XXXX

Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

9.   The value of benefit to the employee (or any member of his household) resulting from the provision of services of a sweeper, a gardener, a watchman or a personal attendant by the employer shall be the actual cost to the employee.

(a)True                                                                 (b)False

Correct answer : (b)

Justification of correct answer :

The value of benefit to the employee (or any member of his household) resulting from the provision of services of a sweeper, a gardener, a watchman or a personal attendant by the employer shall be the actual cost to the employer and not employee.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer : The statement given in the question is false, hence, option (a) is not correct.

10.   The value of benefit to the employee (or any member of his household) resulting from the provision of office assistant (to help the employee in his official work), by the employer shall be the actual cost to the employer.

(a)True                                                               (b)False

Correct answer : (b)

Justification of correct answer :

Nothing shall be charged to tax in respect of helper granted to the employee to assist him in his official work. Thus, the statement given in the question is false and, hence, option

  • is the correct option.

Comment on incorrect answer : The statement given in the question is false, hence, option (a) is not correct.

11.    The value of the perquisite arising on account of supply of gas, electricity or water to the employee will be the amount paid by the employer to the supplying agency in case where the supply is made from resources not owned by the employer.

(a)True                                                                 (b)False

Correct answer : (a)

Justification of correct answer :

The value of the perquisite arising on account of supply of gas, electricity or water to the employee will be the amount paid by the employer to the supplying agency in case where the supply is made from resources not owned by the employer.

Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

12.    The value of the perquisite arising on account of supply of gas, electricity or water to the employee will be the amount paid by the employer to the supplying agency in case where the supply is made from resources not owned by the employer. However, if supplies are made by the employer from his own resources without purchasing from the outside agencies, then the value of the perquisite will be ‘the manufacturing cost per unit incurred by the employer’.

(a)True                                                                 (b)False

Correct answer : (a)

Justification of correct answer :

The value of the perquisite arising on account of supply of gas, electricity or water to the employee will be the amount paid by the employer to the supplying agency in case where the supply is made from resources not owned by the employer. If supplies are made by the employer from his own resources without purchasing from the outside agencies, then the value of the perquisite will be the manufacturing cost per unit incurred by the employer‘. Where the employee is paying any amount in respect of such services, the amount so paid by the employee shall be deducted from the value so arrived at.

Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

13.   Where the education facility is provided to the children of the employee in an educational institution which is maintained and owned by the employer or where such free educational facilities are provided in any institution by reason of his being in employment of that employer, the value of perquisite shall be the of such education in a similar institution in or nearby the locality.

(a)Cost                                                                                 (b) Market value

Correct answer : (a)

Justification of correct answer :

Where the education facility is provided to the children of the employee in an educational institution which is maintained and owned by the employer or where such free educational facilities are provided in any institution by reason of his being in employment of that employer, the value of perquisite shall be the cost of such education in a similar institution in or nearby the locality. Thus, option (a) is the correct option.

Comment on incorrect answer : The value of perquisite in the above case will be the cost of such facility in a similar institution in or nearby the locality. Thus, option (b) giving incorrect criteria of valuation is not correct.

14.   Where the education facility is provided to the children of the employee in an educational institution which is maintained and owned by the employer or where such free educational facilities are provided in any institution by reason of his being in employment of that employer, the value of perquisite shall be the of such education in a similar institution in or nearby the locality (nothing shall be charged to tax if the value of benefit does not exceed Rs. 1,000 per month per child).

(a)Cost                                                                                 (b) Market value

Correct answer : (a)

Justification of correct answer :

Where the education facility is provided to the children of the employee in an educational institution which is maintained and owned by the employer or where such free educational facilities are provided in any institution by reason of his being in employment of that employer, the value of perquisite shall be the cost of such education in a similar institution in or nearby the locality. Thus, option (a) is the correct option.

Comment on incorrect answer : The value of perquisite in the above case will be the cost of such facility in a similar institution in or nearby the locality. Thus, option (b) giving incorrect criteria of valuation is not correct.

15.    Where the education facility is provided to members of a household of the employee in an educational institution which is maintained and owned by the employer or where such free educational facilities are provided in any institution by reason of his being in employment of that employer, the value of perquisite shall be the cost of such education in a similar institution in or nearby the locality (nothing shall be charged to tax if the value of benefit does not exceed Rs. 1,000 per month per child).

(a)True                                                                 (b)False

Correct answer : (b)

Justification of correct answer :

Where the education facility is provided to members of a household of the employee in an educational institution which is maintained and owned by the employer or where such free educational facilities are provided in any institution by reason of his being in employment of that employer, the value of perquisite shall be the cost of such education in a similar institution in or nearby the locality. The benefit of exemption upto Rs. 1,000 per child per month is available only in respect of the children of the employee and not in respect of any other member of the household.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer : The statement given in the question is false, hence, option (a) is not correct.

16.   Amount spent by the employer for the purpose of providing free training to the employee is not taxable in the hands of the employee.

(a)True                                                                 (b)False

Correct answer : (a)

Justification of correct answer :

Amount spent by the employer for the purpose of providing free training to the employee is not taxable in the hands of the employee. Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

17.         Reimbursement of expenditure incurred for the education of the children/members of the household of the employee is not taxable as a perquisite in the hands of any employee.

(a)True                                                                 (b)False

Correct answer : (b)

Justification of correct answer :

Reimbursement of an expenditure incurred for the education of the children/members of the household of the employee is taxable as a perquisite in the hands of employee. Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer : The statement given in the question is false, hence, option (a) is not correct.

