1.8. CHART SHOWING COMPUTATION OF SALARY INCOME Treatment 1. Relationship of employer and employee must exist to create sclary income 2. Only receipts from employer are taxable under this head. Recespts from a person other than employer are taxable under other sources. Salary and pension received by employees of UNO is fully exempted. 4. Any amount received after cessation of employment is also taxable under this head. $. Salary accrues where service is rendered but for govt. employees posted abroad, salary is deemed to accrue in India. In case salary is foregone under legal obligation it is exempted but if foregone voluntarily. it is taxable. Any salary received in lieu of notice is also fully taxable under this head. 8. In case salary is received afler deduction of following items, these are added back to get fully salary ; (@) Own contribution to provident fund. (ii) Tax deducted at source. (iif) Repayment of loan etc. (iv) LIC Premium, if deducted from salary. (») Group insurance scheme. (#) Rent of house provided by employer. In case “NET”, “Received”, “Afier deduction of Or “Amount Credited by Bank” are given, only then the above items are added. 9. Previous year in case of salaries is always financial year i.e. for the assessment year 2023-24 it is 1-4-2022 to 31-3-2023. 10, Salary when due (0) If due on the last date of the month-salary for April, 2022 received on 30-4-2022 upto salary for March 2023. (ii) If due on Ist day of every month-salary for March due on 1-4-2022 upto salary for February 2023 due on 1-3-2023 is included. Scanned with CamScanneron INCOME TAX LAW AND PRACTICE Tem Treatment TA, Satary Us E71) 1 Wages, Pulty taxabte 2. Annuity or Pension, Fully tavabte 3. Gratuity, It hay been treated separately a) Any feex—Fully taxable (h) Come fully taxable (c) Bonus— Fully taxable (a) Perquisites—(Derks) These are treated separately u/s 1702) Ce) Profits in lieu of salary—These are treated separately ws 1703) 5. Salary In lieu of leave/Leave Eneashment, Fully taxable 6. Advance Salary. Fully taxable. q 7. Arrears of Salary. Fully tauuble 8. Taxable portion of Annual Accretion to RPF, It consists of two parts : (a) Employer's Contribution to RPE, It is exempted up to 12% of employee's salary. ess is taxable. [Also taxable if employer's contribution to RPF in excess of £7,50,000 (alongwith contribution towards NPS and Approved Superannuation fund). Salary = Pay + DA which enters into pay for service oF retirement benefits + ‘Commission on tumover achieved by hi {b) Interest credited on RPF balance. Puily exempted if rate of interest is up to 9.5%, Excess is taxable. (Taxable in certain cases as mentioned under the topic “Provident Fund) 9. Taxable Portion of transferred balance of URPF w RPF. “The fund is teated as RPF from the day it was instituted and exemption is allowed. Excess is taxable, The balance of unrecognised provident fund which is transferred to RPP is called “Transferred balance: (0 The fund will be treated as RPF from the date fund was instituted. (id) The employct's contribution to URPF shall qualify for exemption up to 12% of salary and excess shall be taxable (iit) The interest credited to the accumulated balance shall be exempted if rate of interest was up to 9.5%; Excess, if any is taxable (iv) The taxable amount under point (ii) and (idi) above shall be exempted. 10. Refund from Provident Fund. (a) If SPF—Fully exempted. () If RPF—Pully exempted if service is more than 5 years. In case he leaves service of his own accord before 5 years the amount on which tax has not been paid earlier is taxable (which was exempted earlier). (©) If URPF—Taxable portion is added in salary income. Taxable portion is equal 19 employer's contribution + interest on this part. Interest on own contribution 10 URPF is taxable under the head “Income from other sources.” IIL Allowances A. Fully Exempted Allowances () Foreign Allowance given by Govt. to its employees posted abroad. Gi) H.R.A. given to Judges of High Court and Supreme Court. (iii) Sumptuary Allowance given wo Judges of High Court and Supreme Court (iv) Allowance from UNO. (¥) Allowance to teacherfprofessor from SAARC membet States. (vi) Allowance to members of UPSC. B, Fully Taxable Allowances + (#) Dearness Allowance/ Additional D.A/Migh Cost of Living allowance—Pully Taxable. In case it is mentioned that D.A. enters into pay for service or retirement benefits cor is given under the terms of employment it is to be weated as pay and not D.A. and is treated as part of salary for all practical purposes. ii) City Compensatory Allowance. (Ui) Capital Compensatory Allowance. iy) Lunch Allowance. Scanned