Salary Income

1. 28/01/2014
A DISCUSSION ON
SALARY INCOME AND
DEDUCTIONS AVAILABLE
FOR PURPOSE OF INCOME TAX
RATES OF TAXES FOR FY 2013 – 2014
1.) The rates of income-tax in the case of every individual
(other than those mentioned in (ii) and (iii) below) are as
under :-
Income Amount
Rate of Tax
Up to Rs. 2,00,000
Nil.
Rs. 2,00,001 to Rs. 5,00,000
10 %
Rs. 5,00,001 to Rs. 10,00,000
20 %
Above Rs. 10,00,000
30 %
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2. 28/01/2014
RATES OF TAXES FOR FY 2013 – 2014
2.) In the case of every individual, being a resident in India,
who is of the age of 60 years or more but less than 80
years at any time during the previous year,-
Income Amount
Rate of Tax
Up to Rs. 2,50,000
Nil.
Rs. 2,50,001 to Rs. 5,00,000
10 %
Rs. 5,00,001 to Rs.10,00,000
20 %
Above Rs. 10,00,000
30 %
RATES OF TAXES FOR FY 2013 – 2014
3.) In the case of every individual, being a resident in India,
who is of the age of 80 years or more at anytime during
the previous year,-
Income Amount
Rate of Tax
Up to Rs. 5,00,000
Nil.
Rs. 5,00,001 to Rs. 10,00,000
20 %
Above Rs. 10,00,000
30 %
• Education Cess : 3% of the Income-tax.
• Surcharge of 10 % is applicable only if income exceeds Rs. 1 crore.
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3. 28/01/2014
SALARY INCOME:

Salary will include all allowances, profit in lieu of salary
and perquisites.

Allowances is generally defined as fixed quantity of money
or other substance given regularly in addition to salary for
purpose of meeting some particular requirement connected
with services rendered by the employee.

Profit in lieu of salary is defined as compensation received
by employee in connection with termination of his
employment or modification of terms of employment.

A perquisite is defined as some benefit in addition to the
amount that may be legally due by way of contract for
services rendered.
ALLOWANCES:

Special Allowances are prescribed under section 10 (14):

The following allowance, are exempt under section 10(14) to the extent the
amount is utilized for specified purpose for which allowance is received:

Travelling Allowance / Transfer Allowance

Conveyance Allowance (Between office to place of client)

Daily Allowance

Helper Allowance

Research Allowance

Uniform Allowance

Documents: Proper proofs of expenses along with proper logs of expenses
incurred should be produced by the employees to claim the above
allowances as exempt. A declaration from employees that they have
expended these allowances for official purpose and certifying the amount
expended should be obtained from each employees.
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4. 28/01/2014
ALLOWANCES (CONT):

i.
ii.
In case of following allowance the exemption does not depend upon
expenditure but are exempt to the extent of:
The amount of allowance or
The amount specified in Rule 2BB whichever is lower.

The allowance and the exempt amounts specified in Rule 2BB are as
follows:
1.
Children Education Allowance Rs. 100 per month per child up to two
children (maximum Rs. 2,400 pa).
2.
Hostel Expenditure Allowance Rs. 300 per month per child up to two
children (maximum Rs. 7,200 pa).
3.
Transport Allowance (Popularly known as Conveyance Allowance) for
commuting between place of residence and office Rs. 800 pm (maximum
Rs. 9,600).

Documents: A declaration from employees regarding number of school
going children along with their fee receipts are to obtained from employees
for claiming Children Education Allowance and Hostel Expenditure
Allowance as exempt.
HOUSE RENT ALLOWANCE:

House Rent Allowances is exempt under section 10 (13A):

Exemption is least of the following amount.
i.
Actual House Rent Allowance Received, or
ii.
Rent paid in excess of 10% of Salary or
iii.
50% of Salary, if the employee is in Chennai / Mumbai / Kolkatta / Delhi
and 40% of Salary for the employee is in other places.

If the employees resides in his/her own house or in a house for which
he/she does not pay any rent, no HRA exemption is available.

If the employee stays in rented place for part of the year, he will get
exemption only for part of the year.

Documents: Copy of Rent Agreement, Rent Receipts, PAN Card Copy of
the Owner of Premises and a Declaration of total rent paid by employee
from his account during the financial year is required.
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5. 28/01/2014
PERQUISITES: (RENT FREE ACCOMMODATION)
1)
Valuation of Rent – Free Unfurnished Accommodation:

Salaried taxpayers in employment with private sector, the valuation of
perquisite in respect of accommodation would be at rates, as discussed below:

Where the accommodation provided to the employee is owned by the
employer:
Sl.
No
Cities having population as per the 2001
census
Perquisite
1
Exceeds 25 lakh
15% of salary
2
Exceeds 10 lakhs but does not exceed 25 lakhs
10% of salary
3
For other places
7.5 % of salary