18.     School fees of the children/family members of the employees, paid by the employer directly to the school will be charged to tax in the hands of all employees.

(a)True                                                                 (b)False

Correct answer : (a)

Justification of correct answer :

Reimbursement of expenditure incurred for the education of the children/members of the household of the employee is taxable as a perquisite in the hands of employee. Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

19.   The value of perquisite arising on account of interest free loan or concessional loan granted by the employer will be computed on the basis of the rate of interest on such loans charged by the .

(a) State Bank of India                                     (b)RBI

Correct answer : (a)

Justification of correct answer :

The value of perquisite arising on account of interest free loan or concessional loan granted by the employer will be computed on the basis of the rate of interest on such loans charged by the State Bank of India. Thus, option (a) is the correct option.

Comment on incorrect answer : The value of perquisite arising on account of interest free loan or concessional loan granted by the employer will be computed on the basis of the rate of interest on such loans charged by the State Bank of India. Thus, option (b) giving incorrect bank is not correct.

20.   The value of perquisite arising on account of interest free loan or concessional loan granted by the employer will be computed on the basis of the rate of interest on such loans charged by the State Bank of India as on the 1st day of the relevant, in respect of loans for the same purpose advanced by it.

(a)Previous year                                                (b) Assessment year

Correct answer : (a)

Justification of correct answer :

The value of perquisite arising on account of interest free loan or concessional loan granted by the employer will be computed on the basis of the rate of interest on such loans charged by the State Bank of India as on the 1st day of the relevant previous year, in respect of loans for the same purpose advanced by it. Thus, option (a) is the correct option.

Comment on incorrect answer : The value of perquisite arising on account of interest free loan or concessional loan granted by the employer will be computed on the basis of the rate of interest on such loans charged by the State Bank of India as on the 1st day of the relevant previous year, in respect of loans for the same purpose advanced by it. Thus, option (b) giving incorrect year is not correct.

21.   The value of perquisite arising on account of interest free loan or concessional loan granted by the employer will be computed as follows:

Particulars

Interest free loan

Concessional loan

Interest on the respective loan computed on the basis of rate of interest on such loan charged by State Bank of India prevailing on the first day of the previous year

XXXXXX

XXXXXX

Less: Amount recovered from the employee for the respective loan

————-

XXXXXX

Perquisite in respect of interest free or concessional loans

XXXXXX

XXXXXX

(a)True                                                                 (b)False

Correct answer : (a)

Justification of correct answer :

The value of perquisite arising on account of interest free loan or concessional loan granted by the employer will be computed in the manner given in the question. Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

22.   The value of perquisite arising on account of interest free loan or concessional loan granted by the employer will be computed on the basis of the rate of interest on such loans charged by the State Bank of India. Interest shall be computed on monthly basis by considering maximum outstanding monthly balance.

(a)True                                                                 (b)False

Correct answer : (a)

Justification of correct answer :

The value of perquisite arising on account of interest free loan or concessional loan granted by the employer will be computed on the basis of the rate of interest on such loans charged by the State Bank of India. Interest shall be computed on monthly basis by considering maximum outstanding monthly balance. Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

23.   The value of perquisite to the employee resulting from the use by the employee (or any member of his household) of any movable asset (other than assets already specified in Rule 3 and other than laptops and computers) belonging to the employer shall be determined at rate of per annum of the actual cost of such asset to the employer.

(a)10%                                                                  (b)20%

(c)30%                                                                  (d)50%

Correct answer : (a)

Justification of correct answer :

The value of perquisite to the employee resulting from the use by the employee (or any member of his household) of any movable asset (other than assets already specified in Rule 3 and other than laptops and computers) belonging to the employer shall be determined at rate of 10% per annum of the actual cost of such asset to the employer. Thus, option (a) is the correct option.

Comment on incorrect answer : The value of perquisite to the employee resulting from the use by the employee (or any member of his household) of any movable asset (other than assets already specified in Rule 3 and other than laptops and computers) belonging to the employer shall be determined at rate of 10% per annum of the actual cost of such asset to the employer. Thus, options (b), (c) and (d) giving incorrect rates are not correct.

24.   The value of perquisite to the employee resulting from the use by the employee (or any member of his household) of any movable asset (other than assets already specified in Rule 3 and other than laptops and computers) belonging to the employer shall be determined at rate of 10% per annum of the actual cost of such asset to the employer.

If the assets are hired by the employer, the value of perquisite will be the actual amount of rent or charge paid or payable by the employer for the said asset.

(a)True                                                                 (b)False

Correct answer : (a)

Justification of correct answer :

The value of perquisite to the employee resulting from the use by the employee (or any member of his household) of any movable asset (other than assets already specified in Rule 3 and other than laptops and computers) belonging to the employer shall be determined at rate of 10% per annum of the actual cost of such asset to the employer.

If the assets are hired by the employer, the value of perquisite will be the actual amount of rent or charge paid or payable by the employer for the said asset.

Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

25.  Nothing is charged to tax in respect of computer provided by the employer to the employee.

(a)True                                                                 (b) False

Correct answer : (a) Justification of correct answer :

Nothing is charged to tax in respect of computer or laptops provided by the employer to the employee.

Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

26.   Nothing is charged to tax in respect of laptop provided by the employer to the employee.

(a)True                                                                 (b)False

Correct answer : (a)

Justification of correct answer :

Nothing is charged to tax in respect of computer or laptops provided by the employer to the employee.

Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

27.   When a movable asset owned by the employer is transferred to the employee, either free of cost or at a concessional rate, the benefit accruing to the employee from such transfer will not result in taxable perquisite in the hands of the employee.

(a)True                                                                 (b)False

Correct answer : (b)

Justification of correct answer :

When a movable asset owned by the employer is transferred to the employee, either free of cost or at a concessional rate, the benefit accruing to the employee from such transfer will result in taxable perquisite in the hands of the employee. Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer : The statement given in the question is false, hence, option (a) is not correct.

28.   When a movable asset owned by the employer is transferred to the employee, either free of cost or at a concessional rate, value of perquisite will be excess of WDV (i.e., cost less normal wear and tear) of the asset over the amount recovered from the employee in respect of such transfer. In above case, WDV in respect of electronic items  is determined  on reducing balance   method by deducting depreciation for each completed year.

(a)5%                                                                    (b)10%

(c)20%                                                                  (d)50%

Correct answer : (d)

Justification of correct answer :

When a movable asset owned by the employer is transferred to the employee, either free of cost or at a concessional rate, value of perquisite will be excess of WDV (i.e., cost less normal wear and tear) of the asset over the amount recovered from the employee in respect of such transfer. In above case, WDV in respect of electronic items is determined on reducing balance method by deducting 50% depreciation for each completed year. Thus, option (d) is the correct option.

Comment on incorrect answer : The value of perquisite in above case will be computed by deducting depreciation @ 50%. Thus, options (a), (b) and (c) giving incorrect rates are not correct.

29.   When a movable asset owned by the employer is transferred to the employee, either free of cost or at a concessional rate, value of perquisite will be excess of WDV (i.e., cost less normal wear and tear) of the asset over the amount recovered from the employee in respect of such transfer.In above case,WDV in respect of motor car is determined on reducing balance method by deducting depreciation for each completed year.

(a)5%                                                                    (b)10%

(c)20%                                                                  (d)50%

Correct answer : (c)

Justification of correct answer :

When a movable asset owned by the employer is transferred to the employee, either free of cost or at a concessional rate, value of perquisite will be excess of WDV (i.e., cost less normal wear and tear) of the asset over the amount recovered from the employee in respect of such transfer. In above case, WDV in respect of motor car is determined on reducing balance method by deducting 20% depreciation for each completed year. Thus, option (c) is the correct option.

Comment on incorrect answer : The value of perquisite in above case will be computed by deducting depreciation @ 20%. Thus, options (a), (b) and (d) giving incorrect rates are not correct.

30.   When a movable asset owned by the employer is transferred to the employee, either free of cost or at a concessional rate, value of perquisite will be excess of  WDV (i.e., cost less normal wear and tear) of the asset over the amount recovered from the employee in respect of such transfer. In above case, WDV in respect of assets other than electronic item sand motor car is computed by deducting of actual cost (i.e., as per straight line method) for each completed year.

(a)5%                                                                    (b)10%

(c)20%                                                                  (d)50%

Correct answer : (b)

Justification of correct answer:

When a movable asset owned by the employer is transferred to the employee, either free of cost or at a concessional rate, value of perquisite will be excess of WDV (i.e., cost less normal wear and tear) of the asset over the amount recovered from the employee in respect of such transfer. In above case, WDV in respect of assets other than electronic items and motor car is computed by deducting 10% of actual cost (i.e., as per straight line method) for each completed year.

Thus, option (b) is the correct option.

Comment on incorrect answer : The value of perquisite in above case will be computed by deducting depreciation @ 10%. Thus, options (a), (c) and (d) giving incorrect rates are not correct.

31.   When a movable asset owned by the employer is transferred to the employee, either free of cost or at a concessional rate, value of perquisite will be excess of WDV (i.e., cost less normal wear and tear) of the asset over the amount recovered from the employee in respect of such transfer. In above case, WDV in respect of electronic items is determined on straight line method by deducting 50% depreciation for each completed year.

(a)True                                                                 (b)False

Correct answer : (b)

Justification of correct answer :

When a movable asset owned by the employer is transferred to the employee, either free of cost or at a concessional rate, value of perquisite will be excess of WDV (i.e., cost less normal wear and tear) of the asset over the amount recovered from the employee in respect of such transfer. In above case, WDV in respect of electronic items is determined on written down value method (not straight line method) by deducting 50% depreciation for each completed year.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer : The statement given in the question is false, hence, option (a) is not correct.

32.   When a movable asset owned by the employer is transferred to the employee, either free of cost or at a concessional rate, value of perquisite will be excess of  WDV (i.e., cost less normal wear and tear) of the asset over the amount recovered from the employee in respect of such transfer. In above case, WDV in respect of motor car is determined on straight line method by deducting 20% depreciation for each completed year.

(a)True                                                                 (b)False

Correct answer : (b)

Justification of correct answer :

When a movable asset owned by the employer is transferred to the employee, either free of cost or at a concessional rate, value of perquisite will be excess of WDV (i.e., cost less normal wear and tear) of the asset over the amount recovered from the employee in respect of such transfer. In above case, WDV in respect of motor car is determined on written down value method (not straight line method) by deducting 20% depreciation for each completed year.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer : The statement given in the question is false, hence, option (a) is not correct.

33.   When a movable asset owned by the employer is transferred to the employee, either free of cost or at a concessional rate, value of perquisite will be excess of WDV (i.e., cost less normal wear and tear) of the asset over the amount recovered from the employee in respect of such transfer. In above case, WDV in respect of assets other than electronic items and motor car is determined on written down value method by deducting 10% depreciation of actual cost for each completed  year.