with CamScannerCOME FROM SALARIES 2.95 (8) Tiffin Allowance. (vi) Marringe/Family Allowance. (v4) DeputationProject AltoWance. (viii) Wardenship Allowance. ix) Non-Practicing Allowance, (4) Overtime Allowance. (i) Fixed Medical Allowance. (xi) Electricity and Water Allowance. Giff) Entertainment Allowance. It is fully added in employee's Salary. In case of Government employces a deduction is allowed u's 16(i) at the rate of least of following : (a) Statutory Limit 8 5,000 pa. (b) 15th of Basie Salary ; or (©) Actual Entertainment Allowance received. In case of other employees (ie, All non-gov. employees) this deduction is not allowed. (xiv) Allowance to Chairman/retired Chairman of member/retired member wef. A.Y. 2021-22) (40) Transport allowance for normal employees. Gv) Any other allowance neither fully nor partially exempt. C. Partly Taxable Allowances : 1, House Rent Allowance (a) Fully Exempted. if received by the judges of High Court and Supreme Court, (b) Fully taxable, if received by an employee who is living in his own house or in a house for which no rent is paid. (O Exempted up to least of following for those employees who are living in rented house (@) Actual HRA received by the employee. Gi) Rent paid-10% of salary ; or (ii) 40% of salary in ordinary towns ; or 50% of salary in Mumbai, Kolkata, Chennai or Delhi. Taxable HRA = HRA Received-Least of Above. Salary = Pay + D.A. which enters into Pay for Service or Retirement Benefits + Commission on Turnover Achieved by Him. Following allowances are exempted up to actual expenditure incurred for employment. Excess, if any, shall be taxable. 2, Helper Allowance. 3. Uniform Allowance. 4, Academic Research Allowance. 5 6 7. Conveyance Allowance. Travelling Allowance/Transfer Allowance |, Daily Allowance on tour/transfer Following allowance are exempted up to amount so notified. 8, Special Compensatory Allowances. 9. Border Arca Allowances. 10. Compensatory Field Area Allowance. 11. Compensatory Modified Field Area Allowance, 12. Any Special Allowance to counter insurgency. 13, Tribal Area Allowance—Exempted up to © 200 p.m. if received in the states of MP, Tami) Nadu, U.P., Karnataka, Tripura, Assam, West Bengal, Bihar or Orissa. 14, Running or Flight Allowance—If given to employees of transportation system who do not receive any Daily Allowance while away from their place of normal duty it shall be exempted up to © 10,000 p.m. or 70% of such allowance, whichever is less. 15, Transport Allowance : For Handicapped or blind employees it is exempted up to © 3,200 pm. Exemption regarding transport allowance has been abolished for all employees, except handicapped employees. 16, Children's Education Allowance exempted up to © 100 p.m. per child for education in India of own two children only, Scanned with CamScannerTem ve = 17. Hostel Expenditure Allowance Exempted up ta © 300 pm. per child for Hostel expenditure on awn two children only. TV, Perquisites Types of Pecks A. Exempted from 1, Free medical facilities or reamburvement of medical expendiwure for self, family tax members and dependents a) If treatment was taken fron a hospital maintained by employer—Fully Exempted. (b) If treatment is taken from a hospital maintained by Central, State Govt, local fauthority o¢ a hospital approved by the Goverment for purpose of medical treatment of its employees—Fully exempted. (e) If treatment is taken in respect of prescribed discases or ailments specified in Role 3A, im any hospital approved by CCTI—Fully exempted, (a In case employer under a scheme approved by the Central Govt. pays medical insurance premium of employees, it is fully exempted: (e) In case any health insurance premium is paid by employer to General Insurance ‘Corporation under notified scheme (Mediclaim ws 80D) to insure the health of its ‘employees and members of their Families, itis fully exempted. (AM COVED-19 treatment expenses re-imbursement by employer shall not be treated as a perquisite, (g) In case treatment is taken outside India. (4) the expenses on stay and treatment of patient and stay of one attendant shall be exempied up to foreign exchange allowed by RBI ; and (i attendant shall be fully exempted provided gross toxal income of employee does not exceed © 2,00,000 pa. Note, Exemption of ® 15,000 p.s. regarding re-imbursement of medical expenditure hhas been abolished if treatment is taken from a private hospital, nursing ome, ete 2. Free refreshment during working hours. 3. Free recreational facilities. 4. Provision of telephone whether basic of cellular if exclusively for official work. 5. Free meals provided in remote area or at offshore installation are fully exempted. 