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  1. 1. Salari es os e, ka rBSh an IIT U, P uri M ST
  2. 2.  Employer employee relationship. Written or implied contracts. Any benefit or receipt arising from employment.
  3. 3.  Whether director or managing director of a company is an employee ? Whether partner of a firm can be an employee ?
  4. 4.  As pension paid due to the previous employer employee relationships is taxed under salar y . If,af ter the death of such employee family pension received by spouse - comes under other sources, as there is no employer employee relationship.
  5. 5. Sec. 15 - Salaries.The following income shall be chargeable toincome-tax under the head Salaries -(a) any salary due from an employer or a formeremployer to an assessee in the previous year,whether paid or not;(b) any salary paid or allowed to him in theprevious year by or on behalf of an employer or aformer employer though not due or before itbecame due to him;(c) any arrears of salary paid or allowed to him inthe previous year by or on behalf of an employeror a former employer, if not charged to income-tax for any earlier previous year.
  6. 6.  Explanation 1.-For the removal of doubts, it is hereby declared that where any salary paid in advance is included in the total income of any person for any previous year it shall not be included again in the total income of the person when the salary becomes due. Explanation 2.-Any salary, bonus, commission or remuneration, by whatever name called, due to, or received by, a partner of a firm from the firm shall not be regarded as "salary" for the purposes of this section.
  7. 7. Sec. 16 - Deductions from salaries.The following deductions are available incomputing income under the head Salaries,(ii) a deduction in respect of any entertainmentallowance granted to a govt. assessee, a sumequal to one-fifth of his salary (exclusive of anyallowance, benefit or other perquisite) or fivethousand rupees, whichever is less;(iii) a deduction of any sum paid by the assesseeon account of a tax on employment within themeaning of clause (2) of article 276 of theConstitution, leviable by or under any law.
  8. 8. Salary u/s 17(1) includes- Wages Any annuities or pension Any gratuity Any fees, commission, perquisites or profits in lieu of or in addition to salary Advance of salary Amount received on encashment of leave
  9. 9.  Employer’s contribution to recognised P.F. in excess of prescribed percentage of salary Interest credited in a RPF in excess of prescribed percentage Balance transferred from unrecognised PF to RPF(Rule 11 part A, Sc. IV) The contribution by employer under notified pension scheme (Sec. 80CCD).
  10. 10. Perquisites u/s 17(2) includes- Value of rent free accommodation Value of rent concession Value of any benefit provided free or at concession to specified employees Any sum paid by employer for any obligation which would have been payable by employee Any sum payable for life assurance of employees(other than RPF, superannuation fund, deposit linked insurance fund) The value of any other fringe benefit as per Rule 3 on which employer is not liable to pay FBT
  11. 11. Specified employee-(i) Director Employee, (ii)Employee having substantial Interest[beneficial owner 20% or more equity shares,voting power, in the Employer company],(iii)Employees having Salary Income exceedingRs 50.000 /- (excluding all benefits & amenitiesnot provided by way of monetary paymentsfrom one or more Employers in the P.Y.).
  12. 12.  Profits in lieu of salary u/s 17(3)- (i) any payment for termination / modification of terms of employment (ii) any payment other than those received , u/s 10 (10) / (10A) / (10B) / (11) / (12) / (13) / (13A) or from any U.P.F. / Unrecognized Superannuation fund or under Keymans’ Insurance Policy (iii) any sum received from an employer before joining or after cessation of employment etc .
  13. 13. Please noteItems of Salary Wholly Taxablei) Basic ii) D.A. iii) D.P. iv) Commission or Fees v) Bonus vi)Arrear or Advance Salary vii) andother taxable allowances Items of Salary Partly Exempted and Partly Taxablei) H.R.A. ii) T.A. iii) Education Allowance iv)Hostel Allowance v) Perquisites vi) ExcessContribution & Accrued Interest to R.P.F. vii)Retirement Benefits .
  14. 14. Retirement benefits1. Leave encashment2.Gratuity3.Pension4.Retrenchment compensation
  15. 15. Received at the timeReceived while in service- of retirementFully taxable( both govt. &Non govt. employees) Non government employee Govt employees (including employees local (both central & state) authority and corporation) Exempted (see next slide)
  16. 16. Least of the following:a) 10 months average salary*.b) Amount specified by the govt. Rs.3,00,000.c) Actually received at the time of retirement.d) Period of leave on 30-day basis for every completed year of service(-) leave availed during service(-)leave encashed during service] x (average salary of last 10 months)**Average salary-Basic + DA if in employment terms+fixed % of comm.