(a)True                                                                 (b)False

Correct answer : (b)

Justification of correct answer :

When a movable asset owned by the employer is transferred to the employee, either free of cost or at a concessional rate, value of perquisite will be excess of WDV (i.e., cost less normal wear and tear) of the asset over the amount recovered from the employee in respect of such transfer. In above case, WDV in respect of assets other than electronic items and motor car is computed by deducting 10% depreciation of actual cost on straight line method (not written down value method) for each completed year.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer : The statement given in the question is false, hence, option (a) is not correct.

34.   While computing value of perquisite arising on account of movable asset owned by the employer which is transferred to the employee, either free of cost or at a concessional rate, year of use by the employer will mean completed year during which the asset was owned by the employer.

(a)True                                                                 (b)False

Correct answer : (a)

Justification of correct answer :

While computing value of perquisite arising on account of movable asset owned by the employer which is transferred to the employee, either free of cost or at a concessional rate, year of use by the employer will mean completed year during which the asset was owned by the employer.

Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

35.   Value of perquisite in respect of running and maintenance expenses met by the employer in respect of a car owned by the employee when the car is used for official purpose only will be Nil (no conditions specified in this regard are satisfied).

(a)True                                                                 (b)False

Correct answer : (b)

Justification of correct answer :

Value of perquisite in the case given in the question will be Nil. However, this exemption is subject to satisfaction of following conditions :

The employer has maintained complete details of journey undertaken for official purpose which should include date of journey, destination, mileage, amount of expenditure incurred thereon and the employer gives a certificate to the effect that such an expenditure was incurred wholly for performing official duty.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer : The statement given in the question is false, hence, option (a) is not correct.

36.   Value of perquisite in respect of running and maintenance expenses met by the employer in respect of a car owned by the employee when the car is used for official purpose only will be Nil (if conditions specified in this regard are satisfied).

(a)True                                                                 (b)False

Correct answer : (a)

Justification of correct answer :

Value of perquisite in respect of running and maintenance expenses met by the employer in respect of a car owned by the employee when the car is used for official purpose only will be Nil on satisfaction of conditions specified in this regard.

Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

37.   Value of perquisite in respect of running and maintenance expenses met by the employer in respect of a car owned by the employee when car is used wholly for private purpose of employee or any member of his household will be computed as follows:

Particulars

Amount (Rs.)

Actual expenditure incurred or reimbursed by the employer

XXXXX

Less: Amount recovered from the employee

XXXXX

Value of perquisite (if positive)

XXXXX

(a)True                                                                 (b)False

Correct answer : (a)

Justification of correct answer :

Value of perquisite in respect of running and maintenance expenses met by the employer in respect of a car owned by the employee when car is used wholly for private purpose of employee or any member of his household will be computed in the manner given in the question.

Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

38.   Value of perquisite in respect of running and maintenance expenses met by the employer in respect of a car owned by the employee when car is used partly for private purpose of employee or any member of his household and partly for official purpose will be computed as follows:

Particulars

Amount (Rs.)

Actual expenditure incurred or reimbursed by the employer

XXXXX

Less: Amount recovered from the employee

XXXXX

Value of perquisite (if positive)

XXXXX

(a)True                                                                 (b)False

Correct answer : (b)

Justification of correct answer :

Value of perquisite in respect of running and maintenance expenses met by the employer in respect of a car owned by the employee when car is used partly for private purpose of employee or any member of his household and partly for official purpose will be computed as follows :

Particulars

Amount (Rs.)

Actual expenditure incurred or reimbursed by the employer

XXXXX

Less: Prescribed amount, i.e., Rs. 1,800 per month where the cubic capacity of the engine does not exceed 1.6 litres (i.e., 1600 cc) and Rs. 2,400 per month, if the cubic capacity exceeds 1.6 litres and Rs. 900 per month, if chauffeur is provided. (Higher amount can be deducted, if conditions specified in this regard are satisfied)

          XXXXX

Less: Amount recovered from the employee

XXXXX

Value of perquisite (if positive)

XXXXX

Thus the statement given in the question is false and hence option (b) is correct option.

Comment on incorrect answer : The statement given in the question is false, hence, option (a) is not correct.

39.   Value of perquisite in respect of running and maintenance expenses met by the employer in respect of a car owned by the employee when car is used partly for private purpose of employee or any member of his household and partly for official purpose will be computed as follows:

Particulars

Amount (Rs.)

Actual expenditure incurred or reimbursed by the employer

XXXXX

Less: Prescribed amount, i.e., Rs. 1,800 per month where the cubic capacity of the engine does not exceed 1.6 litres (i.e., 1600 cc) and Rs. 2,400permonth,ifthecubiccapacityexceeds1.6litres and Rs.900per month, if chauffeur is provided. (Higher amount can be deducted, if conditions specified in this regard are satisfied)

          XXXXX

Less: Amount recovered from the employee

XXXXX

Value of perquisite (if positive)

XXXXX

(a)True                                                                (b)False

Correct answer : (a)

Justification of correct answer :

Value of perquisite in respect of running and maintenance expenses met by the employer in respect of a car owned by the employee when car is used partly for private purpose of employee or any member of his household and partly for official purpose will be computed in the manner given in the question.

Thus, the statement given in the question is true and hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

40.    There will be no taxable value of perquisite arising on account of motor car provided by the employer (maintenance and running expenses of the car are also met by the employer) for official use. This benefit is available without fulfillment of any condition.