6. Free education, training or refresher course for employees. 7. Goods sold at concessional rates. 8. Free ration received by members of armed forces. 9. Perquisites allowed by Govt. 10 its employees posted abroad. 10. Rent free house given to an officer of Parliament, a Union Minister, and Icader of opposition in Parliament. 11. Conveyance facilities to Judges of Supreme Court and High Court. 12. Free conveyance provided by employer to employces for going to or coming from place of employment. 13. Any amount contributed by employer towards pension or deferred annuity scheme. 14. Employer's contribution to staff group insurance scheme. 15. Computers, laptops given to {not transferred) an employee for official/personal use. 16. Transfer of a moveable asset (computer, car or electronic items] which are more than 10 years old without consideration. 17. Accident insurance premium paid by employer for his own benefit. 18. Interest free loan or loan at concessional rate of interest taken by employee from employer if amount of loan does not exceed © 20,000 or Joan is taken for medical treatment. 19, Value of any shares or debentures given free of cost or at concessional rate 10 employees under stock option scheme approved by the Central Govt. B. Perks Taxable 1-1. Rent Free House for all employees I. Value of Unfurnished House (A) In case of transfer of an employee from one place to another and he is allowed to maintain two accommodations al {wo places, for a period not exceeding 90 days, Scanned with CamScannerOM SALARIES: 297 the value of one accommodation with lower value shall be taxable. But if period exceeds 0 days the vahic of both the accommodations shall become taxable ¥ from the day 90 days are over. (Ut) Nature of accommadation : Owned by Employer/Hired of leased by employer. (dif) Meaning of salary for rent free house It shall include Pay + DA. (which enters) + Fee # Commission of all Types + Statutory Bonus + All Pully Taxable Allowances Except D.A. which does not center + Taxable portion of other allowances + Salary in lieu of leave only if it relates 4 encashment of current year’s leave. It shall not include D.A. (which does not enter), arrears, advance salary, provident fund excess, gratuitous bonus, value of other perks and profits in liew of salary. In case salary is received from move than ane employer, salary from all employers isto be taken, Rules reganding calculation of value of rent free house = A. Owned by employer (a) Gowt. Employees. The value of house is rent fixed [license fee] by the govt. for such house. It can be rent charged by Govt. from another employee of same satus for similar type of house. (b) Other Employees. Value of house is calculated in following manner + (0 In cities whose population is more than 25 lakhs : 15% of employee's salary. (@ In cities whose population is exceeding 10 lakhs but not exceeding 25 lakhs : 10% of employee's salary. In all other places : 7.5% of employee's salary. (iv) Hotel accommodation (for more than 15 days on transfer from one place to another) : 24% of salary for the period of stay in hotel or actual hotel bill w.e. is less is taxable. B. Hired by employer. Actual rent paid by employer or 15% of salary whichever is less is taxable in all cities. IL. For Furnished House : In case of all types of employees calculated value of unfurnished house. If furniture is owned by employer add 10% of cost of these items, If furniture is hired—actual hire charges are added, B.-2, Concesstonal Rent House. Calculate value of rent free house as per above and deduct rent paid by employee. B.3, Obligation of employee met by employer. In case any of the following payment is made by employer these are fully taxable. These are (a) Gas and electricity bills issued on the name of employce but paid by employer— actual expenses met by employer are taxable, (b) Education of Children—bills issued on the name of employee but paid by ‘employer—actual expenses met by employer are taxable. Reimbursement of tuition foe of children is also fully taxable. (0) Income-tax, Professional tax of employee paid by employer—actual expenses met by employer are taxable. {d) Salary of domestic servants employed by employee but paid by employer—actual expenses met by employer are taxable. B-4, Life Insurance premium. On the life of employee or any member his family. if paid by employer is fully taxable. But accident insurance premium paid by employer if policy is for employer's benefit then it is not xable, ULIP paid by employer is also fully taxable, interest is fully exempted. B.S. Value of specified security or sweat