Taxation

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Taxation

  1. 1. SALARIES<br />1<br />LEAVE SALARY<br />Leave Encashment<br />During continuity<br />Of employement<br />At the time of<br />Retirement or <br />Leavig the job<br />Government<br />Employee<br />Non-govt<br />employee<br />CGE/SGE<br />NGE/LA/PSU<br />Exempt<br />Least of<br />Exempt U/S<br />10(10AA)<br />Taxable<br />Cash equivalent of Leave salary<br />(b) [10m(Basic P.M +DA for Retirement) +<br /> fixed % Comm in T.O] / 10 x leave to the credit<_ 30 days P.A<br />Amount Specified by govt =300000<br />Actual leave encashment<br />ॐ<br />1<br />
  2. 2. NOTES:<br />Leave to the credit should be for each completed year of service.<br />Leave salary paid to the legal Heirs of deceased employee is not Taxable<br /> as “salary” but taxable as “IFOS”<br />Leave salary received by family of govt employee who died in harness is not taxable<br />Average salary should be calculated on the basic of salary for immediately preceding <br /> 10 months of the retirement<br />It is a death cum retirement benefit payable on the basic of duration of services<br />GRATUITY: [Sec10(10)<br />(2)<br />Exempt U/S10(10)(i)<br />CGE/SGE/LA<br />Covered by payment of Gratuity Act 1972<br />GRATUITY<br />Exempt Least of<br />15 day’s salary for every completed <br /> year of service or part there of in <br /> excess of 6 months <br /> =BASIC + DA (P.M) x15/26 x N<br />NOTE -> In case of seasonal employees<br /> =BASIC + DA (P>M) x 7/26 x N<br />(b) Maximum 10,00,000<br />(c) Actual gratuity received<br />Not covered by ACT 1972<br />Exempt least of<br />(a) Maximum 10,00,000<br />(b) Half month’s avg salary for each <br /> completed year of service<br /> =10(BASIC + DA for ret)+ comm on T.O/10 x ½ x N<br />(c) Actual gratuity received<br />ॐ<br />2<br />
  3. 3. PENSION (Sec 17(1)(ii)<br />(3)<br />Pension is a perodical payment received by an employee after his retirement<br />Uncommuted<br /> Pension<br />Perodical payment<br /> Of pension<br />Fully Taxable<br />=<br />GE/NGE<br />CGE/SGE/LA/STATE CROP/SCJ/HCJ<br />EXEMPTED U/S10((10A)(i)<br />PENSION<br />Uncommuted pension<br /> =(Pension P.M x M) xxx<br />(b) Uncommuted part of full<br /> pension<br /> =(FPPM x(100/c%) x bal of months <br /> from commuted date) xxx<br /> ----- xxx<br />(c) Commuted pension commuted <br /> value received xxx<br /> (-) exempt<br /> (i) if grautity is received<br /> CV x 100/c% x 1/3 xxx <br /> OR<br /> (ii) if grautity is not received<br /> CV x 100/c% x ½ xxx ___ <br /> Total taxable pension xxx <br />Lumpsum payment<br />In lieu of perodical<br /> payment<br />Commuted<br />pension<br />=<br />NGE<br />Taxable pension<br /> CALCULATION<br />ॐ<br />3<br />
  4. 4. NOTE:<br />pension received from united nations organisation->Exempted<br />(2) Family pension received by family members of an employee after his<br /> death-> not taxable as salary but taxable as GFOS U/S 56<br />(4) VRS Compensation[Sec 10(10)]<br />-> Max exemption 5,00,000<br />-> Exemption allowed only once.<br /> Conditions/Guideline to be satisfied as per rule 2 B.A of IT Rules<br />Applicable if employee has completed 10 years of service or <br /> age of 40 years exepct for employee of public sector co<br />Applicable to all employees<br />VRS should caused due to VRS should not be filled up nor the <br /> retiring employee br employed in another concern of same management<br />Amount under VRS should be-<br /> Less than or = to 3 months’s salary for every completed year of service<br /> OR<br /> ( Salary less or = at the time of retirement) x Balance months of service <br /> left before the date of retirement <br /> Where, salary = salary last drawn P.M<br /> = Basic + DA for retirement + fixed% comm on TO<br />NOTE: ->Relief can be claimed U/S 89<br />ॐ<br />4<br />
