1. SALARY BENEFITS TO AN EMPLOYEE.
The company ‘DELTALTD.’ deals with various business activities in the country which includes
manufacturing and production of industrial items like cement, steel, metal rods and pipes. It also
functions in the telecom sector, hospital line, education sector and consultancy services.
This is a salary package that is allowed to a specific employee by the company. The following
package is designed in such a way that it gives maximum tax benefits to the employee from taxable
income point of view.
Mr John Fernandes is an employee working in the firm’s main office in the position of ‘Assistant
Manager’ in Panaji branch, Goa. He is working in the company from the last 6 years. He pays a rent
of 7,500 p.m. for a flat in Panaji.
Salary package of Mr. John Fernandes.
Taxable amt.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
Basic salary –
30,000 p.m3,60,000
Dearness allowance – 10,000 p.m1,20,000
Employer’s contribution towards Statutory Provident Fund –90,000
NIL
House rent allowance – 40,000
Less exempt u/s 10(13A) [W.N-1] – 40,000 NIL
Transport allowance – 9600
Less exempt –9600 NIL
Food and non-alcoholic beverages – 15,600
Less exempt – 15,600NIL
Diwali gift (in kind) – 5000
Less exempt – 5000 NIL
Children education allowance in employer’s institute (3 children) – 36,000
Less exempt –
36,000 NIL
Children hostel expenditure allowance (3 children) –
10,800
Less exempt –
7,2003600
Travelling allowance for official purpose – 20,000
Leave travel concession (LTC) – 30,000
Profession tax paid by employer – 5,000
5000
Medical expense incurred by employer in his own hospital – 50,000
Reimbursement of travelling expenditure for official use – 3,50,000
Helper allowance – 30,000
Uniform allowance – 12,000
Daily allowance (Rs. 100 per day) – 31,200
Gross total
Less deduction u/s 16(iii)
Taxable amount
488600
5000
483600

2. Working note 1
House rent allowance [sec. 10(13A) and rule 2A]
Least of the following is exempted
1. Amount equal to 40%of the salary 2,00,000
2. House rent allowance received by the employee in respect of the period
during which rental accommodation is occupied by the employee during
the previous year. 40,000
3. The excess of rent paid over 10% of salary. 90,000 – 50,000 = 40,000
Working note 2
Transport allowance 2BB
Transport allowance is granted to an employee to meet his expenditure for the purpose of
commuting between the place of his residence and the place of his duty.
Exemption upto 800 per month. 800*12= 9600
Working note 3
Food and non-alcoholic beverages (refreshments)
Food and non-alcoholic beverages provided in working hours
Not Taxable if the cost of the same to the employer does not exceed Rs.50 per meal.
50*26*12=15,600
Note:Taxable only if the employeris an individual (i.e., sole proprietor), HUF, Government, a
political party, a person whose income is exempt under section 10(23C), a charitable institute
(which is subject to registration under section 12AA), RBI, SEBI or any other person not liable for
fringe benefit tax.
Working note 4
Gift
Gifts up to Rs.5,000 in aggregate during the previous year is not taxable.
Working note 5
Children education allowance in employer’s institute (3 children)
 Educational facilities provided to the children’s of the employees in employers
instituteWhere cost of education does not exceed Rs.1000 per month per child(no restriction
on No. of childrens
1000*3*12=36,000
Wrknd nte6
Children hostel expenditure allowance (3 children
Any allowance granted to an employee to meet the hostel expenditure on his child.
RS. 300 per month per child up to a maximum of two children
300*3*12=10800
Exempt- 300*2*12=7200
Taxable amount- 3600