equity shares alloited or transferred. B46. Contribution to approved superannuation fund of the employee in excess of ® 1,50,000. Scanned with CamScanner2.98 INCOME TAX LAW AND PRACTICE Trem Treatment 1-7, Other fringe benefits : (® lotetest free or concessional loans (1d) Travelling, touring and accomodation facility, (iit) Food or beverages facility Aiv) Gifts oF vouchers, (0) Credit card facility. (8) Club facility. (vi) Use of movable assets (Wii Transfer of movable assets. (és) Any other fringe benefivamenity C. Perks—Taxable for Following perks are taxable only if employee is either a director of company or has Specified Employees substantial interest (20% or more equity shares) or his salary is more than % 50,000 pa. Only ‘This salary means all monetary emoluments, which are taxable under the head salary after deductions ws 16. 1. Car facility, 2. Free servants (a) In case servants are employed by employee but there salary is paid by empicyer full salary is taxable for all employees. (b) In case services of sweeper, gardener and watchman are provided by employer fall salary of these employees is taxable and it shall be reduced by any amount paid by employee. In case gardener is provided for rent free house owned by employer its salary is added in FRV and is not taxable separately. (c) In case employer provides any other servant his full salary is taxable for specified employces only. 3. Free gas, light, water, In case connection is on the name of employer and bill is also paid by employer, actual cost of such benefit is taxable. It shall be reduced by ‘any amount paid by the employee. 4. Free education. If employer provides free education 10 the members of the household of employee reasonable amount which employee would have spent on similar type of education in same or nearby locality is taxable, 5. Free transport, If conveyance is hired or ticket is purchased by employer, actual expenses are tatable, It shall be reduced by any amount paid by the employee. 6. Medical facility. ¥. Profit in Liew Us 17(3) profit in lieu of salary include : of Salary (a) any compensation received from present or past employer during relevant previous [Section 17(3)] ‘year on termination of service ot on modification of terms of service, (b) any other payment received from present or past employer except given ws 10(10), 10{IOA), 1OCLOAA), 10(10B), 10(11), 10(13), 10(13A) and any payment out of provident fund 10 the extent it is taxable. (c) any amount due to or received whether from any person : (A) before his joining any employment with that person ; or (B) after cessation of his employment with that person. All above payments are fully taxable unless exempied u/s 10. Receipts which are 1. Leave travel concession u/s 10(5). includible under the Exempted upto rules effective from 1,10.1997 provided the employce does not opt to Head Salaries under be taxed as per new tax regime ws 11SBAC. See. 17(1) or 173) 2. Passage money u/s 10(6). deleted from A/Y 2004-05. but Exempted u/s 10 3. Any foreign allowunce or perks w/s 10(7), If given by Govt. to its employees posted abroad are fully exempted. lump sum or otherwise by any assessee Scanned with CamScannerCOME FROM SALARIES 2.99 4 ulty ws 10(10). A applicable—Pally exempted. A. For employees covered under Payment of Gratuity Act (Persons on non ranayerial posts in factories) —Exempt up to least of following : (a) Notified limit © 20,00,000 (Less any amount exempted earlier) (b) 15 days Average wages for every one completed year of service (Period exceeding 6 months = | year) 1/2 month's salary = (Average monthly salary cor wages x (15/26) (c) Actual amount received, B. Other employees—Exempted up t0 least of following provided service is more than $ years or employee has not left service of his own : (a) Notified limit = % 20,00,000 [Less any amount exempted earlier). (b) ¥4 month's average salary for every one year of completed service (months to be ignored. (€) Actual amount received. Average salary = Salary [same as for provident fund] for 10 months preceding the month of retirement divided by 10 5. Commutation of pension wis 10(10A) In case commuted value of pension is received— (a) If Govt. employee—is fully exempted. (0) If other employee who receives gratuity also—Lump sum amount is exempted upto commuted value of 1/3nd of pension. other employee who does not get gratuity—Lump sum amount is exempted upto commuted value of % of pension, 6. Leave encashment ws 10(10AA) (a) If received al the time of retirement by a govt. employce—Fully exempted. (0) If received daring service—Fully taxable for all employees. (0) If received by 1 private sector employee at the time of retirement exempted upto : (6 Notified limit € 3,00,000, di) Average salary x 10 months, Gii) Actual amount received, (iv) Average salary x No, of months leave due, Leave due is to be calculated taking one month leave or actual entitlement whichever is less. Average salary = Salary (Same as for PF) for 10 months including the month of retirement /10. 