ALLOWANCE

PROVIDENT FUND
PERQUISITES
PROFITS IN LIEU OF SALARY
DEDUCTIONS U/S 16
BOOKS REFERRED
SINGHANIA - TAXMAN PUBLICATION
V RAJESHKUMAR & SREEKANTHA-MCGRAHIL
ALLOWANCE
at regular intervals
fixed - fixed amount or a fixed % on some
component
always as monetary payment
all these 3 elements should be present

given by the employer to employee

for enabling him to work comfortable manner
Dearness Allowance- Given to enable employee to meet the rising Fully taxable
cost of living. It is usually a fixed as a percentage of ‘Basic Salary’
City compensatory allowance - employees working in cities to meet Fully taxable
extra cost of living in cities
Medical allowance – granted to employee for enabling him to meet Fully taxable
the medical exp of self and family
Servant allowance – to engage domestic servants Fully taxable
Overtime allowance – to meet the possible cost incurred during the Fully taxable
period of overtime
Project allowance - for employees deputed on special projects Fully taxable
Family allowance – for enabling to meet his household exp Fully taxable
Breakfast/lunch/refreshment – to meet food exp during time of Fully taxable
work
Entertainment allowance-given to
enable the employee to meet exp for
entertaining guests and visitors to the
business of employer
Academic allowance - granted for
encouraging the academic and research
pursuits of employees
House Rent allowance- given to enable
meet the rental exp for his residential
accommodation
Helper allowance- to meet helper exp
for assisting in office work
Fully taxable
However Govt employees can claim
deductions u/s 16 to the extent
prescribed.
Exempt u/s 10(14) to the extent used
for the said purpose
Taxable as per format
Exempt u/s 10(14) to the extent used
for the purpose
Daily allowance-granted to meet the
daily exp incurred during official tour
Travelling allowance cost of travelling for
official purpose
Conveyance allowance-to meet the
conveyance exp in performing official
duty
Uniform allowance-to meet purchase
and maintenance of uniform to be worn
for work purpose
Children education allowance-to meet
education exp of his children
Hostel allowance-to meet hostel exp of
children
Exempt u/s 10(14) to the extent used for the
purpose
Exempt u/s 10(14) to the extent used for the
purpose
Exempt u/s 10(14) to the extent used for the
purpose
Exempt u/s 10(14) to the extent used for the
purpose
Exempt up to Rs.100 per month per child for a
maximum of 2 children
Exempt up to Rs.300 per month per child for a
maximum of 2 children
Transport allowance- for normal For blind, Deaf/dumb/orthopedically
employees this allowance is withdrawn. handicapped persons, it is exempt up to Rs.
3200/- per month
Allowances to high court judges Fully exempt
Allowances received by the employee of Fully exempt
UN
Allowances to govt employees outside Fully exempt
India
HOUSE RENT ALLOWANCE
allowance given to meet rental exp of his
residential accommodation. Normally given as
a fixed % on the basic salary. One of the
commonly found allowance given to all
categories of employees. Taxability to be
determined by applying the format.
 Actual House Rent Allowance Received
Less: Exempt u/s 10(13A), being least of
the following
a. actual HRA received
b. excess of rent paid over 10% of salary
c. 40% of salary being Maximum

Taxable HRA

* Salary = basic + DP + DA entering retirement benefit + commission on turnover

Salary on accrual basis whether received or not for the relevant PY
* accommodations in Chennai, Delhi, Kolkota, Mumbai – 50% instead of 40%
Where the rent paid is not exceeding 10% of Salary, then the entire HRA
is taxable. Eg. Salary is 3,00,000 and rent paid is 2000 per month then
rent paid - 10% of 3,00,000
24,000 – 30,000 is not negative but nil… then exemption is 0 means
entire HRA received is taxable.

In the following 3 cases HRA received is fully taxable:

1. employee stays in his own residence. Or house owned by spouse,
parents, HUF
2. Where the employee is not incurring any expenditure for payment of
rent.
3. where the rent paid is not exceeding 10% of salary..
A resides in Chennai gets 60,000 pa as basic salary and
receives 10,000 as HRA. Actual rent paid by her is 8000
pa. compute the taxable HRA.
Actual House Rent Received 10,000
Less: Exempt u/s 10(13A), being least of
the following
a. actual HRA received 10,000
b. excess of rent over 10% of salary (8k-6k) 2,000
c. 50% of salary being Maximum 30,000 2000
Taxable HRA 8,000
Salary = basic +DP + commn on sales + DA entering RT benefit.
As the place is Chennai max is 50%
Mr. B resides in Mysore and gets Rs. 40,000 pa as
Basic salary. He gets DA of 20% on Basic and half
of DA enters the retirement benefit. He receives
Rs. 12,000 pa as HRA though he pays 15,000 as
rent pa. find out the taxable HRA.

Salary = basic +DP + commn on sales + DA entering

RT benefit.
Salary= 40,000 + 4,000 = 44,000 pa
place is Mysore hence max is 40% of salary.
 TAXABLE HOUSE RENT ALLOWANCE
Actual House Rent Received 12,000
Less: Exempt u/s 10(13A), being least of the
following
a. actual HRA received 12,000
b. excess of rent over 10% of salary
15,000-4,400 10,600
c. 40% of salary being Maximum 17,600 10,600
40% 44,000

Taxable HRA 1,400

Mr. C resides in Delhi. He gets Basic salary of
60,000 pa. He is entitled for DA of 30% and
receives 15,000 as HRA but pays 18,000 as rent.
Compute taxable HRA

Salary = basic +DP + commn on sales + DA

entering RT benefit.
Salary= 60,000 = 60,000 pa
place is Delhi hence max is 50% of salary.
 TAXABLE HOUSE RENT ALLOWANCE
House Rent Allowance Received 15,000
Less: Exempt u/s 10(13A), being least of the
following
a. actual HRA received 15,000
b. excess of rent over 10% of salary
18,000-6,000 12,000
c. 50% of salary being Maximum 30,000 12,000

Taxable HRA 3,000

D resides in Bangalore and earns 9000 pm as
basic salary. She is entitled for 30% as DA 50% of
which enters retirement benefit. She has received
an adv salary of 9,000 and bonus of 5,000. She
has earned commission of 8,000 on sales and
4,000 on profit. She receives HRA of 20% of basic
apart from other allowances but pays 1,500 pm
as actual rent. Compute taxable HRA.
Also compute his Gross Salary..
 Salary = 1,08,000 + (30% x 50% x 1,08,000) + 8,000 = 1,32,200

