Compensation mgmt taxation


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Compensation mgmt taxation

  1. 1. COMPENSATION RULES AND DESIGN GUIDELINES Monthly Components Guidelines Amounts (per month) Basic keep >50% of Total Fixed Salary As per labour Department Minimum Basic figure for skilled, semi skilled and un skilled employees should be minimum of Rs.3934 (Unskilled), 4100 (Semi-Skilled) and 4358/-(Skilled). However to be on safer side, do not keep Basic figure less than Rs.4000/- p.m. Income Tax Benefit: NIL Rs.3,934/- (minimum) maximum no limit.. House Rent Allowance (HRA) Maximum 50% basic (Metro cities) 40% basic (non metro cities). Income Tax Benefit: Excess of Actual rent paid over 10% of Basic salary OR Maximum HRA allowed (50% or 60% of basic) OR Actual Rent Paid – whichever is lower is Exempt from Tax. For example. Basic Rs.20000/- HRA Rs. 10000/- Actual Rent Rs. 8000/- Excess of actual rent paid over 10% of Basic (10%x20000 – 8000) Rs. 6000 Hence max exemption allowed is lowest i.e. Rs.6000/- subject to Rent Receipts of Rs.6000/- only Maximum allowed 50% Basic (Metro Cities) OR 40% Basic (Non Metro Cities) Conveyance Allowance Supposed to be conveyance allowance meant for transportation between office and residence only. Income Tax Benefit: Exempt maximum up to Rs.800/- per month. No proof required. Rs.800/- (max) Children’s education allowance Income Tax Benefit: Rs.100 per child subject to max 2 children. Hence maximum Rs.200/- is exempt Rs.200/- (max) Special Allowance Balancing figure – after choosing all the above components with respect to their maximum limits absorbed, remaining amount can be named as Special Allowance. It is fully taxable. Balancing Figure
  2. 2. Medical Reimbursements Can be given against bills or without bills does not matter. Some companies give it monthly, some quarterly, half yearly or yearly also. Some companies give it only against medical bills, some do not ask for bills, rather bills are only demanded for Final Tax Computation at the end of the year. No thumb rule about it. Preferred to pay monthly, without bills and ask bills as per your wish, quarterly, half yearly or at the end of the year. Do not choose to give it against bills only, there is no rule for the same…It only makes salary processing a cumbersome process. Income Tax Benefit: Maximum Rs.1250/- p.m. (Rs.15000 p.a.) is exempt only if Original Bills are provided. Rs.1250/- (max) Food Coupons Non cash component, exempt up to Rs.3000/- p.m. Rs.3000/- (max)
  3. 3. Income Tax Rules - Salary <ul><li>What is Salary? </li></ul><ul><li>Wherever there is </li></ul><ul><li>Employer – Employee </li></ul><ul><li>relationship </li></ul><ul><ul><li>Chargeability of Salary? </li></ul></ul><ul><ul><li>Chargeable on due or receipt basis which ever is earlier; </li></ul></ul>
  4. 4. Denave India Private Ltd Date of Joining - 2nd February, 2009 Name XYZ Designation Executive - Accounts & Finance Location New Delhi   Details of Emoluments   Per Month Per Annum Earnings Break Up: Basic 14000 168,000 HRA 7000 84,000 Conveyance 1200 14,400 CCA 2500 30,000 Medical Reimbursement 1500 18,000 Special Allowance 1,800 21,600 A. Gross Salary 28,000 336,000 Performance Incentive 0 0 B. Variable Salary 0 0 Company Contribution: PF Comp. Contri.@12% 1,680 20,160 ESI Comp. Contri. @ 4.75% 0 0 Gratuity @ 4.81% 673 8,076 Statutory Bonus @ 20% 0 0 C. Company Contribution 2,353 28,236 Total ( A+B+C ) 30,353 364,236 Employee Deduction: PF Emp Contri.@12% 1,680 20,160 ESI Emp Contri. @ 1.75% 0 0 Professional Tax As Per Govt. Rules As Per Govt. Rules D. Employee Deduction 1,680 20,160 In Hand Pre Tax 26,320 315,840
  5. 5. Salary Components <ul><ul><li>Basic Salary / Wages </li></ul></ul><ul><ul><li>Dearness Allowance </li></ul></ul><ul><ul><li>Special Allowance </li></ul></ul><ul><ul><li>Fee / Commission/Incentive </li></ul></ul><ul><ul><li>Profit in lieu of salary </li></ul></ul><ul><ul><li>Advance Salary </li></ul></ul><ul><ul><li>Leave Encashment – Exempted up to 3 lac on retirement </li></ul></ul><ul><ul><li>Pension </li></ul></ul><ul><ul><li>Gratuity – Exempted up to 3.5 lac </li></ul></ul><ul><ul><li>Bonus - taxable on receipt basis. </li></ul></ul>
