Professional Documents
Culture Documents
Salary Income
Salary Income
What is salary?
Payer & Payee More than one source Foregoing salary is salary income Tax free salary should include the tax paid by the employee
Basis of Charge
Salary is chargeable to tax when it is due to be paid whether it is paid or not (salary paid on 1.4.2009) Salary is chargeable to tax when any amount is paid whether it is due or not Arrears of salary paid to employee is chargeable to tax.
Salary means Basic salary and allowances Annuity Gratuity Commission Perquisite in lieu of salary Advance salary Employers contribution to PF Leave salary
Allowances:
Conveyance: Exempted upto Rs.800 per month if used for travel between home and place of work Medical expenses: Exempted when it is a reimbursement of actual expenses upto Rs.15000 .Beyond this limit, it is taxable. Fixed Medical allowance is taxable City compensatory allowance is taxable in all cases
Allowances(cont.)
Tiffin allowance: It is taxable Tea & snacks during office hours are not charged to tax as perquisite while free meals in excess of Rs50 per meal is a perquisite Servant allowances: It is taxable Gifts: Perquisite in respect of gift where it is below Rs.5000, the value is taken as nil
PENSION
1.Pension from UNO 2.Pension received by the family of armed forces 3.Family pension received by family members after the death of employee It is not chargeable to tax
Exempted
PENSION (cont.)
PENSION (cont.)
Uncommuted Pension Commuted Pension Commuted Pension
Govt. /Non Govt Taxable Employee Govt. Employee Exempted from Tax Non-Govt. It is fully or partly Employee exempted
Exempted Fully
1/3 of normal Exempted of normal is exempted
Pension scheme for employees joining Central Govt. or Other Employees after January 1, 2004
Contribution by Employer is added to salary Employers contribution along with the Employees contribution to Pension fund is deductible U/S 80CCD
Leave Encashment
GOVERNMENT EMPLOYEES GETTING LEAVE ENCASHMENT AT TIME OF RETIREMENT:
Leave travel concession is exempted twice in a block of FOUR years. It is available to Indian citizen for proceeding on leave for himself and his family (family includes spouse, children, dependent parents ,brother and sister) Amount of exemption is the actual fare paid for travel anywhere in India by the economy class airfare of national carrier by shortest route, or first class air conditioned rail fare, or any other mode not exceeding the shortest first class rail fare. The Present Block is Jan 1,2006 Dec31,2009
GRATUITY
1. GRATUITY WHILE IN SERVICE IS FULLY TAXABLE 2. GRATUITY AS RETIREMENT BENEFITS Government employee fully exempt Non-government employee-fully or partially exempt under section 10 Non-government employees not covered by the Payment of Gratuity Act ,1972- fully or partially exempt under section 10
GRATUITY (cont.)
wholly exempt
GRATUITY (cont.)
how to find length of service -if 6mths or less then ignored else taken as 1 full year what is salary: Salary means last drawn by employee and includes dearness allowance how to determine 15 days salary -calculated by dividing salary last drawn by 26 days
Provident Fund
Statutory Recognised PF PF Employees Eligible for Contribution Deduction U/S 80C Employers Contribution Exempted upto 12% Interest Exempted as notifd Eg.8.5% Public Unrecognised PF PF No deduction U/S 80C
N.A. No tax No exemption Taxable
PERQUISITES
It means any benefit in addition to salary and wages. Any sum paid by the employer which otherwise would have been payable by the employee. Eg. Rent free house accommodation, car, amenities provided free of cost, concessional interest on housing loan, etc The benefit should be from the employer to be charged as salary It could be in cash or kind It should have a legal origin
Furnished /Unfurnished house without rent or at a concession (not in a remote area, house for MPs, and stay in hotel on transfer not exceeding 15 days) Service of sweeper, gardener( not taxable for non specified employee) Education facility to employees family members (not taxable for non specified employee)
Contribution by employer to effect an assurance on the life of the employee or to effect an annuity Interest free loan( exempted for loan not exeeding Rs.20000, or loan for medical treatment) Use of Employers movable assets are taxable except laptop, desktop & car
SPECIFIED EMPLOYEE
A director is a specified employee An employee who holds 20% or more voting power (called substantial interest) Where an employee is drawing salary of more than Rs.50,000 per year ( without considering non monetary benefit and exemptions like HRA) but , since the minimum exemption limit is Rs.1,10,000, practically all tax payers are specified employees.
Accomodation provided to MPs, judges of High court & Supreme Courts, employees who are in Govt. service being provided accomodation by virtue of their employment is exempted from any tax
Same as above
Salary includes - basic salary - DA ( if terms of employment provide) - bonus, commission, fees - all other taxable allowances - any monetary payment chargeable to tax, but not monetary payments in the nature of perquisite
It is not applicable to an accomodation located in a remote area( 40 kms from town) and in a mining, project ,oil exploration site Where on account of transfer, an employee is given two accomodation , only one will be taxed for 90 days. Beyond that the lesser of the two will be taxed.
Furnished accomodation
Step 1: Find out the value of the accomodation without the value of the furniture Add 10% of the value of furniture if owned by employer or actual hire charges when hired ( Furniture includes TV, fridge, radio and any household appliances)
When servants are engaged by employee and reimbursed by employer, taxable in all cases When engaged by employer only specified employees are taxable Servant allowances are always taxable If servants are provided in a rent free accomodation , they are not valued separately
a) b)
Car owned by Employee Expenses met by Employee No Tax Expenses met or reimbursed by Employer - Official purpose only No tax - Used for private purpose-actual expenses less recovery taxable -Partly used for private purpose (cont. next slide)
A. Expense by employer a) Used only officially No tax b) Wholly used for personal- all expense paid by employer c) Partly official & partly personal-sum of Rs.1200 upto 1.6 ltrs engine capacity -sum of Rs.1600 beyond 1.6 ltrs capacity
B. Expense & maintenance by Employee a) Used only officially, not perquisite so no tax b) Wholly used for personal- 10% of cost for wear
& tear
c) Partly official & partly personal-sum of Rs.400 upto 1.6 ltrs engine capacity -sum of Rs.600 beyond 1.6 ltrs capacity and Rs.600 for chauffeur
Standard Deduction- No deduction is available now. Professional Tax paid in this year Entertainment allowance: available only for Government employees