lastration 37

Tamilnadu Government submits the fol.

Mrs. X, an

information relevant
employee of
for the assessment year 2021-22.
following
Rs. 8,000, Bonus Rs 10 .
Salary: Rs. 86,000, Entertainment allowance:
Income tax Denale.
Education allowance Rs. 4,000 (for her grand children).
Rs. 2,000. Medical expenses reimbursed by emplover.
paid by employer Rs. 1,000, Free residential telephom
Rs. 2,000. Leave travel concession:
Rs.4,000, Free refreshment during office
hours Rs. 4,000. Payment ofElectricitv
Bills employer: Rs. 1,060. Reimbursement ofgas bills Rs. 1,000, Professional
by
Tax paid by employer: Rs. 300, professional tax paid by Mrs. X: Rs. 150,
Mrs.X is provided with a car of more than 1.6 ltr for both personal and
official use and expenses of maintaining and running the car with chauffeur
are borne by the employer.

Contribution to PPF Rs. 1,20,000

(Principal Amount) Repayment of Loan taken for purchase of house:
Rs. 70,000.
Determine the taxable salary and amount deductible
u/s 80C.
ACS Inter June 1997]
 ne Under the Head Salaries
5.105
Solution

Computation of Salary Income of Mrs. X

AY: 2021-2; PY : 2020-21
Particulars
Rs.
Basic Salary
86,000
Bonus 10,200
Allowances
Entertainment Allowance
8,000
Education Alowance (For grand children)
4,000
Perquisites
Value of car as perk :2,400 x 12
28,800
Chauffeur : 900 x 12
10,800 39,600
Income Tax Penalty paid by employer 2,000
Medical reimbursement Tax free
Leave Travel concession Tax free
Free Residential Telephone Tax free
Free refreshment during office hours - Tax free

Payment of Electricity bills by employer 1,060

Reimbursement of Gas bills 1,000
Professional tax paid by employer 300

Gross Salary 1,52,160

Less Deductions u/s. 16
1. Standard deduction 16ia) 50,000
2. Entertainment allowance 16(ii) (Govt. employee) 5,000
3. Professional tax 16(ii) 450
55,450
Taxable Income from Salary 96,710

for deduction u/s 80C PPF Rs. 1,20,000

Qualifying amount :

Housing loan 70,000

1,90,000
LRs. 1.50,000
Amount deductible in salary and then
Oe Professional Tax paid by employer is to be included
is deducted
deducted u/s 16(iii) whereas professional tax paid by employee
us 16(ii).
 Income Tax Theory, Law & Practice Salaries
8.108
(v) R, contributes

to a
22% (12%
PF
RPT and
and the
regular and 10% addi
c o m p a n y matches his
the company
ma

regular
AY.2021-voluni2a0Dry Inco
Amou
Underthe Head
etible u/s 80C Least
dedu
of Rs. 51.840 or 1,50,000.
5.109

contribution)

f12%
invested Rs. 20,000
sfed Rs.
20,00 in ULIP scheme
LIC
ds LIC on
of UTI a contribution
10 000 h edical reimbursement
TAns: Gross Salary:

Rs. 16,000 is Taxable.

Net Salary:
Rs.
Rs.
3,17,700;
2,77,700
( R, has 8,000
towards on
policy for
poi

PPE He paid Rs. a

sum e:1.

imbursement in a Govt, Hospital is fully exempted. Medical

Medical reimbr
Rs.60,000.
iand Dpays Rs.
at Delhi and
assured 2
reimbursement in a private hospital is taxable in the hands of specified
He lives
in a rented
house

HRA.
4.00 p.m. employees only.
(vi) Rs. 3,000 p.m. as as
haspaid teny
Employer He is Since Employer's contribution to RPF is at the exempted rate of
(vi) R, received
Rs. 1,50,000 as gratuity.
not
vered by Gratuit 12% of salary, it is ignored.
act. Working Note 1:
1,60,000 for encashment of leave,
He received Rs.
(vi) leave not availed of being 16 to the extent of least of the
monthe HRA is Exempted following:
Compute R's income forAY:
2020-21. Compute also QA for Rs.
us 8OC.
deduction . Actual HRA received Rs. 3,000 9 27.000
[ACS Dec. 1999 e2. Excess of rent paid over 10% of salary
Solution:
Computation of Salary income of Mr. R
AY: 2020-21 (4,000 9)- Rs. 72,000 x 100
Particulars Rs. 36,000-7.200 28,800
Rs.
Basic Salary 8,000x9 3. 50% of Salary 72.000x0 36,000
Allowances:
72,000 100
D.A 10000 x9 Exempted HRA = Rs. 27,000.