7. Retrenchment compensation, Received by workers covered under Industrial Disputes ‘Act [Section 10(10B)} only for those workers who fulfill the conditions given under Factories Act (as for Payment of Gratuity-Act) least of the following is exempted : (@ Notified limit € 5,00,000, (ii) Actual amount received, ii) Amount payable under Industrial Disputes Act. 8. Any compensation recelved by an employe of public sector undertakings, universities, Public Sector Companies : (0 If given to employees of public sector undertakings under a scheme approved by the CIT itis fully exempted. (ii) For other employees it shall be exempted up to least of the fotlowing : (a) 8 5,00,000, (6) 3 months salary for every one year of service, (c) Actual amount received, or (d) Salary x no. of months service is due before actual retirement. Salary has same meaning as for PF and salary for last month is to be taken. 9. Any tax on perks paid by employer, It is fully exempted ws LO(10CC). Any payment recelved out of SPF. Any payment received out of SPF is fully exempted ws 10(11), 11. Any payment received out of RPF. Any payment received out of RPF is exempted ws 10(12) if service exceeds 5 years. A. employee or semi-govt, emphayee where Govt. rules are Scanned with CamScanner2.100 = INCOME TAX LAW AND PRACTICE tem Treatment ap 12. Any payment received out of an approved superannuation fund is fully cexeinpled ws 10(13). 13. House rent allowance. HRA received is exempted upto prescribed limits (see allowances). 14, Any other allowance, It is exempied upto amount s0 notified ws 10(14), VI. Deductions out 1. Standard deduction ws 16(la) of Gross Salary In A.Y. 2023-24, a standard deduction upto 8 $0,000 i.e, salary earned or & $0,000 [Section 16} ‘we. is Hess, shall be allowed while calculating salary income of the employee, Deduction w/s 80C Out of GTI . Entertalament Allowance u/s 164i). In case of Govt. employees getting entertainment allowance (EA) deduction @ following shall be allowed : (@) Statutory limit & 5,000 per annum, Gi) USth of salary [only Basic Salary), of (iif) Actual EA received. Least of the above is allowed as deduction, . Tax on Employment [u/s 16(fi)] In case any amount of professional tax is paid by the employee or by his employer on his behalf it is fully allowed as deduction. Rate of deduction [Section 80C (1)] ‘This deduction shall be admissible only to an assessee, being an individual or a Hindu undivided family. “The amount of deduction shall be actual amount paid or deposited during the previous ‘year in prescribed saving schemes [to be called as qualifying amount for deduction ws 80C] or © 1,50,000 which ever is less. Qualifying amount for deduction ws 80C : 1. Employee ot assessee’s own contribution to PF. If S.P-F., fully qualifies (Govt., LIC, University, SBI, RBI ete.) IFRP-F., fully qualifies. If PPE, fully qualifies. Account can be in the name of self, spouse or any child. If URPF., does not qualify. 2. Any amount contributed by employee towards Approved Superannuation fund- Fully qualifies 3. Life insurance Premium paid by employee or by employer to assure life of employee, his spouse of children (minor or major, married or unmarried) shall qualify up to actual premium paid or 20 of sum assured (10% of actual capital sum assured for policies issued on or after 1-04-2012) whichever is less, Sum assured shall not include bonus or any premium agreed to be returned. For a person suffering from disability or disease, the premium shall qualify upto 15% of the capital sum assured if the policy is issued on or after 1-04-2013. 4, Amount deposited in Sukanya Samridhi Account. ‘5. Any amount deducted from the salary payable by or on behalf of the Government to any individual in accordance with the conditions of his service, for the purpose of securing 10 him a deferred annuity or making provision for his spouse ot ‘children, in so far as the sum so deducted does not exceed one-fifth of the salary. 