  5. 5. (5) RETRENCHMENT COMPENSATION [Sec 10(10B)]<br />Exempt -> least of<br />Amt calculated as per Industrial Disputes act 1972<br /> =15 days avg pay for each completed year of service or part <br /> there of in excess of 6 months<br />Amt notified by Govt = 5,00,000<br />Actual Retrenchment compensation received<br />-><br /> NOTE: <br />No limit if compensation paid under govt approved scheme<br />Different forms of Allowances<br />(1)City compensatory allowance<br />Taxable<br />(2)House rent allowanse[sec 10(13A)]<br />Exempt least of<br />If Resedential house is in Bombay , Delhi , Calcutta , Madras<br />=50% of BASIC + DA for ret +fixed % comm on TO<br />(a)<br />If at any other place =40% of (BASIC+DA for ret +fixed %commonTO) <br />Actual HRA received for period of occupation<br />Excess of rent paid over 10% of salary on due basis<br /> =Rent paid (-) 10% of (BASIC + DA for ret +fixed %comm on TO)<br />NOTE: No exemption if employee lives in his own house or in a house where<br /> he does not pay any rent<br />ॐ<br />5<br />
  6. 6. (3) Allowance where exemption depends upon actual exependiture by the employee (Sec10(14))<br />Amount of allowance<br />->In case of following<br />exemption=lower of<br />or<br />Actual exp by employee<br />Travelling allowance or transfer allowance<br />Conveyance allowance<br />Daily allowance<br />Helper allowance<br />Research allowance-granted for encouraging academic or professional research<br />Uniform allowance-granted to meet exependiture on purchase or maintenance of uniform<br />(4)Allowance where exemption does not depends on actual exependiture of employee [sec 10(14)]<br />Amount of allowance<br /> or<br />Amount specified in rule2 BB<br />In case of following allowance<br />Exemption = lower of<br />Special compensatory (Hill area) allowance  Exemption 800 P.M<br />Boarder area allowance/remote area/disturbed area allowance<br /> Exemption 200P.M to 1300 P.M<br />ॐ<br />6<br />
  7. 7. (3) Tribal area/Scheduledd area allowance Max Exemption =200 P.M<br />Allowance for transport employee<br /> i e an employee engaged in a transport co.<br /> Exemption = least of <br /> (a) 70% of allowance<br /> (b) 10,000 P.M<br /> (5) Children Education Allowance<br /> Max exemption 100 P.M per child to MAX of 2 children<br /> (6) Hostel expenditure allowance <br />Max exemption 300 P.M per child to MAX of 2 children<br /> (7) Compensatory field area allowance<br />Max exemption = 2600 P.M<br /> NOTE: If this exemption is taken, no exemption allowed for border<br /> area allowance<br /> (8) Compensatory modified area allowance<br /> Max exemption 1000 P.M<br /> NOTE: If this exemption is taken, no exemption allowed for border area allowance <br />ॐ<br />7<br />
  8. 8. (9) Counter insurgency allowance<br />Max exemption =3900 P.M<br /> Exemption allowed to member of armed forces<br /> Available if employee is away from permenant location for more than 30 days<br /> Transport allowance<br /> Granted for going from place of residence to place of duty <br /> Max exemption<br /> --For normal employee 800 P.M<br /> --For blind or orthopardically handicapped employee 1600 P.M<br />(11) Underground allowance<br /> For example –Employee in caol mines<br /> Max exemption =800 P.M<br />(12) High altitude allowance<br /> Granted to employee of armed forces<br />Altitude above <br />15000 ft<br />Altitude of<br />9000-15000ft<br />1060 P.M<br />1600 P.M<br />ॐ<br />8<br />
  9. 9. (13) Highly active field area allowance<br />For member of armed forces<br /> Max exemption=4200 P.M<br />(14) Island duty allowance<br /> For members of armed forces<br /> In Andaman Nicobar & Lakshdeep<br /> Max exemption =3250 P.M<br />(5)Allowance to govt employees outside india[Sec 10(7)] <br /> Totally exempt for an indian citizen<br />(6) Tiffin allowance Taxable<br />(7) Fixed medical allowance Taxable<br />(8) Servant allowanceTaxable<br />(9) Allowance to high court and supreme court judgesExempt<br />(10) Allowance received from united nations organization(UNO)Exempt<br />ॐ<br />9<br />
  10. 10. Deduction U/S 16<br />Standard deduction  Not available now<br />Entertainment allowance<br />NGE = No deduction<br />CGE/SGE<br />Deduct =least of the following<br />Rs 5000<br />20% of basic salary<br />Entertainment allowance granted during PY<br />NOTES:<br />E A  should be added in Gross salary<br />Profesional tax  (Tax on employment) <br /> It should br added to gross salary only if it is paid by Employer on behalf of employee<br />ॐ<br />10<br />
