Basic Conditions Master And servant or employer and employee relationship Contract of employment is important BASIS OF CHARGE Either accrual or receipt which ever is earlier Salary due from an existing andor former employer ID: 467833
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Slide1
Income from Salary
Basic Conditions
Master And servant or employer and employee relationship
Contract of employment is importantSlide2
BASIS OF CHARGE
Either accrual or receipt (which ever is earlier)
Salary due from an existing and/or former employer
Salary paid or allowed by the employer though not due
Arrears of salary paid or allowedSlide3
SALARY COMPONENTS
Basic salary
Advance salary
Arrears of salary
Bonus
Allowances
Leave encashment on retirementSlide4
COMPONENTS
Retrenchment compensation
Pension
Gratuity
Voluntary retirement payments
Perquisites
Provident fund paymentsSlide5
CONCEPT
Gross salary
Deductions such as G.P.F., P.T.
Net salarySlide6
COMPUTATION
Gross salary
Less:- exemption us. 10
Less:-deduction us. 16
Net salary
Deduction under chapter VI-A
Net taxable salarySlide7
EXEMPTION UNDER SECTION 10 FOR SALARY
LEAVE ENCASHMENT 10(10AA)
GRATUITY 10(10)
PENSION 10(10A)
HOUSE RENT PAID 10(13A)
TRANSPORT ALLOWANCE 10(14) –RULE 2BB
LEAVE TRAVEL CONCESSION 10(5)Slide8
Leave Encashment Sec.10(10AA)
Meaning – Leave Salary
Salary standing / accumulated to the credit of an employee at the time of retirement is Leave Salary
Encashment of the same at the time of retirement is referred to as leave encashment
Tax treatment for the same – next slide Slide9
Leave encashment – tax treatment
Nature of Leave encashment
Status of the employee
Tax treatment
Leave encashment during continuity of employment
Government/ Non- government
Taxable
Leave encashment at the time of retirement or leaving of job
Government
Fully Exempt
Leave encashment at the time of retirement or leaving of job
Non-government
Fully or partly exemptSlide10
Non government Employee exemption - detail
1
Period of earned leave to the credit of the employee * average monthly salary
2
10 * average monthly salary
3
Rs.300000 (specified amount by government)
4
Leave encashment actually received
In case of non-government employee (including an employee of local authority or public sector undertaking – exemption is least of the followings.Slide11
Gratuity – Section 10 (10)
It is a retirement benefit.
Payable at the time of cessation of employment & on the duration of service.
Government employees i.e. Central Government employees, State government employees, employees of local authority but not of statutory corporations
Tax treatment - next slideSlide12
Tax treatment
Status of the employee
Whether Gratuity is taxable
Government employee
Fully exempt U/s. 10(10)(i)
Non Government employee covered by Payment of Gratuity Act , 1972
Fully or partly exempt from tax U/s. 10(10)(ii)
Non Government employee not covered by Payment of Gratuity Act , 1972
Fully or partly exempt from tax U/s. 10(10)(iii)Slide13
Employees covered by Payment of Gratuity Act, 1972
Any gratuity received is exempt to the least of the following:
1.
15 days salary (7 days in case of seasonal establishment) based on salary last drawn for each year of service.(15 days salary *
length of service) (6 months & above = full year) (Salary= last drawn salary =Basic + D.A.) (days in month=26)
2.
Rs.350000
3.
Gratuity actually receivedSlide14
Employees not covered by Payment of Gratuity Act, 1972
In case of other employee gratuity received is exempt to the least of the following:
1.
Rs.350000
2.
Half month’s Salary for each completed year of service (
only complete year, part of the year to be ignored; salary based on average salary for last 10 months immediately preceding; Salary=Basic + D.A
.)
3.
Gratuity actually receivedSlide15
Pension
Pension received from UNO by an employee or his family members is not chargeable to tax.
Family pension received by the family members of armed forces is exempt under section 10(19).
Family pension received by others (not covered in 2 above) after the death of the employee is taxable in their hands under section 56 – income from other sources. Slide16
Contd.
Un-commuted Pension
– It is periodical payment of pension- i.e. monthly pension
Commuted Pension
– It is the lump sum payment in lieu of periodical payment.
Pension
Status of the employee
Is it chargeable to tax?
Un-commuted
Government / non government
It is chargeable to tax
Commuted
Government
It is fully exempt from tax under 10(10A)(i)
Commuted
Non government
It is fully or partly exempt from tax under 10(10A)(ii)Slide17
Commuted pension & non government employee
Non government employee
Gratuity is received
1/3
rd
of the pension received is exempt
Non government employee
Gratuity is not received
½ of the pension received is exempt.Slide18
HRA Section 10(13A) & Rule 2A
Least of the following is exempt
Salary = Basic + D.A.( if terms of employment so provide)
1
An amount equal to 50% of Salary (For Metro cities) and 40% of Salary ( For non- Metro cities)
2
The HRA received by the employee in respect of the period during which rental accommodation is occupied by the employee during the previous year
3
The excess of rent paid over 10% of SalarySlide19
Transport Allowance –10(14) Rule 2BB
Allowance is granted to an employee to meet his expenditure for the purposes of commuting between the place of his residence and the place of his duty
It is exempt up to Rs.800 per month
In case of blind or orthopaedically handicapped it is Rs.1600 per month.Slide20
Leave Travel Concession 10(5)
Leave Travel assistance extended by an employer for going anywhere in India along with his family is exempt on the basis of the provisions given in table.
Family includes spouse, children, parents , brothers and sisters (who are dependent on the employee)
Only two journeys in a Block of Four years is exempt.
Amount of exemption is limited to the actual expenditureSlide21
Contd.
Where journey is performed by air
Amount of economy class air fare of the national carrier by the shortest route or the amount spent whichever is less
Where journey is performed by rail
Amount of air conditioned first class rail fare by the shortest route or amount spent whichever is less
Where the places of origin & destination of journey are connected by rail and the journey is performed by any other mode of transport
Amount of air conditioned first class rail fare by the shortest route or amount spent whichever is less
Where the places are not connected by rail & recognized public transport system exist
First class or deluxe class fare by the shortest route or amount spent which ever is lessSlide22
Perquisites - Taxable
Any residential accommodation given to the employee without charging any rent or at a concessional rate
Free supply of gas , electricity or water for household consumption
Wages paid by the employer for the domestic servants employed by the employee
Value of free boarding & lodging expenses.
Free educational facilities to the childrenSlide23
Contd.
Subscription & Bills paid to the club houses by the employer
Vacation at the holiday homes or holiday trips at the cost of the employer
Income tax due on salary but paid by employer
Use of motor car with or without a driver at the cost of the employer for personal use.Slide24
DEDUCTIONS FROM SALARY
ENTERTAINMENT ALLOWANCE [16(2)]
If granted by the employer it is included in the Salary income
From A.Y. 2002-03 the allowance deduction is allowed only to Government employees.
The least of the following is exempt
Actual amount received
Rs.5000 per year
1/5
th
of the basic salary Slide25
DEDUCTIONS FROM SALARY
PROFESSIONAL TAX [16(3)]
Tax deducted from the Salary under Maharashtra State Tax on professions, trade, callings and Employment Act 1975.