6. Any amount contributed to Keep in force a contract for a deferred annuity, not being an annuity plan referred to in clause (12).The persons on whose name savings can be made ate in the case of an individual, the individual, the wife or hhusband and any child of such individual. Such contract does not contain a provision for the exercise by the insured of an option to receive a cash payment fiew of the payment of the annuity ; . Any amount deducted by employer (Govt.) out of employee's salary under group insurance scheme fully qualifies. Scanned with CamScanner“FROM SALARIES 2.401 8. Any amount invested by an individual or H.U.P, with UTI or LIC under Unit Linked Insurance Plan (ULIP) fully qualifies. 9, Any amount invested in NSC VIN issue fully qualifies, 10. Interest. Accrued on NSC VIIX issue purchased earlier is deemed to be reinvested hence fully qualifies, 11, Any amount deposited under notified deposit scheme 92 fully qualifies. 12. Any amount paid to LIC under New Jeevan Dhara, New Jeevan Dhara I, or New Jeevan Akshay, New Jeevan Akshay 1, New Jeevan Akshay II plans fully qualifies. 13. Any amount deposited with mutual fund under a scheme of pension fund i¢, UTI retirement Pension Fund shall fully qualify. 14, Any amount deposited with nationalised bank under home deposit scheme of National Housing Bank, fully qualifies. 15. Any amount deposited with an authority engaged in housing development or town and rural development fully qualifies. 16. Any amount deposited with housing finance institutions fully qualifies 17. Any amount repaid under house building loan taken from Govt, LIC, Bank, HDFC, HUDCO or other housing finance institutions or employer. [Not from friends or relatives} OR ‘Amount repaid as full price or installment of price of 2 house purchased from Govt. o an approved agency shall qualify up 10 actual amount repaid shall fully qualify for deduction ws BOC. ‘The amount repaid must not include interest on loan or ground rent but shall include stamp duty and registration charges. 18. Any amount paid as tuition fees (excluding any payment towards any development fees or donation or payment of similar nature whether atthe time of admission or thereafier to : (a) any school, college or university or other educational institution situated in India, (b) for the purpose of full time education of any two children of the individual. ‘The amount, which shall qualify under this seetion, shall not exceed actual amount paid as tuition fee for two children only. 19, Amount paid as subscription to equity shares or debentures of any eligible issue. In case such issue is notified by CBDT, the amount invested shall qualify for deduction u/s 80C. The amount so invested in on which deduction is claimed shall not qualify for exemption of capital gain ws S4EA or ws S4EB or ws S4EC. 20. Amount paid as subscription to any units of any mutual fund. In case such unit scheme of mutual funds is notified by CBDT, the amount so invested shall qualify for deduction ws 80C. The amount so invested in on which deduction is claimed shall not qualify for exemption of capital gain ws S4EA or Ws S4EB or ws S4EC. ‘The shares, debentures or units acquired under (18) and (19) above cannot be converted into money for three years. In case such units or shares are converted. into money before the expiry of three years the amount of rebate claimed shall become as tax payable of the year in which these are sold or otherwise transferred. 21. Term deposits with scheduled banks for a duration of at least 5 years as per the scheme framed by Central Government, 22. Investment in Notified bonds issued by NABARD will also qualify for deduction ws 80C. 23. Deposits in Post Office Time Deposit Rules and Senior Citizens Savings Scheme Rules. 24, Any amount of contribution made by an employee of Central Govt. to his National Pension System shall qualify for deduction w/s 80C. Such contribution has been ‘made for not less than 3 years and sm is notified ws 8OCCD. Scanned with CamScanner2.102 : INCOME TAX LAW AND PRAGTiCg New Tax Slab Rates under Alternate Tax Regime The Finance Act, 2020 has inserted a new subsection LISBAC for those individuals and H.U.Fs who do not want to claim certain exemptions and deductions and thus are eligible for new tax slaty rates Teption of new tax slab ates is evercised then following exemptions, deductions and certain individuals and HLU.P assessees. Exemption/Deduction not allowed Leave travel concession Section 1013) House Rent Allowance Section 10(14) “Allowances specially granted to meet expenses wholly and exclusively incurred in the performance of duties except the following : (i) Transport allowance given to Divyang (handicapped) employees. (ii) Conveyance allowance for official purposes. (iii) Any other allowance to meet cost of travel or tour of transfer. (iv) Daily allowance to meet the ordinary charges incurred by an employee on account of absence from