  11. 11. PERQUISITIES<br />“Perquisities may be defined as any casual emolument/benefit attached <br />to an office or position in addition to salary”<br />Perquisities are taxable under the head “Salaries” only if they are:<br />(a) Allowed by an employer to his employee,<br />(b) Allowed during continunance of employment<br />(c) Directly dependent upon service,<br />(d) Resulting in the nature of personal advantages to the employee,<br />(e) Derived by virtue of employee’s authority i.e. employee is <br /> authorized to enjoy such perquisite.<br />Specified employee<br />A speceified employee means <br />A director employee : An employee who is a director in the employer<br /> company for any time during the PY OR<br /> An employee : Who has a substantial interest in the employer <br /> company i.e. an employee who is benefical owner of equity<br /> shares carrying greater then 20% voting power in such company<br /> An employee : Drawing in excess od Rs 50000 <br /> i.e. Gross salary xxx<br /> (-) all non monetary benefits xxx<br /> (-) all monetary benefits exempt U/S16 xxx<br /> (-) deduction U/S16 greater then 50000 xxx<br />ॐ<br />11<br />
  12. 12. Following perquisities are not taxable for any type of employee:-<br />Provision of Medical facilities<br />T<br />O<br />T<br />A<br />L<br />L<br />Y<br />E<br />X<br />E<br />M<br />P<br />T<br />Empolyer’s hospital<br />Hospital maintained/approved by <br />Govt/local Authority whether <br />reimbursed or paid by employer.<br />Medical facilities provide to Employee <br /> OR any member of his family<br />Treatement of prescribed disease in a<br />Hospital approved by Chief Commissionor<br />Whether reimbursed or paid by employer<br />Payment or reimbursement of group<br /> Insurance or Mediclaim insurance<br /> by the employer<br />Partially Exempted<br /><ul><li>Medical facilities in a private clinic Max exempt RS 15000 p.a
  13. 13. Medical facilities outside india:
  14. 14. Medical treatment—exemption=exependiture permitted by R.B.I
  15. 15. Cost on travel--- exempt it G.T.I. ≤200000
  16. 16. Cost of stay abroad---exemption=exependiture permitted by R.B.I</li></ul>ॐ<br />12<br />
  17. 17. (2) Refreshment provided by employer to all employees during <br />working hours in office permises. It includes <br /> -tea or snacks during office hours;<br /> -free meals during working hours in a remote area or in an<br /> offshore installation;<br /> -free meals during working hours through paid non-transferable<br /> voucher not exceeding Rs 50 per meal <br /> -Taxable if employee of NON FBT EMPLOYEE<br />(3) Amount spent on training of employee of fees paid for refresher <br /> management course<br /> (4) Goods manufactured by the employer and sold to the employee at <br /> the concessional rates<br />(5) Perquisities allowed outside india by govt to a citizen of india for<br /> rendering service outside india<br /> (6) Employer’s contribution to staff group insurance scheme<br />ॐ<br />13<br />
  18. 18. (7) Leave Travel Concession:<br /><ul><li>Available to indianas well as foreign citizen
  19. 19. Journey may be performed while in service or after retirement;
  20. 20. Available for employee and his family( family means individual</li></ul> spouse and children, and his/her parents, brother and sister<br /> wholly dependent on him)<br />Condition Prescribed<br />Amount of exemption<br />Lower or air economy fair of National<br /> carrier by shortest Route or amount spend<br />Journey performed by air<br />Journey performed by rail<br />Lower of A.C First Class rail<br />Fair by shortest route or amount spent<br />Where rail transport is available but <br />JourneyIs performed by any other mode<br />Lower of A.C First Class rail<br />Fair by shortest route or amount spent<br />When no rail transport is available but<br />First class deluxe class fair on shortest route<br />Or amount spent<br />(a) Recoginized public transport exist<br />(b) Where no public transport exists<br />Lower of A,C First class rail fair as if journey<br />Is performed by rail or amount spend<br /><ul><li>Exemption is available only in respect of two journey performed in a block of 4 </li></ul> calendar years commencing from 1986<br />If exemption is not availed in relevant 4 year block ,it can be claimed in the first <br /> calendar year of next block<br />ॐ<br />14<br />