  17. 17. (i) In case of employee of Central, State, Localauthority it is fully exempt.(ii) In case of employees covered by the Payment ofGratuity Act, 1972 , where 10 or more persons areemployed during any time in preceding 12 months : Least of the following is exempt : (a) 15 days salary ( 7 days in the case of seasonalestablishment ) based on salary last drawn for eachcompleted year of service or part thereof in excessof 6 months. [ 15 / 26 X Salary last drawn X No:of Years of service ](b) Rs. 3,50,000/-(c) Gratuity actually received.
  18. 18. (iii) In other cases least of the following :(a)Rs.3,50,000/-.(b) 1/2 month’s average salary for each completed yearof service.(c) Gratuity actually received.Average Salary means the average of 10 monthsSalary immediately preceding the month of retirementSalary - Basic + DA ( forming part of Salary if in termsof employment) + Commission at fixed % on turnover.
  19. 19. Regular pension received by the employeehimself af ter the retirement is taxable assalar y.Family pension comes under income fromother sources as there is no employer andemployee relationship af ter the death ofemployee.
  20. 20.  Commuted pension is exempt as follows : i) Govt./Local authority employee : Entire commuted pension is exempt u/s 10(10A)(i) ii) Non-Govt. employee : a. If Gratuity received – Maximum 1 / 3 rd of the Full Value of Pension b. If Gratuity not received – Maximum 1 / 2 of the Full Value of Pension
  21. 21.  Applicable for those join on or af ter 1 st Jan 2004. Contribution made by employer –taxable. Employer and employee’s contribution to the extent of 10% is deductible as saving U/S80CCD. When pension received –fully taxed in the hands of recipient Salar y=Basic +DA if it comes for retirement benefit.
  22. 22. Voluntar y Retirement scheme Maximum amount of exemption is Rs.5,00,000. Up to Rs. 5,00,000 is exempted Conditions: The same employee can not be re-employed in the same or any other company comes under the same management. Salar y means the last salar y drawn for computation of compensation Basic+ DA which comes for retirement + fixed % of commission on sales.
  23. 23. HRA received is taxable after allowing an exemption u/s 10(13A) read with Rule 2A Least of the following: i) H R A actually received ii) Rent Paid - 10% of Salary iii) 50% (for Delhi/ Kolkata / Mumbai / Chennai) OR 40% of Salary for other places) Salary*= Basic+DA+Comn. at fixed % of turnover. [Gestetner Duplicator (P) Ltd Vs C.I.T (1979) 1 Taxman 1 /117 ITR (SC)]
  24. 24.  Government(central & state) employees: Least of the following is deductible: 1. Rs. 5,000, 2. 20% of salary, 3.Amount of entertainment allowance granted during the previous year. Non government employees are not exempted Salar y excludes allowances benefit or other perquisites.
  25. 25. Education Allowance received for educationOf employees own children is taxable afterallowing an exemption of Rs 100/- p.m. perchild for a maximum of two children.
  26. 26. Accommodatio City with City with City with populationn population population not exceeding 10 exceeding 25 exceeding 10 akhs lakhs lakhs but upto25 lakhsOwned by 15% of salary 10% of salary 7.5% of salaryemployerTaken on Lease or rent or Lease or rent or Lease or rent orlease or rent 15% of salary 10% of salary 7.5% of salary - Least – Least - Least Furnished- 10% of cost of furniture or actual hire charges. Concessional rate- Perquisite-amount recovered. Salary- Includes pay, allowances, bonus, commission etc. butexcludes DA, DP conditionally, exempted allowances, perquisites andemployer’s contribution to PF.
  27. 27. Education Allowance received for educationOf employees own children is taxable afterallowing an exemption of Rs 100/- p.m. perchild for a maximum of two children.
  28. 28. (i) Interest Free Loan- The following are not taxable (a) If the Loan is for medical treatment of diseases specified in Rule 3A [ i.e. Cancer , Tuberculosis , AIDS , Disease of Heart / Blood / Lymph Gland / Bone Marrow / Respiratory , Nervous , Urinary , Digestive system / Liver / Gall Bladder / Skin involving surgical operation ] (b) If the aggregate amount of loan does not exceed Rs 20.000/-The Perquisite value of such Interest free Loan to be calculatedat the rates applicable in S B I for the respective loan on themaximum outstanding balance” on the last day of each month .
  29. 29. The Perquisite value for use of movable assets :-(I) Use of Computer , Laptop is not taxable perquisite. (II) Use of Other Movable Assets: a) If Owned by employer - 10 % of Actual Cost . b) If Hired by employer - Actual Hire Charges.(iii) The Perquisite value for Transfer or Sale of M.A.a) Electronic appliances including Computers & Cars to be valued at W D V depreciated @ 50% & 20%b) Other Assets to be valued at Actual Cost as depreciated by 10% of actual cost for each year .
  30. 30. THANK YOU