House Rent allowance

90,000
Working ote 2:
27,000
Les: Exempted (W.N.1) 27,000 Taxable Gratuity:
Retirement benefits .
Gratuity (W.N.2) Gratuity is exempt to the extent of least ofthe following:
Leave encashment (W.N.3) 30,000 Rs
1. Actual amount of Gratuity 1,50,000
Medical expenses reimbursed 80,000
Half month average salary for every
by employer 2
Perk: Car provided 2,400x9 (21,000 -5,000) 16,000
1.20,000
completed year of service: 8.000 x 30x
Chauffeur 900x 9 21,600
8.100 29,700 3. Rs. 10.00,000
Gross Salary
Less: .Exempted Gratuity =Rs. 1,20,000.
Deduction U/s. 16: 3,17,700
Taxablegratuity
=
1,50,000-1,20,000 Rs. 30,000.
Standard Deduction 160) Working Note 3:
50,000
Net Salary Taxable Leave Encashment:
Leave to the extent of least of the following
encashment is exempted
2,67,700 four amounts:
 Law & Practice

S110
Income
Tax Theory,
e:AY.2021 Rs
ene
Underthe Head
Salaries

ntributes premium of Rs. 5,000 to the LIC

5.111
received
He
() ,000) and pays to P.F. Rs. 8,400. Repayment of(policy value
loan taken to
encashment
actually
160,000 property Rs. 80,000.
1. Leave salary (8,000
10)
buy house
80,000
x
average
10months
2 reauired to compute the income from salary and the amount on
3. Amount
specified by
Government

his credit
3.00,000 Youare

is entitled to deduction u/s 80C for the

h e is
enti
assessment year 2019-20
of leave to which reasons for clusions and deletions.
4 Cash equivalent g i v i n gr e a s

at the
time of
retirement. 1,28.000 Madras, M.Com. April 19951
months x
8,000
16
Rs. 80,000
Solution:
=

Exempted
Amount
Computation of Salary Income of Arvind
(1,60,000-80,000)
Taxable amount = PY: 2020-21; AY: 2021-22
= Rs. 80,000.
u/s 80c
Particulars Rs Rs.
amount tor deduction
.

Horkingnote 4:Qualitying
R's contribution to
RRF: 72,000 x22% 15,840 Basic 3,000 12 36,000
20,000 Bonus 7500
ULIP
10,000 HRA 10,800
UTI
LIC=Premium 6,000 Less: Exempted 7200
(Actual premium or 10% of policy value 3,600
whichever is less) 51,840 Perks:Shares allotted 500x 14 7,000
Gross Salary S4,100
Illustration 40
Mr. Aravind is a Manager of Prabha Polysters Ltd. In connection Less: Deduction u/s. 16:
with 50,000
his income-tax assessment
for 2021-2022 (financial year ending 31-3-2021), Standard deduction u/s. 16(ia)
he has furnished the following
particulars. Net Salary 4,100
(a) Salary Rs. 3,000 per month
u/s. 80C:
(b) Bonus Rs. 7.500 Qualifying amountfor deduction
(c) HRA Rs. 900 per month. ) LIP Rs. 2,000
He resides in a house
belonging to his Hindu Undivided Family and NSC Rs.60,000
pays rent of Rs. 900 per month.
Housing loan repayment| 80,000
(d) The company has
(e) Medical
provided a car. i) PF Rs.8,400
reimbursement Rs. 15,800.
) Car purchased from the company onTreatment done in a Private Hosplual Total QA is 1,50,400
17-10-2020
by company in
1991) at the book value of Rs.(which was purchasea
him after 3 months 10%% of value.
for Rs. 32,000. 20,000 was sola o LIC premium qualifies for deduction U/s 80C upto
(g) 500 shares of ever is less)
cost in
the face value of Rs. 10 each of (Actual premium or 10% of policy value, which
appreciation
of his loyal services for are
him the given to
Amount deductible u/s 80C: Least of Rs. 1,50,000
or 1,50,400.
company, the market value of the share over a decaae
(h) The company
has a personal accidentbeing Rs. 14 each.
premium being Rs.taken
1,200. Contribution policy for him, the annual
to NSC: 60,000.
5.112 Income Tax Theory, Law& ctice:A.Y. 021-2022
Note: (1)HRA exempted is least of the following:
(a) Actual HRA Rs. 10,800
6 0 , 0 0 0 S 0

(b) 50% of Salary i.e., is Rs. 18,000

100
(c) Rent paid - 10% of Salary (10,800 -3,600) is Rs. 7,200.
(2) Salary after deduction u/s. 16 does not exceed 50,000. Therefore
he is not a specified employee. Hence medical reimbersement
exceeding 15,000 is nottaxable.
3) Profit on Car purchased from the Co. and resold is treated as capital
gain and does not form part of salary income.
(4) Shares allotted to employees is 'taxable perk'.
(5) Car used by the employer for a period of 10 years or more and
sold to employee is not taxable.
6) Car provided by employer is taxable in the hands of specified
a
employees only. Arvind salary (other than perk) does not exceed
Rs. 50,000 hence he is not a specified
employee.
(7) Premium paid by the company on
taxable.
personal accident policy is not
m a r v of P O