  21. 21. (8) Free telephone including mobile phone  exempted<br />(9) Transport facility to railway employee or employees of airlines Exempt<br /> But if facility is provided by private transport undertaking its employees,then<br /> Taxable perquisities = Value of benefit (-) Amt received from the employee<br /> [NOTE; Taxable for employee of NON FBT employer]<br />(10) Payment of annual premium by employer on personal accident policy effected by him<br /> on his employee<br />(11) Free educational facility provided in an institute owned/maintained by employer<br /> to children of employeeMax exemption 1000 per month<br />(12) Gift in kind uptoRs 5000 per year Exempt<br /> but gift in cash and cheque  Taxable<br />(13) Computer/laptop given(not transferred) to an employee for official/personal purpose<br /> (which is owned or hired by employer) Not taxable<br />(14) Transfer of movable asset(other than computer,electronicitem,car) by employer to<br /> an employee after using it for 10 years or more without considerationNot Taxable<br />(15) Interest free loan for medical treatment specified in rule 3A  Not taxable<br />(16) Initial fees paid by employer for acquiring corporate membership of clubNot taxable<br />(17) Use of health club etc. provided uniformally to all employees by the employer->Not Taxable<br />(18) Perodicals and journals provided for dis charge of workNot taxable<br />(19) Conveyance facility provided to high court and supreme courtNot taxable<br />(20) Conveyance facility provided to an employee to cover the journey between office<br /> and residence Not taxable<br />(21) The value of any benefit provided free of cost or at concessional rate by a company to <br /> its employees by the way of allotment of shares debentures or warrents under employee<br /> stock plan Not taxable<br />ॐ<br />15<br />
  22. 22. (22)Tax on perquisities-in-kind paid by the employer Not taxable<br />(23) Rent free accomodation<br /> Provided in a remote area to an employee working at a mining site or oil <br /> exploration site etc Not taxable<br /> provided on transfer of an employee in a hotel for not exceeding 15 daysNot taxable<br /> provided to high court judge,supreme court judge,official of parliament,union minister,<br /> leader of opposition Not taxable<br />Following Perquisities are TAXABLE in hands of both SPECIFIED as well as <br />NON-SPECIFIED EMPLOYEES:<br />(1) Rent free Accomodation<br />Accomodation includes house ,flat,farm house or part there of<br />accomodation in hotel ,motel service apartment,guest house <br />carvan, mobile home, ship or any other floating structure<br />Rent free accomodation may be UNFURNISHED or FURNISHED<br />ॐ<br />16<br />
  23. 23. Valuation of rent free UNFURNISHED accomodation:-<br /> (i) CGE/SGETaxable value = liscense fee determined by Central State Govt<br /> (ii) NGE <br />Population in<br /> City<br />Accomodation owned by<br /> Employer<br />Accomodation taken on lease or<br /> Rent by the Employer<br />Having population<br /> 0 to 10 lakh<br />7.5% of salary for period of <br />occupation of accomodation<br /> Which ever is lower is <br /> taken<br />Amount of lease rent paid<br /> or<br /> 15% of salary<br />Having population<br /> 10 to 25 lakh<br />10% of salary for period of <br />occupation of accomodation<br />Having population<br />25 lakh and above<br />15% of salary for period of <br />occupation of accomodation<br /><ul><li>For the purpose of valuation of rent free unfrunishedaccomodation,</li></ul> Salary includes= (BABC SALARY) Basic+DA(for ret)+Bonus+comm+all taxable allowances <br /> and all taxable monetary payments but does <br /> not include employer’s contribution to PF all<br /> Allowances which are exempt from tax value of perquisities<br />salary shall be determined accrual basis<br />salary from one or more employers for period of occupation shall br taken<br /> into account<br />ॐ<br />17<br />