TAXABLE HOUSE RENT ALLOWANCE

Actual House Rent Received (20% x 9000 x 12) 21,600
Less: Exempt u/s 10(13A), being least of the
following
a. actual HRA received 21,600
b. excess of rent over 10% of salary
18,000-13,220 4,780
c. Maximum amt - 40% of salary 52,880 4,780
Taxable HRA
 Gross Salary
Forms of Salary:
▪ Basic Salary
▪ Advance Salary
▪ Bonus
▪ Commission on sales
▪ Commission on Profit
Allowances:
▪ Dearness Allowance – Fully taxable
▪ Taxable HRA as per format
Mr. Prem is an employee of an organisation and
furnishes the following details..
He joined on 1-1-2016 with a scale of 12,500-
500-14,000-1,000-18,000pm
dearness allowance is 15% of Basic salary.
During the PY, he received bonus of 5000,
commission of 10,000 on profit, children
Education allowance of 7,200 for 2 children,
conveyance allowance of 500 pm, tiffin allowance
of 200pm. Compute his Gross Salary for AY 22-23..
1-1-2016… 31-12-2016 12,500
1-1-2017… 31-12-2017 13,000
1-1-2018… 31-12-2018 13,500
1-1-2019… 31-12-2019 14,000
1-1-2020… 31-12-2020 15,000
1-1-2021… 31-12-2021 16,000
1-1-2022….31-12-2022 17,000

PY 21-22.. 1-4 2021…………….31-3-2022

16000x9 + 17,000x3 =1,44,000+51,000 = 1,95,000
DA =15% x1,95,000 = 29,250
 COMPUTATION OF TAXABLE SALARY
Assesse: name of the Employee Assessment year 2021-22
Residential Status: Previous year 2020-21
Category: Govt/Semi-govt/Non-govt
Forms of salary XXXX
Allowances XXXX
Provident fund XXXX
Perquisites XXXX
Profits in lieu of salary XXXX
Gross salary XXXXXXXXX
Deductions u/s 16
standard deduction XXXX
Entertainment allowance XXXX
Employment tax XXXX
Taxable salary XXXXXXXXXXX
 COMPUTATION OF GROSS SALARY
Assesse: Mr. Prem Assessment year
Residential Status: Previous year
Category:
Forms of salary
* Basic Salary 1,95,000
* Bonus 5,000
* Commission 10,000
Allowances
* Dearness Allowance – fully taxable 29,250
* Children’s Edu Allowance 7,200
- Exempt u/s 10(14) 100x12x2 -2,400 4,800
* conveyance allowance 500 x 12 6,000
* Tiffin Allowance 200 x 12 Fully taxable 2,400
Gross salary XXXXX
PROVIDENT FUND -
* it is a type of saving scheme -
* Provides for future benefit of the employees
* Employee contributes to this fund
* Usually employer also matches this contribution
* This investment by employer and employee earns
interest which is re-invested
* this process continues till the retirement or death of
the employee.
* paid on retirement, resignation to the employee or
on death of the employee to his legal heirs.
Statutory PF- set-up, maintained and managed in
accordance with the provisions of PF Act 1925. govt
org, semi-govt, universities,…..

Recognised PF - recognised under PF and Misc prov

Act 1952. the fund is created by the employer for
which approval is granted by PF commissioner. –
widely found in private or non-govt organisations.
Un-recognised PF- Neither statutory nor
recognised and approval is also not granted by PF
commissioner.

PPF - maintained and operated by central govt

for the benefit of general public. There is no
employer-employee relationship and as such no
contribution by the central Govt.
employee’s contribution - not an income but a
saving.. Tax benefit on this depends on the type of
PF
employer’s contribution deemed rcpt-taxable -
under the head ‘Income from salary’

int on accumulated balance an income in the hands

of assesse

withdrawal of accumulated balance is a capital rcpt

 Statutory PF Recognised PF

Employee’s contribution Deductible Deductible u/s 80C

to his PF a/c u/s 80C
Employer’s Contribution in excess of
Contribution to Exempt 12% of salary is taxable
employee’s PF
Interest on accumulated interest in excess of 9.5% is
balance Exempt taxable
Withdrawal of Exempt if at least 5 years of
accumulated balance Exempt service has been rendered
 Unrecognized PF public PF
Employee’s contribution to No tax benefit Deductible
his PF a/c u/s 80C
Employer’s Contribution to ignored --------
employee’s PF
Interest on accumulated ignored Exempt
balance
Withdrawal of accumulated Employer’s contribution+ interest Exempt
thereon is taxable under the head
balance
income from salaries. Interest on
employees contribution is taxable under
the head income from other sources
* Salary for PF = Basic + DP + DA entering retirement benefit + commission on turnover
X Provides the following information-
Basic salary 1,80,000 -DA 60,000-46% is a part of salary
for retirement benefit.
He is eligible for 1.5% commission of 6,00,000 turnover
achieved by him.
Children’s education Allowance for 3 children is 1600
each child. Employer contributes 30,000 towards PF to
which X contributes equal amount. Interest credited to
PF on 15th March 2021 at 14% comes to 1,19,000.
find out Gross Salary of X for PY 21-22 if PF is
a) SPF b) RPF c) un-recognised PF
 COMPUTATION OF GROSS SALARY
Assesse: name of the Employee Assessment year
Residential Status: Previous year
Category: SPF RPF UN-RPF
Forms of salary
* Basic Salary 1,80,000 1,80,000 1,80,000
* Commission 9,000 9,000 9,000
Allowance
* DA-fully taxable 60,000 60,000 60,000
* Children’s Edu Allowance 4,800 2,400 2,400 2,400
- exempt 100x12x2 -2,400
Provident Fund
* Employer’s contribution - working1 Exempt 4,008 Ignored
* Interest on PF- working 2 exempt 38,250 ignored
Gross salary
* Salary = basic + DP + DA entering retirement benefit + commission on turnover
Salary PF =1,80,000+ 46%x60,000 + 9000=2,16,600

1.employer’s contribution 30,000

- exempt RPF12% of salary -25,992 = 4,008
12% x 2,16,600 Taxable

2.Int on PF 14% 1,19,000

exempt 9.5% taxable is 4.5%
If 14 is 1,19,000
then 4.5 = 1,19,000x 4.5/14 = 38,250 taxable
DEDUCTIONS U/S 16
deducted from gross salary
gives the taxable salary..