  6. 6. Allowances / Reimbursements <ul><li>Conveyance / Transport Allowance – Ex. Rs. 800/- pm </li></ul><ul><li>House rent Allowance – Exemption u/s 10 (13) </li></ul><ul><li>Medical Allowance – Fully Taxable </li></ul><ul><li>Medical Reimbursement – Non Taxable up to Rs. 15,000/- pa </li></ul><ul><li>Education allowance – Ex. Up to 1200/- per annum per child up to two child </li></ul><ul><li>Hostel Allowance – Rs. 300/- pm up to two child </li></ul><ul><li>Leave Travel Allowance – Non Taxable twice / two journeys in block of four years </li></ul><ul><li>Food Allowance / Vouchers – Ex. Up to Rs. 100/- per day </li></ul><ul><li>Any other Allowance – Fully taxable </li></ul>
  7. 7. Compensation <ul><li>Retrenchment : Amount fully exempted where scheme is approved by central govt. or in other cases, amount calculated u/s 25 (b) of Industrial Dispute Act, 1947 </li></ul><ul><li>Voluntary : Exempted up to Rs. 5 lac / In case of installment receipt up to overall Rs. 5 lac </li></ul>
  8. 8. Fringe Benefit Tax – No Tax from Employee <ul><li>Clause 115 WB (2) – 20% of Value </li></ul><ul><ul><li>Entertainment </li></ul></ul><ul><ul><li>Hospitality (5% of value in case of Hotel ) </li></ul></ul><ul><ul><li>Conference / sales Promotions </li></ul></ul><ul><ul><li>Employee’s Welfare </li></ul></ul><ul><ul><li>Conveyance / tour expenses </li></ul></ul><ul><ul><li>Hotel Expenses/Boarding / Lodging </li></ul></ul><ul><ul><li>Telephone </li></ul></ul><ul><ul><li>Maintenance & depreciation cost of Motor Car </li></ul></ul><ul><ul><li>Maintenance of House Accommodation </li></ul></ul><ul><li>Clause 115 WB (2) – 50 % of Value </li></ul><ul><ul><li>Festival Celebrations </li></ul></ul><ul><ul><li>Health Club or similar facilities </li></ul></ul><ul><ul><li>Club Facilities </li></ul></ul><ul><ul><li>Gifts </li></ul></ul><ul><ul><li>Scholarships </li></ul></ul>
  9. 9. Tax Slabs….. <ul><li>General - </li></ul><ul><ul><li>Up to 1.5 lac – Nil </li></ul></ul><ul><ul><li>150001- 300000 : 10% </li></ul></ul><ul><ul><li>300001- 500000 : 20% </li></ul></ul><ul><ul><li>Above 500000 :30% </li></ul></ul><ul><li>For Women </li></ul><ul><ul><li>Up to 1.80 lac – Nil </li></ul></ul><ul><ul><li>180001- 300000 : 10% </li></ul></ul><ul><ul><li>300001- 500000 : 20% </li></ul></ul><ul><ul><li>Above 500000 :30% </li></ul></ul>
  10. 10. Tax Slabs….. <ul><li>For Senior Citizen- </li></ul><ul><ul><li>Up to 2.25 lac – Nil </li></ul></ul><ul><ul><li>225001- 300000 : 10% </li></ul></ul><ul><ul><li>300001- 500000 : 20% </li></ul></ul><ul><ul><li>Above 500000 :30% </li></ul></ul><ul><li>10 % Surcharge of tax if taxable income is above 10 lac </li></ul><ul><li>3% Education Cess on Tax </li></ul>
  11. 11. Deductions / Rebate <ul><li>Loss from House Property : Interest on Housing Loan up to 1.5 lac if borrowed after 01/04/1999 </li></ul><ul><li>Under chapter VI : </li></ul><ul><ul><li>u/s 80 D Premium of Mediclaim Policy </li></ul></ul><ul><ul><li>u/s 80 C : Up to 1 lac </li></ul></ul><ul><ul><ul><li>LIC </li></ul></ul></ul><ul><ul><ul><li>PPF </li></ul></ul></ul><ul><ul><ul><li>PF </li></ul></ul></ul><ul><ul><ul><li>ULIP </li></ul></ul></ul><ul><ul><ul><li>NSC </li></ul></ul></ul><ul><ul><ul><li>Infrastructure Bonds </li></ul></ul></ul><ul><ul><ul><li>Principal Amount of Housing Loan </li></ul></ul></ul><ul><ul><ul><li>Tuition fee of any of two children </li></ul></ul></ul><ul><ul><ul><li>Pension Fund </li></ul></ul></ul>
  12. 12. Income from Other Sources <ul><li>Any income which does not fall under any head will fall under income from other sources and will be added in taxable income like income from commission, interest etc. </li></ul>
  13. 13. IT Returns <ul><li>Form 24 Q – Quarterly Return to be filed by employer within 15 days </li></ul><ul><li>Form 24 – Annual return to be filed on or before 30th June </li></ul><ul><li>Income certificate from Employer : Form 16 </li></ul><ul><li>To be issued to the employees within one month from last day of financial year </li></ul><ul><li>IT return to be filed by individual in Form 2 D “Saral” on or before 31 st July </li></ul><ul><li>In case of more than one employer in a year, Form 12 B to be submitted to new employer by the employee </li></ul>