(a)True                                                                 (b)False

Correct answer : (b)

Justification of correct answer :

In this case, nothing is charged to tax if following conditions are satisfied :

The employer has maintained complete details of journey undertaken for official purpose which should include date of journey, destination, mileage, amount of expenditure incurred thereon and the employer gives a certificate to the effect that such an expenditure was incurred wholly for performing official duty.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer : The statement given in the question is false, hence, option (a) is not correct.

41.   Value of perquisite arising on account of motor car provided by the employer (maintenance and running expenses of the car are also met by the employer) for private use of the employee will be computed as follows:

Particulars

Amount (Rs.)

Actual expenditure incurred or reimbursed by the employer

XXXXX

Add: 10% per annum of actual cost of car, if car is owned by the employer or actual hire charges, if car is hired by the employer

  XXXXX

Less: Amount recovered from the employee

XXXXX

Value of perquisite (if positive)

XXXXX

(a)True                                                                (b)False

Correct answer : (a)

Justification of correct answer :

The question gives the correct mode of valuation. Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

42.   Value of perquisite arising on account of motor car provided by the employer (maintenance and running expenses of the car are also met by the employer) which can be used partly for private purpose of employee or any member of his household and partly for official purpose will be computed as follows:

Value of perquisite will be calculated at the rate of Rs. 1,800 per month where the cubic capacity of the engine does not exceed 1.6 litres (i.e., 1600 cc) or Rs. 2,400 per month, if the cubic capacity of the engine exceeds 1.6 litres and Rs. 900 per month, if chauffeur is provided (nothing is deductible for amount recovered from the employee).

(a)True                                                                 (b)False

Correct answer : (a)

Justification of correct answer :

The question gives the correct mode of valuation. Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

43.   Value of perquisite arising on account of motor car provided by the employer (maintenance and running expenses of the car are also met by the employer) which can be used partly for private purpose of employee or any member of his household and partly for official purpose will be computed as follows:

Value of perquisite will be calculated at the rate of Rs. 1,800 per month where the cubic capacity of the engine does not exceed 1.6 litres (i.e., 1,600 cc) or Rs. 2,400 per month, if the cubic capacity of the engine exceeds 1.6 litres and Rs. 900 per month, if chauffeur is provided (actual amount recovered from the employee is also to be deducted).

(a)True                                                                 (b)False

Correct answer : (b)

Justification of correct answer :

The question gives the incorrect mode of valuation, because in the above case amount recovered from the employee is not to be deducted. Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer : The statement given in the question is false, hence, option (a) is not correct.

44.   Value of perquisite arising on account of motor car provided by the employer and maintenance and running expenses of the car are met by the employee will be Nil if the car is used for official purpose and the conditions specified in this regard are satisfied.

(a)True                                                                (b)False

Correct answer : (a)

Justification of correct answer :

Value of perquisite arising on account of motor car provided by the employer and

maintenance and running expenses of the car are met by the employee will be Nil if the car is used for official purpose and the conditions specified in this regard are satisfied.

Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

45.   Value of perquisite arising on account of motor car provided by the employer and maintenance and running expenses of the car are met by the employee will be Nil if the car is used for wholly for private purpose of the employee.

(a)True                                                                 (b)False

Correct answer : (b)

Justification of correct answer :

In the case given in the question, the value of perquisite will not be Nil but will be computed as follows :

Particulars

Amount (Rs.)

10% per annum of actual cost of car, if car is owned by the employer or actual hire charges, if car is hired by the employer plus salary paid to chauffeur by the employer, if any

XXXXX

Less: Amount recovered from the employee

XXXXX

Value of perquisite (if positive)

XXXXX

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer : The statement given in the question is false, hence, option (a) is not correct.

46.   Value of perquisite arising on account of motor car provided by the employer and maintenance and running expenses of the car are met by the employee will be Nil if the car is used partly for private purpose of employee or any member of his household and partly for official purpose.

(a)True                                                                 (b)False

Correct answer : (b)

Justification of correct answer :

In the case given in the question, the value of perquisite will not be Nil but will be computed as follows :

Value of perquisite will be calculated at the rate of Rs. 600 per month, where the cubic capacity of the engine does not exceed 1.6 litres (i.e., 1600 cc) or Rs. 900 per month, if the cubic capacity exceeds 1.6 litres and Rs. 900 per month, if chauffeur is provided (nothing is deductible for amount recovered from the employee).

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer : The statement given in the question is false, hence, option (a) is not correct.

47.   Value of perquisite arising on account of running and maintenance expenditure met or reimbursed by the employer in respect of any automotive conveyance (other than car) owned by the employee will be Nil if the conveyance is used exclusively for official purpose and conditions specified in this regard are satisfied.

(a)True                                                                 (b)False

Correct answer : (a)

Justification of correct answer :

Value of perquisite arising on account of running and maintenance expenditure met or reimbursed by the employer in respect of any automotive conveyance (other than car) owned by the employee will be Nil if the conveyance is used exclusively for official purpose and conditions specified in this regard are satisfied.

Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

48.    Value of perquisite arising on account of provision of food and other non- alcoholic beverages provided in office premises or through non-transferable paid vouchers usable only at eating joints will be computed as follows:

Particulars

Amount (Rs.)

Cost to the employer in respect of aforesaid items in excess of Rs. 50 per meal

XXXXX

Less : Amount recovered from the employee

XXXXX

Value of perquisite (if positive)

XXXXX

(a)True                                                                 (b)False

Correct answer : (a)

Justification of correct answer :

The correct manner of valuation is given in the question. Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

49.   Nothing shall be charged to tax in the hands of the employee in respect of food and other non-alcoholic beverages provided by the employer in working hours in remote area or in an off shore installation.