1. Std deduction - 50,000/- or gross salary WEL

2. Entertainment allowance - taxable..
However for Govt Employee deduction is the least
of the below
20% of Basic salary / max 5,000 / Actual E allw..
3. Prof tax or empt tax..
 COMPUTATION OF TAXABLE SALARY
Assesse: name of the Employee Assessment year
Residential Status: Previous year
Category: Govt/Semi-govt/Non-govt
Forms of salary XXXX
Allowances XXXX
Provident fund XXXX
Perquisites-RFA XXXX
Profits in lieu of salary XXXX
Gross salary XXXXXX
Deductions u/s 16
standard deduction 50000 XXXX
Entertainment allowance XXXX
Employment tax XXXX
Taxable salary XXXXXXXXXXX
X, a sales manager for MN steels Ltd furnishes the
following details for the PY.
Basic salary 20,000pm up to 31-8-21 and 25,000
afterwards. DA 20%. Conveyance allowance received
5000 pm, out of which 2,200 was used for the said
purpose. Employer’s Contribution to RPF 15% of Basic
and DA. CEA 500 pm Per child for 2 children. CCA 300
pm, Hostel exp allowance 380 pm per child for 2
children. Tiffin allowance 5000 pa actual exp was 3,700.
Tax on employment 2500. compute taxable salary of X
for AY 22-23.
 COMPUTATION OF TAXABLE SALARY of X for AY
Forms of salary
Basic salary (20x5) + (25x7) 2,75,000
Allowances
* DA 20% x 2,75,000 -fully taxable 55,000
* Conveyance allowance - 2800x12 33,600
* CCA fully taxable 300x12 3,600
* Tiffin allowance - fully taxable 5,000
* CEA (500-100)x12x2 9,600
* Hostel allow (380-300)x12x2 1,920
Provident Fund
Employer contribution to RPF working 1 9,900
Gross salary 3,93,620
 Gross salary 3,93,620
Deductions u/s 16
Standard deduction 50,000
Entertainment allowance NA
Employment tax 2,500
Taxable salary 3,41,120

Employer’s RPF contribution – salary = 3,30,000

15% of Basic+DA= 49,500
-12% of 3,30,000 = 39600
Taxable = 9,900
Note that DA is entering retirement benefit
 COMPUTATION OF TAXABLE SALARY of X for AY
Forms of salary
Basic salary
Bonus
Commission
Allowances
• DA -fully taxable
• Entertainment allowance – fully taxable
• House rent allowance working 1
• Travelling allowance –
• Breakfast allowance - fully taxable
• CEA
• Uniform allowance
• Provident Fund
Employer contribution to RPF working 2
Interest on RPF working 3
Gross salary
PERQUISITES
It is a casual emolument attached to an office in
addition to the salary…it results in personal
benefit/advantage to the employee.
Monetary or non-monetary benefits given to the
employee
Taxable under the head ‘income from salary’ when
*given by employer to employee
*during service period
*for services rendered.
* May not be on regular basis
* the amount is not fixed
* May be in monetary form or could be non-
monetary form also..

Tax-free perquisites
taxable perquisites
*taxable in hands of all employees
*taxable for specified employees.
Tax-free perquisites.
1. Computer, laptops given
2. employers contribution to group ins
3. Refreshments provided during working hours
4. medical ins premium paid by employer
5. Telephone facility provided
6. Gifts in Kind up to 5,000/-
7. Rent free house provided to high court/supreme
judges
8. interest free/concessional int loan provided.
Taxable for all employees
1. Rent –Free accommodation RFA
2. Accommodation provided at Concessional rent
3. personal obligation of the employee paid by the
employer
4. Ins premium paid by the employer on the life ins
policy of the employee, policy taken by employer
5. Free or concessional allotment of shares under
ESOP
 Specified employees

According to section 17(2)(iii) an employee is a

specified employee when:
* He is a director of the company
* He has substantial interest in the company holding
>20% of eq shares.
* His total taxable monetary emoluments from all
employers after providing for deductions u/s 16
exceeds 50,000/-
List of perquisites taxable in the hands of specified
employees only

* Free/concessional motor car facility

* Free/concessional domestic servants
* Free/concessional supply of Gas, electricity,
water
* Free/concessional educational facility to
employees family
* Free/concessional transport facility..
Rent –Free accommodation RFA
Free accommodation with or without furniture.
provided by the employer to the employee and
his family.
Value of such accommodation should be
ascertained in accordance with the specified
provisions.
Accommodation may be
House accommodation or Hotel Accommodation.
 Value of RFA is computed as below
Govt-Employee License fee - determined by central or
state government in accordance with
rules framed
Other than Govt- Amount of lease rent
employee Or
Accommodation leased by 15% of salary WEL
the employer
Other than Govt- 15% of salary-population > 25 L
employee 10% of salary –population is 25-10 L
Accommodation owned by 7.5% of salary – population < 10L
the employer
Salary for RFA = Salary on accrual basis
Basic whether received or not
Bonus
Any commission
Taxable Allowance
DA entering retirement benefit
DP
Fees
Taxable monetary benefit not being perquisite..
Venu is an employee of PQR ltd
drawing 4,00,000 pa as basic pay
65,000 as DA and 70,000 as
Bonus. He is provided with a RFUA
at Mangalore. Lease rent paid by
the company is 1,05,000 PA
Determine the Value of RFUA
Manjunath is employed in Mysore where the
population as per 2001 census is 15 lakhs. He has
drawn Basic salary of 60,000 pa DA is 36,000 (50%
forming a part of salary) Conveyance allowance
5000/- (but spent 1,500) Medical allowance is 3000
(spent 2000). He is provided with RFA fair rent of
which is 48,000 pa. He is also provided with
furniture costing 25,000. Hire charges of AC
installed amounted to 3,650 which is paid by the
employer. Compute his Gross Salary
 COMPUTATION OF GROSS SALARY of Manjunath For AY
Forms of salary – Basic salary 60,000
Allowances
* DA - fully taxable 36,000
* Medical allowance - fully taxable 3,000
* Conveyance allowance (5000-1500) 3,500
Provident fund ----
Perquisites
Value of RF Furnished Accommodation- working 1 14,600
Gross salary 1,17,100
* In the absence of information, it is assumed that Manjunath is ‘other
than Govt employee’.
* Accommodation is owned by the employer
* place of accommodation is relevant, Mysore with 15 lakh population
* Value of RFUA is 10% of Salary
* salary = 60,000+(50%x36000)+3500+3000 = 84,500
* RF unfurnished Accommodation = 8,450