  24. 24. (B) Valation of rent free FURNISHED accomodation:-<br />Taxable value is calculated as under<br />Taxable value of rent free unfurnished accomodationxxxx<br />Add: 10% of original cost furniture, if furniture is<br /> owned by the employer xxxx<br />OR<br />Actual hire charges of furniture is hired by the <br />Employer xxxx<br />Taxable value of rent free furnished accomodationxxxx<br />Note: (a) Furniture includes radio sets, television sets, refrigerators, air-<br /> conditioner and other housrhold appliances.<br />(c) Valuation of perquisities if accomodation is provided in a hotel for more than 15 days:-<br />Taxable value=24% of salary or actual charge of hotalwhich ever is less<br />Note: If hostel accomodation is provided on employees transfer nothing is taxable<br />ॐ<br />18<br />
  25. 25. (d) Valuation of perquisitie if accomodation is provided at concessional rent:-<br />Taxable value=Taxable value of rent free <br /> Unfurnished/Furnished house xxxxxx<br />LESS : Rent payable by the employee xxxxxx<br />Taxable value of accomodation. At concessional rent xxxxxx<br />(2) Gas, electricity or water supply provided free of cost to an employee<br /><ul><li>Purchased by employer from outside agency</li></ul> Taxable value= Amount paid by employer to such agency<br /> (-) Any amount recovered from the employee<br /><ul><li>If supplied out of own sources </li></ul> Taxable value = Manufacturing cost per unit incurred by the employer<br />Important note: If gas electricity or water supply connection is taken in the<br /> name of employer and the employer also bears expenditure thereon<br />perquisities is taxable only in the hands of specified employees<br />ॐ<br />19<br />
  26. 26. (3) Perquisities in respect of credit card provided to the employee<br />Taxable for employee of NON FBT employer<br />(a) Taxable value = Amount paid or remibursed by employer (-) Amount recovered from employee<br />(b) Running & maintenance expenses met by EMPLOYER<br /> Used wholly for official purpose<br />Nil if employer maintains complete <br />details of journey and gives certificate<br /> for official use<br /><ul><li>Used wholly for private purpose
  27. 27. Owned by employer
  28. 28. Hired by employer</li></ul>Taxable value =Actual exependiture of<br /> employer(+) 10% of cost of car <br /> (+)salary of chauffeur<br />Taxable value =<br /> Hire charges (+) Chauffeur’s salary<br />Taxable value= <br /> 1800 p.m if cc ≤ 1.6 litres<br /> OR<br /> 2400 p.m if cc ≥1.6 litres<br /> (+)<br /> 900 p.m if chauffer is provided<br /><ul><li>Used partly for official and </li></ul> partly for private purpose<br />ॐ<br />20<br />
  29. 29. (C) When employee uses any automative conveyance other than car & expenses met by employer<br />Used wholly for official purpose<br />Nil if employer maintains complete details of<br />Journey and gives certificate of official use<br />Used partly for official and partly <br />for private purpose<br />Taxable value=<br />Actual expense by employer (-) 600 p.m<br />Important Notes:<br /> Month means each completed month as per englishcalander and part of<br /> the month should be left out <br />  No amount recovered from employee is deductible in case of car owned<br /> or hired by employer and used for official as well as private purpose .In<br /> other cases however amount so recovered is deductible from value of perqusities<br />  If more than one car is given value of first car should br calculated in usual maner<br /> and for the remaining car it is demend to have been used for personal as well as official <br /> purpose & the car is owned & Hier by employer and the Govt, Huf ,Charitable institution<br /> whose income is exempt<br />ॐ<br />21<br />