his normal place of duty. Section 10(17) | Allowances to M.P'MLA's. Section 10(32) ‘Allowance for income of minor upto % 1,500 available in the case of| clubbed income Section 10AA Exemption of SEZ unit Section 16 All deductions available under this section Section 17(2) Exemption available in respect of free food and non-alcoholic beverage given through paid voucher (upto € 50 per meal) Section 24(b) Interest on housing loan in respect of self-occupied or vacant property upto 2 houses. Section 32(1)iia) ‘Additional depreciation Section 32AD Investment on new P&M in notified backward areas Section 33AB Business of manufacture of tea/coffee/rubber. Section 33ABA Business of extration or production of Petroleum and Natural Gas. ‘Section 35(1Mii)(iayiii) | Expenditure on scientific esearch, and 35(2AA) Section 35AD Deduction regarding expedition on specified business Section $5CCC Deduction regarding expedition on Agricultural Extension Project. Section S7(iia) Deduction out of family pension Deductions u/s 80 All deductions u/s 80C to 80U. 80CCD( Option regarding reduced tax stab rates is to exercised (A) Individuals and HUF having no business income, These assesses are allowed to exercise this option every assessment year. This means that they are allowed to change their option every year. (B) Individuals and H.U.F’s having business income, These assessees are not allowed to change their option every year. It means that the option once exercised shall apply for that Scanned with CamScannerINCOME FROM SALARIES 2.103 and for all subsequent years. But the option once exercised can be changed or withdrawn only once for a previous year other than the year in which it was exercised. In case these assesses ceases to have business income in future, then they will have the option to change it as per (A) above, Other points to be kept in mind If assessee opts new regime of taxation u/s 115BAC (1) Valuation of Perquisites. The method of valuation of perks as given under rule 3 shall continue to be followed under new tax slab regime. But in case of an employee gets free food and non-alcoholic beverage, he cannot claim exemption (upto & 50 per meal) available to other employees. (2) Setting off of depreciation. While calculating income under the head “Business or Profession”, brough forward unabsorbed depreciation is presumed to have been given full effect on the W.D.Y. of that block of such asset, but if no effect has taken place upto Assessment Year 2021- 22 then full effect of such adjustment should be made in the W,D,V. of block of such assets as on 14-2020 ie, for A.Y. 2021-22. * It may also be noted that under the new tax regime, additional depreciation shall not be allowed and the rate of normal depreciation shall not be more than 40% of W.D.V Jcost (3) Carry Forward Business Loss. Any carry forward business loss or additional depreciation pertaining to assessment year/or years prior to A.Y. 2021-22 and this loss or additional depreciation is related to such deductions which are not allowed under new regime, then such loss/additional depreciation shall not be allowed in A.Y. 2021-22 and subsequent years. Loss under the head ‘House Property’ will also not be allowed to be set-off against the income of any other head in future years, (4) Alternative Minimum Tax (AMT). In case an individual or a H.ULF. has adopted to be taxed under new tax regime, then the provisions of AMT shall not be applicable and even AMT tax credit of earlier years cannot be adjusted against the tax liability computed as per section 115BAC. ILLUSTRATION 47 ‘Computation of salary income in case employee opts for new tax slab rates. Followings are the particulars of Mr, A’s salary income. Compute his salary income if he opts for new tax slab rates. Salary (Basic) 60,000 p.m. DA—50% of salary (50% of D.A. forms part of salary) Bonus—one month's basic salary Leave travel concession—equal to one month's basic salary (given once in two years) Conveyance allowance € 4,000 p.m. House rent allowance % 12,000 p.m. Mr. A is paying € 15,000 p.m. as rent Entertainment allowance & 2,000 p.m. Education allowance @ % 500 p.m. per child. Two children of Mr. A are studying in a school and he is paying a monthly tuition fees of € 1,800 p.m. for both children. Helper allowance & 2,000 p.m. Uniform allowance % 5,000 p.a. Conveyance allowance is given to Mr. A to meet petrol expenses of his car which be uses to come to office and go back to his residence. It is also observed that he spends almost 50% of the éniertainment allowance on visitors coming to mect him in connection with his businesvjob dates, he Scanned with CamScanner