Where the accommodation so provided is taken on lease/ rent by the
employer:
The prescribed rate is :
 15% of the salary or
 The actual amount of lease rental payable by the employer, whichever is
lower, as reduced by any amount of rent paid by the employee.
PERQUISITES: (RENT FREE ACCOMMODATION)
1.
Valuation of the perquisite of furnished accommodation,
the value of perquisite as determined by the above
method (in A) shall be increased by
•
10% of the cost of furniture, appliances and equipments, or
•
Where the furniture, appliances and equipments have been
taken on hire, by the amount of actual hire charges payable
as reduced by any charges paid by the employee himself.
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6. 28/01/2014
PERQUISITES: (MOTOR CAR)
A. If an employer provides motor car facility to his employee the value of such
perquisite shall be :
i.
Nil, if the motor car is used by the employee wholly and exclusively in the
performance of his official duties.
ii.
Actual expenditure incurred by the employer on the running and
maintenance of motor car including remuneration to chauffeur as increased
by the amount representing normal wear and tear of the motor car and as
reduced by any amount charged from the employee for such use (in case the
motor car is exclusively for private or personal purposes of the employee or
any member of his household).
iii.
Rs. 1800/- (plus Rs. 900/-, if chauffeur is also provided) per month (in case the
motor car is used partly in performance of duties and partly for private or
personal purposes of the employee or any member of his household if the
expenses on maintenance and running of motor car are met or reimbursed by
the employer).
However, the value of perquisite will be Rs. 2400/- (plus Rs. 900/-, if chauffeur
is also provided) per month if the cubic capacity of engine of the motor car
exceeds 1.6 liters.
PERQUISITES: (MOTOR CAR)
iv.
Rs. 600/- (plus Rs. 900/-, if chauffeur is also provided) per month
(In case the motor car is used partly in performance of duties
and partly for private or personal purposes of the employee or
any member of his household if the expenses on maintenance
and running of motor car for such private or personal use are
fully met by the employee).
However, the value of perquisite will be Rs. 900/- (plus Rs. 900/-, if
chauffeur is also provided) per month if, the cubic capacity of
engine of the motor car exceeds 1.6 liters.
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7. 28/01/2014
PERQUISITES: (MOTOR CAR)
B. If the motor car or any other automotive conveyance is owned by the employee but
the actual running and maintenance charges are met or reimbursed by the
employer, the method of valuation of perquisite value is different and as below:

Where the motor car or any other automotive conveyance is owned by the employee
but actual maintenance & running expenses (including chauffeur salary, if any) are
met or reimbursed by the employer, perquisite shall not be chargeable to tax if the
car is used wholly and exclusively for official purposes. However, following
compliances are necessary:

The employer has maintained complete details of the journey undertaken for official
purposes;

The employer gives a certificate that the expenditure was incurred wholly for official
duties.

However, if the motor car is used partly for official or partly for private purposes
then the
Amount of perquisite shall be the actual expenditure incurred by the employer as
reduced by the amounts in iii) referred to in (A) above, as the case may be.


Normal wear and tear of the motor car shall be taken at 10 % per annum of the
actual cost of the motor car.
PERQUISITES: (INTEREST FREE OR CONCESSIONAL LOANS)

It is common practice, particularly in financial institutions, to provide
interest free or concessional loans to employees or any member of his
household. The value of perquisite arising from such loans would be
the excess of interest payable at prescribed interest rate over
interest, if any, actually paid by the employee or any member of his
household. The prescribed interest rate would now be the rate
charged per annum by the State Bank of India as on the 1st
day of the relevant financial year in respect of loans of same
type and for the same purpose advanced by it to the general
public.

Perquisite value would be calculated on the basis of the maximum
outstanding monthly balance method. For valuing perquisites, under
this rule, any other method of calculation and adjustment otherwise
adopted by the employer shall not be relevant. However, small loans
up to Rs. 20,000/- in the aggregate are exempt.
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8. 28/01/2014
PERQUISITES: (MEDICAL REIMBURSEMENT)

Medical Reimbursement by the employer
exceeding Rs. 15,000/- p.a. for any hospital or
clinic u/s 17(2) is to be taken as taxable
perquisite.