  30. 30. (4) Valuation of perquisities in respect of Motor car<br />(i) Where car is owned by Employee:-<br />(ii) Where car is owned or hired by employer:-<br />Situation<br />Value of perquisities from 1/4/01<br />(a) Running & maintaince<br /> expense<br />Car expenses met by <br /> employee<br />Not a Perquisities-Not taxable<br />Not a Perquisitie-Not taxable<br /> Used wholly for <br /> official purpose<br />(b) Running & maintaince<br /> expense<br />Used wholly for <br />Private purpose<br />Owned by employer<br />Nil if employer maintains complete <br />details of journey and gives <br />Certificate for official use<br />Used wholly for <br /> official purpose<br />Taxable value=10% p.a of<br /> cost of car(+)driver’s salary<br />Used wholly for<br /> private purpose<br />Hired by employer<br />Taxable value=Hire charges <br /> (+) driver’s salary<br />Taxable value=<br /> Actual exependiture of employer<br /> Taxable value= <br />1800 p.m if cc ≤ 1.6 litres OR<br />2400 p.m if cc ≥1.6 litrres (+)<br /> 900 p.m if chauffer is provided<br />Used partly for official<br /> and partly for private<br /> purpose<br /> Taxable value= <br />600 p.m if cc ≤ 1.6 litres OR<br /> 900 p.mif cc ≥1.6 litrres (+)<br />900 p.m if chauffer is provided<br />Used partly for official<br /> and partly for private<br /> purpose<br />ॐ<br />22<br />
  31. 31. (5) Valuation of perquisities in respect of free education facilities:<br />Free education or training to employee – Not taxable <br />In the following cases if bills are issued in the name of employee and paid by the<br /> employer then the perquisities is taxable in the hands of both specified and <br /> non specified employee BUT otherwise it is taxable in the hands of specified <br /> employees only:<br /> (a) School fees of family members of the employee paid by the employer <br /> directly to the school-TAXABLE<br /> (b) Reimbrusement of school fees or any other exependiture on education <br /> of family members of the employee-TAXABLE<br /> (c) Education facilities provided in employer’s institute or in any institute due <br /> to employee’s employment with the employer<br />Provided to employee’s children<br /><ul><li>Cost of education or value of </li></ul> benefit ≤ Rs 1000 p.m.<br /><ul><li>Per child > Rs 1000 p.m.</li></ul>Not Taxable<br /> Taxable value= Cost of education in similar institute <br /> (-)1000 p.m per child<br /> (-) Amount paid or recovered from employee<br />Provided to any other member of <br />employee’s household ….including <br />grand children<br />Cost of education in similar institute<br />(-)amount paid or recovered from employee<br />(d) Amt of scolarship given by employer company to the children of its employees-NOT TAXABLE<br />ॐ<br />23<br />
  32. 32. (6) Interest free loan at concessional rate of interest provided<br /> to the employee –(or any member of his household)<br />Taxable for both specified and non specified employees.<br />Taxable value=<br /> If loan is for house and conveyance <br /> and not for repairs<br />Simple interest @ 8% p.a on maximum outstanding <br />balance sheet of each loan as on last day of each<br /> month (-) interest actually paid by employee<br />If loan is for any other purpose<br />Simple interest @ 16% p.a on maximum<br /> outstanding monthly balance of each loan(-)<br />Interest actually paid employee<br />Note: If loan Amt ≤ Rs 20000<br />Nothing is taxable<br />(7) Perquisitie in respect of use of movable asset by the employee&any member of his household<br />Taxable for both specified and non specified employee<br />Taxable value= 10% p.a of actual cost to the employer<br /> (-) amount paid/recovered from employee<br />Assets owned by employer<br />Taxable value= Rent paid or payable by employer(-)<br />Amount paid/recovered from employee<br />Assets hired by employer<br />ॐ<br />24<br />
  33. 33. (8) Perquisitie in respect of movable assets sold by an employer to its employee at a nominal price<br />Taxable for both specified and non specified employees<br />Taxable value is calculated as under-<br />Actual cost of such assets to the employer xxxxxx<br />LESS:<br />Depreciation for each completed year which asset was put<br />to use by the employer by RBM on MOTORCAR 20%(RBM) xxxxxx<br />Electronic items @ 50%p.a and computer xxxxxx<br />By SLM on any other assets @ 10% p.axxxxxx<br />Taxable value xxxxxx<br />Note: Electronic items include data storage and handling devices like computer , digital <br /> diaries and printer but do not include household appliances like washing machines,<br /> microwave ,ovens , mixers, hot plates , ovens etc<br />ॐ<br />25<br />