(a)True                                                                (b)False

Correct answer : (a)

Justification of correct answer :

Nothing shall be charged to tax in the hands of the employee in respect of food and other non-alcoholic beverages provided by the employer in working hours in remote area or in an offshore installation.

Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

50.   Nothing shall be charged to tax in the hands of the employee in respect of light refreshment (i.e., tea or non-alcoholic beverages and snacks) provided during working hours including working on holidays, overtime,etc.

(a)True                                                                 (b)False

Correct answer : (a) Justification of correct answer :

Nothing shall be charged to tax in the hands of the employee in respect of light refreshment (i.e., tea or non-alcoholic beverages and snacks) provided during working hours including working on holidays, overtime, etc.

Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

51.    Expenditure on provision of free meals by the employer to the employee in excess of per meal is treated as perquisite in the hands of the employee.

(a)Rs. 100                                                            (b) Rs.75

(c)Rs. 50                                                               (d) Rs.25

Correct answer : (c)

Justification of correct answer :

Expenditure on provision of free meals in excess of Rs. 50 per meal is treated as perquisite. Thus, option (c) is the correct option.

Comment on incorrect answer : Expenditure on provision of free meals in excess of Rs. 50 per meal is treated as perquisite. Thus, options (a), (b) and (d) giving incorrect amounts are not correct.

52.   Nothing shall be charged to tax in the hands of the employee in respect of credit card provided by the employer if the credit card is used only for official purpose and conditions specified in this regard are satisfied.

(a)True                                                                 (b)False

Correct answer : (a)

Justification of correct answer :

Nothing shall be charged to tax in the hands of the employee in respect of credit card provided by the employer if the credit card is used only for official purpose and

conditions specified in this regard are satisfied.

Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

53.   Nothing shall be charged to tax in the hands of the employee in respect of credit card provided by the employer if the credit card is used only for private purpose by the employee.

(a)True                                                                 (b)False

Correct answer : (b)

Justification of correct answer :

Value of perquisite arising on account of provision of credit card by the employer will be computed as follows :

Particulars

Amount (Rs.)

Expenditure incurred by the employer in respect of credit card used by the employee or any member of his household

XXXXX

Less: Amount recovered from the employee

XXXXX

Less: Expenditure incurred for official purposes

XXXXX

Value of perquisite (if positive)

XXXXX

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer : The statement given in the question is false, hence, option (a) is not correct.

54.    Nothing shall be charged to tax in the hands of the employee in respect of provision of club facility by the employer.

(a)True                                                                 (b)False

Correct answer : (b)

Justification of correct answer :

Value of perquisite arising on account of provision of club facility by the employer will be computed as follows :

Particulars

Amount (Rs.)

Expenditure incurred or reimbursed by the employer in respect of club facility used by the employee or any member of his household

XXXXX

Less: Amount recovered from the employee

XXXXX

Less: Expenditure incurred for official purposes

XXXXX

Value of perquisite (if positive)

XXXXX

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer : The statement given in the question is false, hence, option (a) is not correct.

55.   Nothing shall be charged to tax in the hands of the employee in respect of health club, sports and other facilities provided uniformly to all classes of employees by the employer.

(a)True                                                                 (b)False

Correct answer : (a)

Justification of correct answer :

Nothing shall be charged to tax in the hands of the employee in respect of health club, sports and other facilities provided uniformly to all classes of employees by the employer.

Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

56.   Nothing shall be charged to tax in the hands of the employee in respect of initial one-time deposit or fees for corporate or institutional membership fees paid by the employer, where benefit does not remain with particular employee after cessation of employment.

(a)True                                                                 (b)False

Correct answer : (a)

Justification of correct answer :

Nothing shall be charged to tax in the hands of the employee in respect of initial one-time deposit or fees for corporate or institutional membership fees paid by the employer, where benefit does not remain with particular employee after cessation of employment.

Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

57.  Value of any gift, gift vouchers, etc., received from the employer by the employee or member of his household, shall be equal to

(a) The value determined by the employer

(b) Rs.5,000

(c) The value of such gift 

(d) The value determined by the employee

Correct answer : (c)

Justification of correct answer :

Value of any gift, gift vouchers, etc., received from the employer by the employee or member of his household, shall be equal to the value of such gift. Thus, option (c) is the correct option.

Comment on incorrect answer : Value of any gift, gift vouchers, etc., received from the employer by the employee or member of his household shall be equal to the value of such gift. Thus, options (a), (b) and (d) giving incorrect value of gift are not correct.

58.   Nothing shall be charged to tax in the hands of the employee in respect of gift given by the employer if the aggregate value of such gift, vouchers, etc., during the previous year do not exceed     .

(a)Rs. 5,000                                                                         (b) Rs.10,000

(c)Rs. 11,000                                                                       (d) Rs.15,000

Correct answer : (a)

Justification of correct answer :

Nothing shall be charged to tax in the hands of the employee in respect of gift given by the employer if the aggregate value of such gift, vouchers, etc., during the previous year do not exceed Rs.5,000. Thus, option (a) is the correct option.

Comment on incorrect answer : Nothing shall be charged to tax in the hands of the employee in respect of gift given by the employer if the aggregate value of such gift, vouchers, etc., during the previous year do not exceed Rs.5,000.

Thus, options (b), (c) and (d) giving incorrect amounts are not correct.

59.   Nothing is taxed in the hands of the employee in respect expenses on telephone actually incurred by the employer on behalf of an employee.

