INCOME FROM SALARY(Sec
15 to 17)
Sec.15. Basis
of charge
(a)
Due - Salary due from employer or former employer to the assessee during the
previous year whether paid or not by the
employer
(b)
Advance- Advance salary received by the assessee during
P.Y before it falls due
(c)
Arrears - Arrears of salary received from the employer or former
employer during the P.Y
Explanation:
Salary
received in advance shall not be included again in the Previous year in which
it falls due.
Salary,
bonus, commission, remuneration received
by partner from firm shall not be regarded as salary.
Sec. 16 – Deductions from salary
16(i) deleted
16(ii) Deduction from entertainment allowance received by
government employee.
Least of followings:
(a)
Actual Entertainment
allowance received
Or
(b)
1/5th of salary
(basic salary only)
Or
(c)
Rs. 5,000/-
16(iii) Tax on employment any amount
Section 17, defines salary, perquisites, profits in
lieu of
Salary,
addition to salary
17(1): Salary
includes:
(i)
Wages
(ii)
Annuity, gratuity,
(iii)
Pension
(iv)
Fee, commission, bonus perquisites, allowances
(v)
Leave salary
(vi)
Advance salary
(vii)
Annual accretion to salary
(viii)
Transferred balances
(ix)
Contribution by govt. or any other
employer towards New Pension Scheme(NPS)
17(2) Perquisites
(i)
Value of rent free accommodation
provided by the employer to the assessee
Where accommodation is owned by employer and population
exceeds 25,00,000 15% of Salary
10,00,000 - 25,00,000 10% of salary
Not exceeding 10,00,000 7.5%
of salary
Salary means:
S + A + B + C
Basic Salary
Allowances :
D.A (Eligible) and other allowances to the extent taxable
Bonus
Commission
Added: 10%
P.A of cost of furniture to the employer
Hire charges/ rent of furniture
Where accommodation is not owned by
employer
15%
of salary
Or
Fair
rent of the accommodation
Which ever is less
(ii)
Concession in the matter of rent
respecting accommodation provided by the employer to the assessee
(iii)
Value of any benefit or amenity granted
or provided free of cost or at concessional rate to specified employees:
(a)
to director of company
(b)
to substantially interested person
(c)
any
other employee having monetary salary exceeding Rs. 50,000.
(a)
Provision of gas, electric energy and water for house hold consumption
(b)
Provision of house hold servants –
sweeper, gardener, watchman, cook etc.
(c)
Provision of Motor car/ other automotive
(d)
Provision of educational facility for
children
(e)
Provision of transport facility by
employer engaged in carriage of
passengers/goods
(i)
In case of air or railway: Nil
(ii)
In case of road /shipping : Cost as offered to public.
(iii)
Interest free /concessional loan to
employee or house hold
Sum equal to rate charged by SBI as on Ist day of
relevant previous year on loan for the same purpose on maximum outstanding
monthly balance.
(iv)
Free food and non-alcoholic beverages :
Actual
expenditure incurred by the employer.
(v)
Free food and non-alcoholic beverages
during office hours, or business premises or through paid vouchers not transferable
and usable at eating joints excess of Rs. 50/- per meal, or to tea or snacks .
(vi)
Value of any gift, voucher or coupon
Other fringe/benefits provided
(i)
Any sum paid by employer in respect of
any obligation which but for such payment, would have been payable by the
assessee.
(ii)
Any sum payable by the employer to effect
assurance on the life of the assessee or to effect contract for an annuity.
(iii)
Value of any specified security or sweat
equity share allotted or transferred by the employer free of cost or at concessional
rate to the assessee
(iv)
Amount of contribution to SAF (Super
Annuation Fund) to the extent exceeding Rs. 1,00,000/-
(v)
Value of any other fringe benefit or any
amenity as may be prescribed {See rule-3(7)}
Provided that this sub-section not to apply to value
of medical facility provided to assessee by the employer.
17(3)- Profits in lieu
of salary includes:
(i)
Any amount of compensation – in
connection termination of employment of modification in terms of employment.
(ii)
(a) Any payment to assessee from URPF (employer’s share of contribution towards URPF)
(b) Payment of interest on Employer’s contribution
to URPF)
(c) Any sum received under Keyman insurance policy
and bonus allocated on such policy.
(iii) any sum due to or received – in lump sum or otherwise
from any person
A: before joining employment
B: After cessation of employment
Treatment of
allowances
Allowance is fixed
quantity of money- given regularly to employee by employer
A: Allowances fully taxable:
(i)
Dearness Allowance (DA)
(ii)
City Compensatory allowance (CCA)
(iii)
Over Time Allowance (OTA)
(iv)
Entertainment allowance received by
private employee.
(v)
Medical Allowance (whether or not any
expenditure on medical treatment is incurred)
(vi)
Warden Allowance
(vii)
Non-practicing allowance
(viii)
Lunch/Tiffin Allowance
(ix)
Servant Allowance
(x)
Family Allowance
B: Allowances fully exempt/not taxable
(i)
Any allowance received by Gov. Employee
while serving outside India Sec. 10(7)
(ii)
Leave Travel Concession {sec. 10(5)}
(iii)
Conveyance Allowance if fully spent
(iv)
Travelling Allowance if fully spent
(v)
Allowance received by Judges of High
Courts and Supreme Court.