  34. 34. (9) Valuation of perquisities in respect of free domestic servants:<br />Domestic servants include sweeper, gardener , watchman , personal attendant.<br /><ul><li>Engaged by employerTaxable for specified employees
  35. 35. Engaged by employee & salary paid/reimbursed by employerTaxable for specified employees</li></ul>Taxable value =Salary paid or payable by employer to the servant (-) any amount<br />paid for specified employees for such service<br />Note:<br /><ul><li> If rent free accomodation is provided , gradner’s salary is not separetaly taxable
  36. 36. Domestic servant allowance or allowance for engaging domestic servant </li></ul> is always chargeable to tax for all <br />(10) Valuation for holiday home facilities i.e expenses met by employer for travelling ,touring<br />and accomodation of employee<br /> Taxable value= Amount of expenditure by employer(-) amount paid/recovered from employee<br />(11) Issue of right shares to an employee who is a shareholder –Not taxable<br />(12) Any other perquisities<br />Bills issued in the name of employee but paid by employer taxable for all <br />Otherwise – taxable for only specified employees<br />ॐ<br />26<br />
  37. 37. PROVIDENT FUND<br />Provident fund is retirement benefit. A certain amount is deducted from employee’s salary <br />regularly as his contribution to P.F Employer also generally contributes the same amount to <br />the fund . Interest is received on both these amounts and credited to the fund account . Whole <br />Amount is paid to the employee at the time of his leaving the job or on retirement.<br />There are four kinds of provident funds:-<br />STATUTORY PROVIDENT FUND – It is act under the provisions of the provident funds Act 1925.<br /> it is maintained by govt and semi govt organizations, local authorities , railways ,universities<br /> and recognized educational institutions<br />RECOGNISED PROVIDENT FUND- It is set up under the employee’s provident fund and <br /> Miscellaneous provision Act 1952. it is applicable to the establishments 20 or more <br /> employees can also join RPF<br />UNRECOGNISED PROVIDENT FUND- If the provident fund is not recognized by the <br /> commissioner of Income Tax as Recognized Provident fund ,it is known as Unrecognized<br /> provident fund<br />PUBLIC PROVIDEN FUND- This fund is developed by the central Govt for the benefit of <br /> general public. Both Salaried employees as well as self employed person can join this scheme.<br /> However no interest @ 8% p.a is credited to this fund at present. The accumulated sum <br /> Is payable after 15 years.<br />ॐ<br />27<br />
  38. 38. Tax treatment of Provident Fund<br />Particulars<br />S .P .F<br />R .P .F<br />U .P .F<br />P .P .F<br />Employer’s Contribution<br />Exempt<br />Exempt upto 12% of salary Taxable value =Employer’s Contribution(-)12% of (Basis(+)DA for ret(+)Fixed% comm on TO)<br />Exempt<br />Employer does not contribute<br />Deduction on Employee’s<br /> contribution U/S 80C<br />Available<br />Available<br />Not Available<br />Available<br />Interest credited to P. F<br />Taxable value =Interest credited (-) Interest @ 8.5%<br />Exempt<br />Exempt<br />Exempt<br />Lumpsum payment on <br />retirement<br />Exempt if some condition are fulfilled (*)otherwise treated as UPF<br />Exempt<br /><ul><li>Employee’s contribution</li></ul>Exempt<br />Exempt<br />Taxable as income from other sources<br />Exempt<br /><ul><li>Interest on employee’s cont</li></ul>Exempt<br />(II)<br /><ul><li>Employer’s contribution</li></ul>Exempt<br />(II)<br />Exempt<br />Taxable as salary<br /><ul><li>Interest on employer’s cont</li></ul>Exempt<br />(II)<br />Taxable as salary<br />Exempt<br />Condition: Accumulated balance under RPF is exempt if employee renders a continuous service of 5 years or more with one<br /> or more employers. (2) If he could not complete 5 years due to reason beyond his control E.G Ill-health is continuance of <br />employer’s business etc (3)If he joins another employment and accumulated balance is transferred to the RPF maintained <br />by such other employer. If the above condition are not fulfilled all the calculation are to be made as if fund is UPF<br />ॐ<br />28<br />

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