VALUE OF FURNISHED RFA

VALUE OF UNFURNISHED ACCOMMODATION 8,450
+ 10% OF FURNITURE VALUE 2,500
+ RENTAL CHAREGES OF AC 3,650
VALUE OF FURNISHED RFA 14,600
Gowrish received the following emoluments : Basic pay
1,62,000, Special allowance 9,000, Dearness pay 36,000,
DA 20% of Basic pay not forming a part of salary for
retirement benefits, Bonus-2 months Basic, CCA 250 pm,
CEA 150 pm for 3 children, Uniform allowance 100 pm
entire amount spent for the maintenance, Lunch allowance
300 pm( actual lunch exp is 200), He is also provided with
RFA – furnished, the lease rent of which is 2,50,000 pa.
House hold appliances provided costed 36,000 and rental
charges of AC amounted to 10,000. Employer paid 2,000
professional tax on behalf of Gowrish. Compute the gross
salary of Gowrish.
 COMPUTATION OF GROSS SALARY of Manjunath For AY
Basic salary 1,62,000
DP 36,000
Bonus- (162,000/12) x 2 27,000
* Special Allowance –fully taxable 9,000
* DA - fully taxable 20% basic 32,400
* CCA-fully taxable 250x12 3,000
* Lunch allowance-fully taxable 300x12 3,600
* CEA (150x12x3) – (100x12x2) 3,000
* Uniform allowance – (1200 -1200) 0
Perquisites – RFA - working 1 50,140
Prof tax paid by employer 2,000
Gross salary
Not a govt employee
accommodation leased by employer
place is immaterial
Value of unfurnished RFA is
actual rent or 15% of salary WEL
salary = 2,43,600
2,50,000 or 15% 2,43,600 = 36,540
furnished RFA = unfurnished RFA+ 10% of
furniture + AC hiring chares
36,540 + 3600 + 10,000 = 50,140
Srinivas an employee at Kolar, receives the following
from his employer during the PY. Basic 25,000 pm, DA
15,000-50% forming a part of salary, other taxable
allowances 5,000 pm, commission on profit 10,000,
Bonus received 75,000 of which 50,000 belongs to PY
20 -21 and 25,000 belonging to 21-22 is outstanding,
leave salary 25,000 Med exp of his family reimbursed by
employer 12,000. He is provided with RFA with sofa and
other furniture costing 75,000 and AC the cost of which
is 48,000 installed on 1st July. Employer also hired a book
rack the rental charges of which is 500 pm.
Calculate the value of furnished RFA in the following
situations:
a) Srinivas is employee of Govt of Karnataka-license fee as
per rules is 48,000 pa
b) Srinivas is an employee of Canara Bank and the
accommodation is owned by employer
c) Srinivas is an employee of a college and the lease rent
paid by employer is 5000 pm
d) Srinivas is an employee of a private firm and the
accommodation provided is a service apt the tariff of
which is 11,000 pm paid by the firm.
Actual rent 60,000
15% salary 80,250 …….WEL

RFA unfurnished 60,000

+sofa, AC & rack 17,100
RFA -Furnishsed 77,100
Value of RF Hotel Accommodation
Actual charges payable to Hotel or 24% of salary WEL
Accommodation provided at concessional rate refers to accommodation
provided not free of rent but for a nominal or concessional rent. This
also results in benefit to the employee hence taxable.
Value = value of RFA – rent charged to employee

in the above question if the employer is charging a rent of Rs. 3,000 pm,
compute the taxable value of this perquisite
Personal obligation of employee met by the employer..
* Income tax/empt tax..
* Personal loan of employee repaid by employer..
* LIC policy taken by employee, premium paid by
employer
* Domestic servants appointed by employee, the salary
for whom is paid by employer.
Fringe benefits.. Other benefits given to employee, which
may not relate to the office or position of the employee..
Holiday-home facility, credit card facility, club facility, gifts,
List of perquisites taxable in the hands of specified
employees only
* Free/concessional motor car facility
* Free/concessional domestic servants
* Free/concessional supply of Gas, electricity,
water
* Free/concessional educational facility to
employees family
* Free/concessional transport facility..
Motor car facility..

1. Employer provides motor car and also meet

running and maintenance exp..
2. Employer provides motor car but the running and
maintenance exp is met by the employee
3. Employer meets or reimburses the running and
maintenance exp of the car which belongs to
employee.
 purpose Value of perquisite

Used for Office use

Car provided by only No tax
employer
Running/Rep/ Used for personal Value of car + R/M
Maintenance by purpose reimbursed – amount
employer charged to employee
Used both for official
and personal purpose Standard value
 purpose Value of perquisite

Used for Office use

Car provided by only No tax
employer
Rep/Maintenance Used for personal Value of car – amount
by employee purpose charged to employee

Used both for official

and personal purpose Standard value
 purpose Value of perquisite

Used for personal Maintenance cost

Car owned by purpose reimbursed
employee
Rep/Maintenance
by employer Used both for official
and personal purpose R/M reimbursed -
Standard value
Value of the car
owned by employer-10% of original cost
if car is hired by employer- Actual hire charges

when the car is used both for official use and

personal purpose then, the taxable value is
dependent on the ‘Standard Value’ given as
below:
 Type of car R/M met by R/M met by
employer employee
Small car CC of Rs. 1,800 per Rs. 600 per calendar
engine being< or calendar month month
equal to 1600

Big car CC of engine Rs. 2,400 per Rs. 900 per calendar
being > to 1600 calendar month month