(a)True                                                                 (b)False

Correct answer : (a)

Justification of correct answer :

Nothing is taxed in respect of expenses on telephone including a mobile phone actually incurred by the employer on behalf of an employee. Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

60.   Nothing is taxed in the hands of the employee in respect of expenses on mobile phone actually incurred by the employer on behalf of an employee.

(a)True                                                                 (b)False

Correct answer : (a)

Justification of correct answer :

Nothing is taxed in respect of expenses on telephone including a mobile phone actually incurred by the employer on behalf of an employee. Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

61.    Nothing is taxed in the hands of the employee in respect of medical facility provided in a hospital maintained by the employer.

(a)True                                                                 (b)False

Correct answer : (a)

Justification of correct answer :

Nothing is taxed in the hands of the employee in respect of medical facility provided in a hospital maintained by the employer. Thus, the statement given in the question is true and hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

62.    Nothing is taxed in the hands of the employee in respect of medical facility provided by the employer in a hospital maintained by the Government or local authority or other person but approved by Government.

(a)True                                                                 (b)False

Correct answer : (a)

Justification of correct answer :

Nothing is taxed in the hands of the employee in respect of medical facility provided by the employer in a hospital maintained by the Government or local authority or other person but approved by Government.

Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

63.    Nothing is taxed in the hands of the employee in respect of medical facility provided by the employer for treatment of specified diseases in a hospital approved by the Chief Commissioner.

(a)True                                                                 (b)False

Correct answer : (a)

Justification of correct answer :

Nothing is taxed in the hands of the employee in medical facility provided by the employer for treatment of specified diseases in a hospital approved by the Chief Commissioner.

Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

64.    In respect of expenditure incurred by the employer on account of providing medical facility to the employee or his family member in a private hospital value of perquisite will be Nil if the amount of such expenditure does not exceed per year.

(a)Rs. 5,000                                                                         (b) Rs.10,000

(c)Rs. 11,000                                                                       (d) Rs.15,000

Correct answer : (d)

Justification of correct answer :

In respect of expenditure incurred by the employer on account of providing medical facility to the employee or his family member in a private hospital value of perquisite will be Nil if the amount of such expenditure does not exceed Rs. 15,000 per year. Thus, option (d) is the correct option.

Comment on incorrect answer : In respect of expenditure incurred by the employer on account of providing medical facility to the employee or his family member in a private hospital value of perquisite will be Nil if the amount of such expenditure does not exceed Rs. 15,000 per year. Thus, options (a), (b) and (c) giving incorrect amounts are not correct.

65.    Nothing is taxed in the hands of the employee in respect of group medical insurance premium for employees and their family members, paid or reimbursed by the employer.

(a)True                                                                 (b)False

Correct answer : (a) Justification of correct answer :

Nothing is taxed in the hands of the employee in respect of group medical insurance premium for employees and their family members, paid or reimbursed by the employer.

Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

66.   Nothing is taxed in the hands of the employee in respect of shares issued to the employee under an employees’ stock option plan.

(a)True                                                                 (b)False

Correct answer : (b)

Justification of correct answer :

Value of perquisite arising on account of issue of shares to the employee under an employees‘ stock option plan is taxed in the hands of the employee.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer : The statement given in the question is false, hence, option (a) is not correct.

67.   Nothing is taxed in the hands of the employee in respect of shares issued to the employee under an employees’ stock option plan if the shares are issued at concessional value.

(a)True                                                                 (b)False

Correct answer : (b)

Justification of correct answer :

Value of perquisite arising on account of issue of shares to the employee under an employees‘ stock option plan is taxed in the hands of the employee. The rule is same whether shares are issued free of cost or are issued at concessional rate.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer : The statement given in the question is false, hence, option (a) is not correct.

68.   Nothing is taxed in the hands of the employee in respect of shares issued to the employee under an employees’ stock option plan if the shares are issued at free of cost.

(a)True                                                                 (b)False

Correct answer : (b)

Justification of correct answer :

Value of perquisite arising on account of issue of shares to the employee under an employees‘ stock option plan is taxed in the hands of the employee. The rule is same whether shares are issued at free of cost or are issued at concessional value.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer : The statement given in the question is false, hence, option (a) is not correct.

69.   Nothing is taxed in the hands of the employee in respect of sweat equity shares allotted to the employee.

(a)True                                                                 (b)False

Correct answer : (b)

Justification of correct answer :

With effect from assessment year 2010-11, sub-clause (vi) of section 17(2) has been substituted with new sub-clause so as to include in the definition of perquisite the value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer or former employer free of cost or at concessional rate to the employee. Thus, if any of the above mentioned shares/securities are transferred by the employer to the employee on or after 1-4-2009, fair market value of such shares/securities on the date of exercise of the option, less amount recovered from the employee will be the taxable value of perquisite in the hands of the employee. Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer : The statement given in the question is false, hence, option (a) is not correct.

70.   Nothing is taxed in the hands of the employee in respect of shares issued to the employee under an employees’ stock option plan if the shares are issued by a former employer.

(a)True                                                                 (b)False

Correct answer : (b)

Justification of correct answer :

With effect from assessment year 2010-11, sub-clause (vi) of section 17(2) has been substituted with new sub-clause so as to include in the definition of perquisite the value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer or former employer, free of cost or at concessional rate to the employee. Thus, if any of the above mentioned shares/securities are transferred by the employer to the employee on or after 1-4-2009, then fair market value of such shares/securities on the date of exercise of the option, less amount recovered from the employee, will be the taxable value of perquisite in the hands of the employee. Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer : The statement given in the question is false, hence, option (a) is not correct.

