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Income from salaries
- 2. Income from Salary • Section 15 to 17 • Any remuneration paid by an employer to his employee in consideration of his service. • Monetary value of those benefits and facilities provided by the employer which are taxable.
- 3. Salary – Section 17 (1) • Includes: – Wages – Any annuity / pension – Any gratuity – Any fee, commission – Perquisites/ profits in lieu of salary – Any advance salary – Any payment received in respect of any period of leave not availed (Encashment of earned leave) – Annual accretion to Recognized Provident Fund – Taxable portion of transferred balance – Contribution made by the Central government / other employer under the pension scheme
- 4. Important points • Foreign Salary and Pension • Relationship of employer and employee • Professional income- business/ profession • Receipts from persons other than employer • Pension • Salary of MP- Other Sources • Salary of a partner- Business/ Profession • Family pension
- 5. Salary Basic Salary Allowances Perquisites Profits in lieu of Salary Less Entertainment Allowance Employment Tax
- 8. Meaning • Payments in cash made by the employer to his employee monthly, other than salary. • Fixed sum of money paid regularly in addition to salary for the purpose of meeting some particular requirement connected with the service rendered by an employee.
- 10. Taxable Allowances Dearness Allowances Fixed Medical allowances Tiffin Allowances Servant Allowances Non- Practicing Allowances Hill Allowances Warden and proctor Allowances Deputation Allowances Overtime Allowances Other Allowances
- 11. • Dearness Allowances – Common allowance on account of high prices – Additional DA- sometimes – Included- Salary – Taxable in full – Given as terms of employment- included in salary for determining exemption limit of HRA, RPF, etc – Dearness Pay - becomes part of basic salary
- 12. • Fixed Medical Allowances – fully taxable. • Tiffin Allowance – Lunch and Refreshment to the employees – Meal allowance / Refreshment Allowance • Servant Allowance – Taxable for all categories of employees • Non- practicing allowance- – Medical Doctors - government service
- 13. • Hill Allowance – Given to employees working in hill areas on account of high cost of living in hilly areas as compared to plains – Fully taxable - place < 1000 metre height from sea level • Warden and Proctor Allowance – Educational Institutions for working as warden of the hostel • Deputation Allowance – An employee is sent from his permanent place of service to other place or institution or organization on deputation for a temporary period • Overtime Allowance – Employee works for extra hours over and above his normal hours of duty – Extra wages - fully taxable
- 14. • Other Allowances – Family allowance to armed personnel while on field without family – Project allowance – Marriage allowance – Rural allowance – City Compensatory Allowances – Telephone Allowance – Education Allowance – Dinner Allowance – Health allowance – Holiday allowance – Special qualification allowance, etc
- 17. Allowances Exempt Upto Specified Limit
- 18. Allowances Exempt Upto Specified Limit HRA Entertainm ent Special Allowances Sec 10 (14) (i) Special Allowances Sec 10 (14) (ii)
- 19. House Rent Allowances • Allowance granted to an assessee by his employer to meet expenditure incurred on payment of rent in respect of residential accommodation occupied by him • Exempt upto a certain extent • Rule 2A - least of the following amount shall exempt 1. HRA actually received 2. Excess of rent paid over 10% of salary 3. a) If the accommodation - Mumbai, Kolkata, Delhi or Chennai- 50 % of salary b) At any other places - 2/5th (40%) of salary House Rent Allowances
- 20. • Employee is living his own house - getting HRA • Living in a house for which he is not paying any rent • Fully taxable • Salary – Basic Pay – Dearness Allowance- if terms of employment – Commission based on fixed percentage of turnover HRA
- 21. Entertainment Allowance • Included in the Salary u/s 15 • Deduction - u/s 16 (ii)
- 23. • Special allowances exclusively to be incurred in the performance of the duties of his office • Sec 10 (14) (i) • Travelling Allowance • Cost of travel on tour or on transfer • Travel on transfer - any sum paid in connection with transfer packing, and transportation of personal effects on such transfer.