If Driver service is also provided by the employer, then Rs. 900

per month is added to the above values
Find out the taxable value of the perquisite in respect of
car in the following different situations for the assessment
year 21-22.
Situation 1: S is employed by a company He has been
provided a car of 1300 CC owned by the employer, cost of
the car is 6,34,000. The expenditure incurred by the
company on maintenance of the car are, petrol 80,000/-
driver 72,000 and maintenance 5,000. The car can be
used both for official and personal use. A sum of Rs.
12,000 is recovered from S and he is a specified employee
S is a specified employee.
Car is provided by the employer and it is taxable
as the employee is a specified employee.
As the car is used for both personal and official
purpose the standard Value should be applied.
Small car with 1300 CC- (1800+900) x 12 = 32,400

Note: When Std Value is taken to compute

taxable value, no deduction is available for the
amount charged to the employee..
Situation 2: If this car is used for personal use
only..
Car owned by employer, R/M by employer
then the taxable value =

value of car 10% of car = 63,400

+ R/M(80+72+5) =1,57,000
- amt charged to S = (12,000)
= 2,08,400
X is the employee.. Provided with a Car of 1800
CC is owned by the employer, the cost of which is
5,40,000. Employee uses it for both office and
personal use. During the previous year, the total
expenditure incurred by X is 78,000 on car.
car provided by employer
R/M by employee..
Used for personal & office use
Std value ..Big car.. 900 X 12 =
10,800/- value of perquisite
X and Y are working for Gama ltd. As per salary fixation
norms, the following perquisites were offered:

1. For Mr. X who engaged a domestic servant for Rs.

500/- per month, his employer paid entire to the
servant.

2. Mr. Y was provided with a domestic servant at 500/-

per month as part of remuneration package.

Comment on the taxability of the above for X and Y who

are not specified employees.
1. employee’s personal obligation met by the
employer - A perquisite taxable in the hands of
all employees,, 500 x 12 = 6,000/- taxable in
the hands of X

2. Free domestic servant provided is taxable

only for specified employees.. Y is not a
specified employee. Hence 6,000/- is not
taxable in the hands of Y..
X employed in ABC co ltd as Finance Manager, gives
the list of perquisites provided by the company to
him for the entire financial year 21 -22.
1. Medical facility given to his family in the hospital
maintained by the company, the estimated value of
the benefit is 40,000/-
2. Domestic servant was engaged by X salary of
whom is 1500 per month which was paid by
company. In case the company provides the servant,
what is the value of perquisite
3. Free education was provided to his children P &
Q in a school maintained and owned by the
company. The cost of such education for P is
computed at 900 pm and for q it is 1200 pm. No
amount was recovered by the company..

4. Employer has provided movable assets such as

TV fridge, AC at the residence of X. the cost of
assets provided is 1,10,000..
1. Medical facility given to the employee and to
his family members at a hospital owned and
maintained by employer is Tax-free perquisite..

2. If servant is employed by X, salary reimbursed

by company, then it is ‘Personal obligation of the
employee met by the employer’- perquisite
taxable in the hands of all employees. 18,000/-
If the servant is provided by the company, then
it is taxable only if X is a specified employee.
3. Education facility taxable only for specified
employee.. The taxable value is as below:
Exempt up to 1000 pm
Hence for child P no tax
Q - 1200 pm x 12 exempt up to Rs.1000 balance 200
pm Taxable = value is 2,400/-
If free education/training is given to the employee, then
it is tax free..

4. Movable Assets provided:

taxable value 10% of cost – 11,000/-
Profits in lieu of Salary- any other monetary
benefit other than forms of salary and allowances
received by the employee from the employer in
addition to the salary or in lieu of salary.
* Payment in appreciation of service
* compensation for modification of terms and
conditions of employment
* voluntary retirement compensation
* retrenchment compensation
Smitha works as sales ex in ABC co ltd, Kolkata and her
salary details for PY 21-22 are as below from which
compute her taxable salary for AY 22-23:
Basic- 21,000 pm, Bonus-2 months basic, DA 7000/- pm
entering retirement benefit, commission 3% on 5 lakh
sales achieved, Med allowance 1,400 pm(med exp
15,000), C H Allowance & CEA for 2 children 500 pm per
child and 400 pm per child respectively, RPF contribution
by company 6,000 pm and by her 5,000 pm, Int on RPF at
11% is 44,000. She is provided with furnished RFA owned
by the company and cost of furniture is 60,000. She has
paid 2,400 prof tax.
 COMPUTATION OF TAXABLE SALARY
Name of Assesse: Smitha AY
Residential status PY
Category-non Govt employee