C: Allowances partly exempt - partly taxable
House Rent Allowance
(HRA) Sec. 10(13A)/Rule 2A
Least of the following
amount is exempt
Actual
HRA received
OR
Rent paid
in excess of 10% of salary*
OR
50% of
salary* if accommodation situates at Delhi, Mumbai, Kolkata or Chennai
40% of
salary* if accommodation situates at any other place.
*Salary means – Basic
Salary + eligible DA + Commission given at fixed rate on turnover achieved by
employee
*Salary to be taken for
the period during which accommodation is occupied.
(i)
Entertainment allowance received by
Govt. employee – as provided u/s 16(ii)
(ii)
Any allowance received by assessee from
his employer specifically given for specific purpose to the extent spent for
official duty will be exempt. Allowance
not spent will be taxable.
(iii)
Children Education Allowance - 10(14):
Exempt – Rs. 100/- P.M per child limited
to two children
(iv)
Hostel Allowance – 10(14) :
Exempt – Rs. 300/- P.M per child limited
to two children
(v)
Transport Allowance - 10(14) :
Exempt -
Rs. 800/- P.M
Rs. 1,600 P.M in the case of blind or
orthopedically handicapped.
(vi)
Under Ground Allowance – 10(14)
to employees working in underground
mines
Exempt Rs. 800/- P.M
(vii)
Transport Allowance to employees working
in transport system such on road airways, shippings.
Exempt – 70% of such allowance or Rs.
6,000/- P.M whichever is less.
Name of the Assessee: Mr.Mohan
Status: Individual
Previous ended on: 31.03.2012
Assessment Year: 2012-13
…………….
Computation of
Income
I Income from Salary {15-17}
Salary 7,45,600
Entertainment allowance 25,400
Less deduction u/s 16(ii) Nil 25,400
(being private employee)
Leave salary: 18,600
Less exemption: Nil 18,600
Bonus: 37,300
Value of Perquisites {sec. 17(2)}
(i)
Provision
of free gas and water 15,500
(ii)
Domestic
servant: 48,000
(iii)
Value
of cook: 42,000
(iv)
Value
of holiday home: 27,500
Total: 9,59,900
II Income from other sourcesL (sec. 56-59)
37,500
Gross total income: {80A(5)} 9,97,400
Less deductions u/c VIA
Section 80C
Qualifying Amount:
(a) PPF 70,000
(b) NSC 75,000
1,45,000
Limited to Rs. 1,00,000
Taxable Income: 8,97,400
Rounded off u/s 288A: 8,97,400
COMPUTATION OF TAX
LIABILITY
Income-tax
on Rs. 1,80,000: Nil
Income-tax
on Rs. 3,20,000 @ 10% 32,000
Income-tax
on Rs. 3,00,000 @ 20% 60,000
Income-tax
on Rs. 97,400 @ 30% 29,220
Total: 1,21,220
Sur
charge:
NIL
Total: 1,21,220
Education
Cess @ 3% 3,636
Total: 1,24,856
Total
tax liability:
Rounded
off u/s 288B: 1,24,860
………………………………..
Name of the Assessee: Mr.Ram Manohar
Status: Individual
Previous ended on: 31.03.2012
Assessment Year: 2012-13
…………….
Computation of
Income
Income
from Salary( Sec. 15-17)
Basic
Salary: 2,50,000
DA
(eligible) 1,00,000
Entertainment
allowance 20,000
Less
deduction u/s 16(ii) NIL
20,000
House
Rent Allowance
60,000
Less
exemption u/s 10(13A)/Rule 2A
(i): Actual HRA received: 60,000
OR
(ii): Rent in excess of 10% of
Salary
{1,20,000 – (10% os sal.)
(
1,20,000- 10% 0f Sal. 3,50,000): 85,000
OR
(iii):
40% of salary:*2,50,000 +1,00,000) 1,40,000
Whichever
is less 60,000 NIL
Non-monetay
benefits:
Employer’s
contribution to
RPF
in excess of 12% of salary
37,500
– (12% of (2,50,000+1,00,000)
37,500
– 42,000 NIL
Interest
credited to RPF
In
excess of 9.5% p.a
24,000
X 2.5 /12 5,000
Value
of Furniture:
10%
p.a of Cost of furniture: 5,000
Value
of Cook: 12,000
Concession
-Value of Watchman
Salary
of the watchman: 24,000
Less
deduction by employer: 18,000
6,000
Total: 3,98,000
Gross
total Income: 3,98,000
Less
deduction u/s VIA
Sec.
80C:
Qualifying
amount
Contribution
to RPF: 37,500
LIP
on own life: 40,000
LIP
on life of major son 20,000
97,500 97,500
Taxable
Income: 3,00,500
Computation of
tax liability
Income-tax
on first 2,50,000: Nil
Income-tax
on 50,500 @ 10% 5,050
Education
Cess @ 3%: 151
Total
tax liability: 5,151
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