71.   Value of perquisite arising on account of issue of shares to the employee under an employees’ stock option plan will be the fair market value of the share on the date of floating of the option.

(a)True                                                                 (b)False

Correct answer : (b)

Justification of correct answer :

Value shall be the fair market value of such shares/securities on the date of exercise of the option, less amount recovered from the employee, will be the taxable value of perquisite in the hands of the employee. Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer : The statement given in the question is false, hence, option (a) is not correct.

72.   Value of perquisite arising on account of issue of shares to the employee under an employees’ stock option plan will be the fair market value of the share on the date of floating of the option less amount recovered from the employee.

(a)True                                                                 (b)False

Correct answer : (b)

Justification of correct answer :

Value of the perquisite shall be the fair market value of such shares/securities on the date of exercise of the option, less amount recovered from the employee, will be the taxable value of perquisite in the hands of the employee. Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer : The statement given in the question is false, hence, option (a) is not correct.

73.   Value of perquisite arising on account of issue of shares to the employee under an employees’ stock option plan will be the fair market value of the share on the date of vesting of the option.

(a)True                                                                 (b)False

Correct answer : (b)

Justification of correct answer :

Value of the perquisite shall be the fair market value of such shares/securities on the date of exercise of the option, less amount recovered from the employee, will be the taxable value of perquisite in the hands of the employee. Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer : The statement given in the question is false, hence, option (a) is not correct.

74.   Value of perquisite arising on account of issue of shares to the employee under an employees’ stock option plan will be the fair market value of the share on the date of vesting of the option less amount recovered from the employee.

(a)True                                                                 (b)False

Correct answer : (b)

Justification of correct answer :

Value of the perquisite shall be the fair market value of such shares/securities on the date of exercise of the option, less amount recovered from the employee, will be the taxable value of perquisite in the hands of the employee. Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer : The statement given in the question is false, hence, option (a) is not correct.

75.   Value of perquisite arising on account of issue of shares to the employee under an employees’ stock option plan will be the fair market value of the share on the date of exercise of the option. Nothing will be deducted in respect of amount recovered from the employee.

(a)True                                                                 (b)False

Correct answer : (b)

Justification of correct answer :

Value of the perquisite shall be the fair market value of such shares/securities on the date of exercise of the option, less amount recovered from the employee, will be the taxable value of perquisite in the hands of the employee. Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer : The statement given in the question is false, hence, option (a) is not correct.

76.   Value of perquisite arising on account of issue of shares to the employee under an employees’ stock option plan will be the fair market value of the share on the date of exercise of the option less amount recovered from the employee.

(a)True                                                                 (b)False

Correct answer : (a)

Justification of correct answer :

With effect from assessment year 2010-11, FBT has been abolished and sub-clause (vi) of section 17(2) has been substituted with new sub-clause so as to include in the definition

of perquisite the value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer or former employer free of cost or at concessional rate to the employee. Thus, if any of the above mentioned shares/securities are transferred by the employer to the employee on or after 1-4-2009, fair market value of such shares/securities on the date of exercise of the option, less amount recovered from the employee, will be the taxable value of perquisite in the hands of the employee. Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

77.   Value of perquisite arising on account of issue of shares to the employee under an employees’ stock option plan will be taxed in the previous year in which the shares are offered, allotted or transferred to the employee.

(a)True                                                                 (b)False

Correct answer : (b)

Justification of correct answer :

This perquisite shall be taxed on the year of allotment or transfer of the shares and not in the year of offer.

Comment on incorrect answer : The statement given in the question is false, hence, option (a) is not correct.

78.   Value of perquisite arising on account of issue of shares to the employee under an employees’ stock option plan will be taxed in the previous year in which the shares are offered to the employee.

(a)True                                                                 (b)False

Correct answer : (b)

Justification of correct answer :

This perquisite shall be taxed on the year of allotment or transfer of the shares and not in the year of offer.

Thus, the statement given in the question is false and hence, option (b) is the correct option.

Comment on incorrect answer : The statement given in the question is false, hence, option (a) is not correct.

79.   Value of perquisite arising on account of issue of shares to the employee under an employees’ stock option plan will be taxed in the previous year in which the shares are listed on the stock exchange for the first time after the shares are issued to the employee.

(a)True                                                                 (b)False

Correct answer : (b)

Justification of correct answer :

It will be taxed in the previous year in which the shares are allotted or transferred to the employee.

Thus, the statement given in the question is false and hence, option (b) is the correct

option.

Comment on incorrect answer : The statement given in the question is false, hence, option (a) is not correct.

80.   Value of perquisite arising on account of issue of shares to the employee under an employees’ stock option plan will be taxed in the previous year in which the shares are allotted or transferred to the employee.

(a)True                                                                 (b)False

Correct answer : (a)

Justification of correct answer :

With effect from assessment year 2010-11, FBT has been abolished and sub-clause (vi) of section 17(2) has been substituted with new sub-clause so as to include in the definition of perquisite the value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer or former employer free of cost or at concessional rate to the employee. Thus, if any of the above mentioned shares/securities are transferred by the employer to the employee on or after 1-4-2009, fair market value of such shares/securities on the date of exercise of the option, less amount recovered from the employee, will be the taxable value of perquisite in the hands of the employee. It will be taxed in the previous year in which the shares are allotted or transferred to the employee.

Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer : The statement given in the question is true, hence, option (b) is not correct.

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