* Basic salary 2,52,000

* Bonus - (21,000) x 2 42,000
* Commission 3% x 5,00,000 15,000
DA - fully taxable 84,000
Med allowance-fully taxable 16,800
CEA (400x12x2) – (100x12x2) 7,200
CHA 500x12x2 – 300x12x2 4,800
* RPF- working 1 29,880
* Int on RPF working 2 6,000
perquisite: Furnished RFA - working 3 69,270
Gross salary 5,26,950
 Gross salary 5,26,950
Deductions u/s 16
*Standard deduction 50,000
*Entertainment allowance --
*Employment tax 2,400
Taxable salary 4,74,550
Working 1.
Salary for RPF= Basic+DA+Comm=3,51,000 Working 2 int on RPF
con by employer- 72,000 11% 44,000
- Ex 12% of Salary 42,120 -ex 9.5%
Taxable 29,880 Taxable 1.5% 6,000
Working 3 furnished RFA:
Non govt employee
accommodation owned by employer
Kolkata popn taken to be > 25 lakhs
value of RFUA= 15% of salary
salary = Basic+bonus+comm+taxable allowance
=4,21,800..
15% of 4,21,800 = 63,270
+10% of Furniture 6,000
Furnished RFA = 69,270
Mr. Madhav is an employee of Canara Bank, B’lore and he
submits the following information for the AY, from which
compute his taxable salary.
Basic 8,000/- DA 1,500 not entering Rt benefit, Bonus 10,000/-
CCA 300 pm, Conveyance allowance2000 pm(spent 60% for
office) HRA 5,000 pm Rent paid by Madhav is 7,000 pm,
payment of LIC premium by bank 4,000 pa, services of
sweeper paid by bank 200 pm, LTC rs. 5,000 (first time in
current block period), reimbursement of electricity and water
charges by the bank 2,500 pa, SPF contribution by bank and
Madhav 12% of salary int earned on SPF at 7% 14,000.prof tax
paid by Madhav 5,000/-
 COMPUTATION OF TAXABLE SALARY of Madhav for AY
* Basic salary 8000 x 12 96,000
* Bonus 10,000
DA - fully taxable 18,000
CCA-fully taxable 3,600
Con allowance- 24,000 -14,400 9,600
HRA - working 1 21,600
• SPF- Note 2 Exempt
• Int on SPF- note 2 Exempt
* LIC premium paid by Bank - note 4 4,000
* Sweeper - note 1 2,400
* Electricity and water – note 1 2,500
* LTC - note 3 Exempt
Gross salary 1,67,700
 Gross salary 1,67,700
Deductions u/s 16
Standard deduction 50,000
Entertainment allowance --
Employment tax 5,000
Taxable salary 1,12,700
Note: 1. Madhav is a specified employee as his monetary emoluments is >
50K. Hence Sweeper and water electricity facility provided is taxable in the
hands of Madhav as he is a specified employee
2. employer’s Contribution to SPF and Interest thereon is Exempt
3. LTC facility extended by employer to employee is exempt for going any
where in India twice in a block of 4 years.
4. LIC premium paid by the employer is a taxable perq in the hands of all
employees.
 Working 1.
Salary = Basic + DA + DP + Comm = 96,000/-
TAXABLE HOUSE RENT ALLOWANCE
Actual House Rent Received (5000 x 12) 60,000
Less: Exempt u/s 10(13A), being least of the
following
a. actual HRA received 60,000
b. excess of rent over 10% of salary
(7000 x 12) = 84,000 - 9,600 74,400
c. 40% of salary being Maximum 38,400 38,400
Taxable HRA 21,600
Mr. Sam, area manager of SYZ co ltd, Mumbai has furnished the
following details for AY from which compute his Taxable salary.
Basic-20,000 pm, DA 6,000 pm forming part of salary, Bonus- 3
months basic, Entertainment Allowance 2,500 pm(spent
12,000),
CHA for 3 children 400 pm per child, medical bill reimbursed
22,000 treatment taken in a pvt hospital. He is also provided
with RF Furnished Acc fair rent of which is 7,500pm cost of
furniture provided is 1,00,000. Free telephone provided -3,500
Med ins premium of Sam paid by the company 4,000 pa. RPF
contribution by company 14% of salary and int at 14% is 14,000.
 COMPUTATION OF TAXABLE SALARY of Sam for AY
* Basic salary 20000 x 12 2,40,000
* Bonus- 20000 x 3 60,000
DA - fully taxable 72,000
Ent allowance-fully taxable 30,000
CHA- (400x3x12) - (300x2x12) 7,200
• RPF- working 1 6,240
• Int on RPF - working 2 4,500
* Medical ins premium paid by company note 3 Exempt
* Medical bill reimbursed – fully taxable note 1 22,000
* Telephone facility note 3 exempt
* RFA-furnished - working 3 71,380
Gross salary 5,13,320
 Gross salary 5,13,320
Deductions u/s 16
Standard deduction 50,000
Entertainment allowance note 2 NA
Employment tax -----
Taxable salary 4,63,320
Note:
1. Medical bill reimbursed is fully taxable
2. Entertainment allow is fully taxable and no deduction can be claimed as
he is not a govt employee.
3. Telephone facility and med ins premium paid by employer is tax-free
perquisites.
 Working 1. Working 2 int on RPF
Salary for RPF = Basic+DA = 3,12,000 14% 14,000
con by employer- 14% -ex 9.5%
- Ex 12% of Salary Taxable 4.5% 4,500
Taxable 2% of 3,12,000 = 6,240

Working 3.
* In the absence of information, Sam is ‘other than Govt employee’.
* Accommodation is owned by the employer as fair rent is given
* place of accommodation is relevant, Mumbai with >25 lakh popn
* Value of RFUA is 15% of Salary * salary = 4,09,200
UNFURNISHED RFA 15% of 4,09,200 61,380
+ 10% OF FURNITURE VALUE 10,000
VALUE OF FURNISHED RFA 71,380
Anand is an employee of Malpani ltd at Mumbai. He was
appointed on 1-3-2022 on a scale of 25,000-2,500-35,000.
15% of basic is DA which forms part of salary for retirement
benefit. Bonus is one and half months basic at the end of
year. He contributes 18% of his salary towards RPF with
equal contribution from the company. He is provided with
free accommodation taken on lease by company at 15,000
pm. Other facilities provided are:
company reimbursed the medical bill of 40,000 of his
daughter. The monthly salary 2,000 of a house keeper is
met by the company. He is getting telephone allowance of
1,000 pm. A gift voucher of 4,700 was given on the
occasion of his birthday.
The company paid his med ins premium of 12,000. Motor car
running and maintenance was paid by the company amounting
to 36,600 and car belongs to Anand. The engine capacity is <
1,600 CC. This car is used both for office and personal purpose.
Value of free lunch provided during office hours is 2,200.
compute the salary chargeable to tax for AY.
Note:
1. Medical bill reimbursed is fully taxable, where as med ins prem is tax-free
2. Telephone allowance is fully taxable
3. House keepers salary reimbursed is ‘personal obligation of the employee
met by the employer’ - taxable in hands of all employees
4. As the gift is less than 5000, it is tax-free
5. Free lunch/breakfast/tiffin provided during office hours is tax-free
 COMPUTATION OF TAXABLE SALARY of Anand for AY
* Basic salary – working 1 3,02,500
* Bonus 41,250
DA - fully taxable 45,375
Telephone allowance-fully taxable 12,000
• Employer’s contribution RPF - working 2 20,873
* Medical ins premium paid by company –tax free Nil
* Medical bill reimbursed – fully taxable 40,000
* RFA- - working 3 60,169
* House keeper 24,000
* Gift voucher – tax free Nil
* Motor car facility - working 4 15,000
* Free lunch provided – tax free Nil
Gross salary 5,61,167
 Gross salary 5,61,167
Deductions u/s 16
Standard deduction 50,000
Entertainment allowance --
Employment tax -----
Taxable salary 5,11,167
Working 1. Basic for PY 21 -22 Working 2.
1-4 2021……31-3-2022 18% employer’s contribution
1-3-2021 --- 28-2-2022 25,000 - exempt 12%
1-3-2022 – 28-2-2023 27,500 6% of salary taxable
(25000x11) + (27,500x1) = 3,02,500 Salary = basic + DA
DA 15% of 3,02,500= 45,375 = 3,47,875
Bonus 1.5 X 27,500=41,250 6% of 3,47,875 = 20,873
Working 3: RFA- Not a govt employee
accommodation leased by employer, place is immaterial,
Value of RFA = actual rent or 15% of salary WEL
Salary (RFA) =Basic + DA + Bonus + taxable allowance=4,01,125
1,80,000 or 15% of salary = RFA= 60,169/-