- 24. Special Allowances Sec 10 (14) (i) Travelling Daily Conveyance Helper Academic Uniform Special Allowances Sec 10 (14) (ii) Special hill compensatory Children Education Children Hostel Transport
- 27. Allowances Exempt Upto Specified Limit
- 29. Allowances Exempt Upto Specified Limit HRA Entertainm ent Special Allowances Sec 10 (14) (i) Special Allowances Sec 10 (14) (ii)
- 30. Special allowances • Two types • Those which are exclusively incurred in the performance of the duties of his office • Those which are to meet the personal expenses
- 31. Special Allowances Exempt u/s 10 (14) (i) Exempt u/s 10 (14) (ii)
- 32. Special Allowance Sec 10 (14) (i) • Exclusively to be incurred in the performance of the duties of his office • Special allowances granted to meet expenses wholly, necessarily and exclusively incurred in the performance of the duties of an office. • These are exempt to the extent actually spent • Such expenses are actually incurred for that purpose and • Notified by the Central Government.
- 33. Special Allowances Exempt u/s 10 (14 ) (i) Travelling Daily Conveyance Helper Academic Uniform
- 34. Special Allowance Sec 10 (14) (i) • Travelling Allowances – To meet cost of travel on tour or on transfer – The cost of travel on transfer – any sum pad in connection with transfer packing and transportation of personal effects on such transfer • Daily allowance – Allowance granted for the period of journey on tour or on transfer – To meet the ordinary daily charges incurred by an employee – On account of absence from his normal office place of duty.
- 35. Special Allowance Sec 10 (14) (i) • Conveyance Allowance – To meet expenditure incurred on conveyance in the performance of duties of an office or employment of profit. • Helper Allowance – Expenditure incurred on a helper where such helper is engaged for the performance of official duties.
- 36. Special Allowance Sec 10 (14) (i) • Academic Allowance – Allowance granted for encouraging the academic, research and other professional pursuits. • Uniform Allowances – Expenditure incurred on the purchase or maintenance of uniforms for wear during the performance of official duties
- 38. Special Allowance Section 10 (14) (ii)
- 39. Special Allowances • To meet personal expenses • Any such allowance granted to the assessee either • To meet his personal expenses at the place of his official duties or • At the place where he ordinary resides or • To compensate him for the increased cost of living. • Exempt from tax to the extent notified by the Central Government
- 40. Special Allowances 1. Special Compensatory Allowance 1. Special hill compensatory allowance 2. High altitude allowance 3. Uncongenial climate allowance 4. Snow bound area allowance 5. Avalanche allowance
- 41. Special Allowances 2. Special Compensatory Allowance – Border area allowance – Remote locality allowance – Difficult area allowance – Disturbed area allowance 3. Special Compensatory – Tribal Areas/ Scheduled Areas/ Agency Areas) Allowances – Madhya Pradesh, Tamil Nadu, UP, Karnataka, Tripura, Assam, West bengal, Bihar and Orissa – Rs 200 p.m
- 42. Special Allowances 4. Any allowances granted to an employee working in any Transport System – To meet his personal expenses – During his duty performed in the course of running such transport from one place to another place – 70 % of such allowance or – Rs 10,000 p.m whichever is less
- 43. Special Allowances 5. Children Education Allowance – Rs 100 p.m per child – Max – 2 children 6. Children Hostel Allowance – Rs 300 p.m per child – Max – 2 children
- 44. Special Allowances 7. Transport Allowance – To compensate the cost incurred on account of commuting between the place of residence and the place of duty • Max Rs 1,600 p.m – If the employee – blind or deaf and dumb or orthopedically handicapped with disability of extremities • Exempt- Rs 3,200 p.m
- 45. Special Allowances 8. Underground Allowance – Employee who is uncongenial unnatural climate in underground mines – Max Rs 800 p.m. 9. Special allowances to members of Armed forces
- 49. Fully Exempted Allowances • Foreign Allowances – Paid by government to Indian citizen outside India – For rendering services abroad – It is not taxable at all – Several types – overseas allowance, children education allowance, entertainment allowance, etc – Not available to non- government employees – Those who are not Indian citizens
- 50. Fully Exempted Allowances • Sumptuary allowances to High court or Supreme court judges – Allowances given to high court and supreme court judges – Fully exempt from tax • Allowances from UNO – Paid by U.N Organizations to its employees
- 51. Fully Exempted Allowances • Per-diem allowances – Paid for the purpose of use of hotel, boarding and lodging facilities to an employee