Working 4: Motor car facility taxable as Anand is a specified

employee as his total emoluments > 50k
Car owned by Anand R/M reimbursed by company
Used for office and personal use
Value of perquisite = Amount reimbursed – Std value
36,600 – (1800 x 12) = 36,600 - 21600 = 15000/-
X retired from the services of ABC ltd on 31-1-2022
after completing 30 years and one month of service.
He joined the company in 1991 and received the
following on retirement:
1. Gratuity of 6,00,000 covered under PGA
2. Leave encashment received 3,30,000/- with 330
days leave balance in his account. He was credited
with 35 days of leave for each year of completed
service
3. An amount of 3,90,000 as commutation of pension
for 2/3 of his pension
4. Company presented him a gift voucher of 6,000 on
retirement.
5. His colleagues gifted him TV worth 50,000 from
their own contribution.
Other details: 1. He has drawn a basic of 20,000 and
50% DA pm from 1-4-2021 to 31-1-2022.
2. Received pension of 5,000 pm, for Feb and March
2022 after commuting 2/3.
compute his taxable salary from the above details for
the AY 22-23
1. Gift received in excess of 5,000 is taxable
2. Gifts from colleagues is not income from salary
3. in the absence of information, DA is not entering
retirement benefit
 COMPUTATION OF TAXABLE SALARY of X
• Basic salary 20,000 x 10 2,00,000
• Taxable gratuity - Working 1 80,768
• Taxable leave salary - Working 2 2,10,000
• Taxable pension - Working 3 2,05,000
DA - fully taxable- 50% of basic 1,00,000
* Gift voucher – (6000-5000) 1,000
Gross salary 7,96,768
Deductions u/s 16
Standard deduction 50,000
Entertainment allowance --
Employment tax --
Taxable salary 7,46,768
 FORMAT 1 - covered under Gratuity’s Act)
Actual Gratuity received 6,00,000
Less: Exempt u/s 10(10)(ii)- Least of the following
• 15/26* last drawn salary* years of service
15/26 x 30000 x 30 5,19,231
• Maximum limit 20,00,000
• Actual gratuity received 6,00,000 5,19,231

Taxable gratuity 80,769

Salary = basic + DA = 20+10 = 30,000

30 years of service (rounded off)
 Actual leave salary received 3,30,000
Less: Exempt - Least of the following
• Average salary* leave at credit 20x6 1,20,000
• Maximum limit 3L
• 10 months ‘Average salary’ 2,00,000
• Actual leave salary received 3,30,000 1,20,000
Taxable leave salary 2,10,000
Salary = Basic + DA(Rt)+ DP+ Comm = 20,000

Leave given by employer= 35x30 years= 1050 days..

Leave at credit is 330 ie.. 720 days (1050-330)availed..
As per IT, 30x30years = 900 leave entitlement -720 leave availed
=180 days leave at credit = 6 months
 Taxable pension
Regular/Normal- pension received -5000x2 10,000
+ taxable Commuted pension 1,95,000
Commuted pension received 3,90,000
Less: exempt u/s 10(10A)ii
(1/3 )actual value of commuted pension 1,95,000
1/3 x 5,85,000
Total taxable pension 2,05,000
Actual value of commuted pension=3,90,000x3/2
= 5,85,000
Raj is the manager of a cloth mill. Determine the
taxable salary for AY 22-23. He receives every month
Rs. 19,000/- as basic 4,000 as DA and 500 as
entertainment allowance. He owns a house but the
company has provided him with the following
amenities. Free services of a gardener, sweeper and
cook, each of whom is paid 700 pm. Free use of
company’s Fridge costing 10,000, free supply of gas
water to which the company pays 13,500 annually.
During the year he paid 2,400 as professional tax
He owns a car and uses it both for official and personal
purpose but the company meets all the exp of
maintaining car. The exp incurred by the company
towards the car used for personal purpose is estimated
at 8,450 and the company maintains the log book. His
son is studying in a school run by the company where
the cost of education is 18,000 pa, but the company
collects 300 pm towards this. During the year he went
to shimla and stayed in a holiday home maintained by
the company, which incurred Rs.30,000 towards this
facility.
Notes: 1. credit card/club/Holiday home facility are the
fringe benefits and is taxable for all employees.
2. use of movable property is taxable-10% of asset
3.Raj is a specified employee as his monetary
emoluments exceed 50,000 hence service of sweeper,
gardener, water electricity is taxable.
4. car facility- as log book is maintained, the exp towards
personal use that is 8,450 is perquisite and is taxable.
5. Ent allowance is fully taxable. Deduction u/s 16
cannot be claimed as he is not a govt employee.
6. concessional education provided is taxable in
the hands of specified employee. As the employer
owns the school the value of this perquisite is

value of education 18,000

- exempt 1000 x 12 12,000
benefit/perquisite 6,000
- amt recovered 300 x12 - 3,600
taxable perquisite 2,400
 COMPUTATION OF TAXABLE SALARY of Raj for AY
• Basic salary – 19,000x12 2,28,000
DA - fully taxable 4000 x 12 48,000
entertainment allowance-fully taxable 6,000
* Free services of GW&E – Note 3 13,500
* Free use of Fridge – 10% of 10,000 1,000
* Holiday Home 30,000
* Sweeper, gardener, cook- 700 x3x12 25,200
* Car exp used for personal use 8,450
* Educational facility note 6 2,400
Gross salary 3,62,550
 Gross salary 3,62,550
Deductions u/s 16
Standard deduction …50k or Gross salary - WEL 50,000
Entertainment allowance NA
Employment tax 2,400
Taxable salary 3,10,150
Mr. Sagar is an employee of HMM ltd, Bangalore and
supplies the following information for the PY21-22. compute
his taxable salary.
Basic 10,000 pm, DA 6,000 pm, Family allowance 600 pm
CCA 800 pm, education allowance for 2 children 350 pm per
child, entertainment allowance 750 pm, HRA 1,600 pm but
he pays 3000 pm as actual rent. Company provided free
telephone at his residence, exp of which was 6000 pa.
company paid his income tax of 6,420. Conveyance
allowance of 8,000 for branch visit was fully spent for the
said purpose. He and company contribute 14% of salary
towards RPF. Int at 15% on RPF was 15,000.
Conveyance allowance of 8,000 for branch visit was
fully spent for the said purpose. He and company
contribute 14% of salary towards RPF. Int at 15% on
RPF was 15,000.

Note:
1. Family allowance is fully taxable
2. free telephone is a tax-free perquisite
3. income tax-personal obligation of the employee met by the
employer is a perquisite taxable in the hands of all employees.
4. in the absence of information, DA is not entering rt benefit
 COMPUTATION OF TAXABLE SALARY of Sagar for AY
Basic salary – 10,000x12 1,20,000
• DA-fully taxable-6000x12 72,000
• Family Allowance-fully taxable 7,200
• CCA – fully taxable 9,600
• CEA (350x2x12) – (100x2x12) 6,000
• Entertainment Allowance fully taxable 9,000
• Conveyance allowance Nil
• HRA working 1 00
• Rec Prov Fund working 2 2,400
• Int on RPF working 3 5,500
• Free telephone-tax free Nil
• Income tax paid by the company 6,420
Gross salary 2,38,120
 Gross salary 2,38,120
Deductions u/s 16
Standard deduction 50,000
Entertainment allowance NA
Employment tax ----
Taxable salary 1,88,120
Working 2. Working 3.
14% employers contribution 15% int is 15,000
- exempt 12% Exemption is 9.5%
2% of salary taxable Balance 5.5% taxable
Salary = basic + DA+ DP+Comm At 15% int is 15,000
= 2% of 1,20,000 = 2,400 5.5% taxable int is 5,500
 Working 1. HRA
Salary = Basic + DA + DP + Comm = 1,20,000
TAXABLE HOUSE RENT ALLOWANCE
Actual House Rent Received 1600x12 19,200
Less: Exempt u/s 10(13A), being least of the
following
a. actual HRA received 19,200
b. excess of rent paid over 10% of salary
36,000 – 12,000 24,000
c. 40% of salary being Maximum 40% x 120000 48,000 19,200
Taxable HRA Nil
Kiran is working in a private company in Bangalore.
Compute his taxable salary from the following
information for the PY. Net Basic salary 74,000 pa
after TDS of 8,000. DA Rs 800 pm Bonus -3 months
basic, HRA of 800 pm but he pays 1,200 pm as rent.
His son is studying in a residential school in Mysore
and the company is paying Edu allowance of 4,000
and hostel allowance of 4,000 pa. He is contributing
to RPF at 15% which is equally matched by the
company. Int on RPF is 4,200 at 14% .
Conveyance allowance is 8,500 pa of which 5,500 is
spent for office purpose. He is a member of rotary
club, the annual subscription of 2,000 is paid by the
company. Kiran has a telephone at his residence
which is used for office and personal purpose the
bill of 5,000 pa is paid by the company. He paid 510
as prof tax.
*Basic salary = 74000+8000=82000
*bonus= 82000x 3/12=
*CEA- 4000 – (100x1x12)= 2,800 taxable
*CHA- 4000 – (300x1x12)= 400 taxable
*conveyance allowance=8500-5500=3000 taxable
*telephone provided – tax free perquisite
* club membership fee paid by the company is a
fringe benefit - perquisite taxable in the hands of
all employees
work out the question
 COMPUTATION OF TAXABLE SALARY of X for AY
Forms of salary
Basic salary 2,88,000
Dearness pay 12,000
Allowances
* DA 25% x 2,88,000 -fully taxable 72,000
• Medical allowance – 6,000
* CEA 150x12x2 6,600
*HRA working 1 12,480
Uniform allowance 9,600
Provident Fund
Employer contribution to SPF exempt
Gross salary
 Gross salary
Deductions u/s 16
*Standard deduction 50,000
*Entertainment allowance --
*Employment tax 2,400
Taxable salary
 Salary = 2,88,000 + (40% x 25% x 2,88,000) + 12,000 = 3,28,000

TAXABLE HOUSE RENT ALLOWANCE

Actual House Rent Received (12,000x12) 1,44,000
Less: Exempt u/s 10(13A), being least of the
following
a. actual HRA received 1,44,000
b. excess of rent over 10% of salary
9,60,000-32,800
c. Maximum amt - 40% of salary 1,31,520 1,31,520
Taxable HRA 12,480
Arrival Departure
1/5/2015 1/5/2018
1/4/2019 1/12/2019

AY 22-23 PY 21-22
Stay
21-22 0 days
20-21 0 days

does not fulfil the basic condition a) or b) Hence- NON-RESIDENT

particulars type NR
Profit from business in America Foreign – 35,000 25,000
Indian - 25000
Income from agriculture in Indian exempt
Hassan
Consultation fee from Indian indian 20,000
company
Profit from sale of house indian 55,000
property in Mysore
Gross Total Income 1,00,000
Not covered under PGA – format 2
Salary is Average salary of 10 month excluding
month of retirement
Basic 12,500
+ commission on turnover 850
Salary 13,350

Completed years of service 28 years

 Computation of taxable gratuity-FORMAT 2
Actual Gratuity received 18,00,000
Less: Exempt u/s 10(10)(iii)- Least of the
following
• 1/2* ave salary* completed yrs of service
1/2 x 13,350 x 28 1,86,900
• Maximum limit 20,00,000 1,86,900
• Actual gratuity received 18,00,000
Taxable gratuity 16,13,100
TAXABLE PENSION = normal pension received + taxable
commuted pension
Normal pension – 6 months x 28,000 = 1,68,000
uncommuted
60% of 28,000 x 3 months = 50,400

Total normal pension = 2,18,400

Non Govt employee - Actual value of commuted pension =
18,00,000 x 100/40

TAXABLE PENSION-gratuity received

Regular/Normal- pension received 2,18,400
+ taxable Commuted pension
Commuted pension received 18,00,000
Less: exempt u/s 10(10A)ii 15,00,000
(1/3 )actual value of commuted pension 3,00,000

Total taxable pension 5,18,400