Documents:
For
claiming
Rs.
15,000
reimbursement, doctor’s certificate is required
to the effect that the employee and his family has
incurred Rs. 15,000 or more on medical facilities
during the year and is supported by medical bills.
TAX ON EMPLOYMENT [SECTION 16(III)]:
 The
tax on employment (Professional Tax)
leviable by or under any law, shall also be
allowed as a deduction in computing
the income under the head "Salaries".
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9. 28/01/2014
DEDUCTION UNDER CHAPTER VIA:
1.) DEDUCTION IN RESPECT OF CERTAIN PAYMENTS – U/S 80C:
NATURE OF INVESTMENT
REMARKS
Life Insurance Premium
For
individual,
policy
must
be
in
self
or
spouse’s
or
any
child’s
name.
For
HUF,
it
may
be
on
life of any member of HUF
1. If policy issued before 01.04.2012 – 20%
of sum assured.
2. If policy issued after 01.04.2012 – 10% of
sum assured
Contribution made under Employee’s Provident
Fund, a Recognized Provident Fund or a
superannuation fund
Contribution to PPF
---
For individual, can be in the name of self/spouse,
any child & for HUF, it can be in the name of any
member of the family
Subscription to National Saving Certificates
Accrued Interest also eligible for deduction
Sum deposited in ULIP of LIC, UTI or other
approved Insurance companies
---
Contribution to notified annuity Plan of LIC (e.g.
Jeevan Dhara) or Units of UTI / notified Mutual
Fund.
---
NATURE OF INVESTMENT
REMARKS
Certain payment made by way of
installment or part payment of loan taken
for purchase / construction of residential
house property.
Condition has been laid that in case the
property is transferred before the expiry of 5
years from the end of the Financial year in
which possession of such property is
obtained by him, the aggregate amount of
deduction of income so allowed for various
years shall be liable to tax in that year.
Subscription to units of a Mutual Fund
notified u/s 10 (23D)
---
Subscription to deposit scheme of a public --sector, company engaged in providing
housing finance
Tuition fees paid at the time of admission or
otherwise to any school, college, university
or other educational institution situated
within India for the purpose of full time
education of any two children.
Available in respect of any two children.
Any payment towards any development fees
or donation or payment of similar nature
will not be eligible.
Bank fixed deposits
The
term
of
the
deposit
not be less than five years
Payment
made
time deposit in
the Post Office
as
five
an account
should
year --under
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10. 28/01/2014
DEDUCTION UNDER CHAPTER VIA:
2.) DEDUCTION IN RESPECT OF PENSION FUND – U/S 80CCC:
NATURE OF DEDUCTION
Payment of premia for annuity plan of
LIC or any other insurer. Deduction is
available up to a maximum of Rs.
1,00,000/-
REMARKS
The premium must be deposited to keep
in force a contract for an annuity plan of
the LIC or any other insurer for receiving
pension from the fund.
 The aggregate amount of deduction under sections 80C and 80CCC
together shall not exceed Rs.1,00,000/ Documents: Copies of Investment Proof should be provided to the
Employer in order to claim 80C and 80CCC deductions in Form No 16.
DEDUCTION UNDER CHAPTER VIA:
3.) DEDUCTION IN RESPECT OF MEDICAL INSURANCE PREMIUM U/S 80D

The salient features of the provisions of section 80D are as
follows:
1.
2.
3.
4.

The tax payer is individual or HUF
Mediclaim premium is paid by individual on his life, spouse,
dependent children and parents. In case of HUF for any member
of HUF
Payment should be made by any other mode other than by cash.
Deduction available is Rs. 15,000 and in case insurance policy is
of senior citizen deduction available shall be Rs. 20,000.
Documents: Copies of Mediclaim 80D Certificate and
Policy Copy to be provided to employer to claim 80D
deduction in Form No 16.
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11. 28/01/2014
DEDUCTION UNDER CHAPTER VIA:
4.) DEDUCTION IN RESPECT OF MAINTENANCE INCLUDING MEDICAL
TREATMENT OF A DEPENDENT BEING A PERSON WITH DISABILITY U/S

The salient features of the provisions of section 80DD are as follows:
The tax payer is resident in India (Individual or HUF)
1.
The tax payer has opted for any (or both) of the following:
2.


The tax payer has incurred an expenditure for the medical treatment (including
nursing), training and rehabilitation of a dependent.
The taxpayer has paid or deposited under any scheme framed in this behalf by
the LIC or any other insurer or administrator approved by Board.
For above purpose a “dependent being person with disability “ is a
person who satisfies following points:
3.


4.
80DD
In case of individual – spouse, children, parents, brother or sister
In case of HUF – member of HUF
Such person is wholly and mainly dependent upon such individual
and HUF
DEDUCTION UNDER CHAPTER VIA:
4.) DEDUCTION IN RESPECT OF MAINTENANCE INCLUDING MEDICAL
TREATMENT OF A DEPENDENT BEING A PERSON WITH DISABILITY U/S
80DD
5. Such person suffers from autism, cerebral palsy or multiple
disability or disability prescribed under Person with Disabilities
Act in any other case. Disability should be atleast to the extent of
40 %
6. Copy of
Certificate in Form 10 IA to be obtained from
Government Hospital and is to be submitted along with return of
Income
7. Amount of deduction is Rs. 50,000 irrespective amount incurred
or deposited in the scheme.
8. If disability is 80% or more deduction shall be Rs. 100,000.
9. However if, dependent predeceases the tax payer entire amount
expended or paid shall be taxable in the previous year in which it
is received.
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12. 28/01/2014
DEDUCTION UNDER CHAPTER VIA:
5.) DEDUCTION IN RESPECT OF MEDICAL TREATMENT – U/S 80DDB

The salient features of the provisions of section 80DDB are as follows:
1. The tax payer is resident in India (Individual or HUF).
2. The tax payer has actually paid for the medical treatment of
specified disease or ailment as prescribed.
3. Has actually incurred for medical treatment of the assessee
himself or wholly / mainly dependent spouse, children,
parents, brothers and sisters of the taxpayer. If tax payer is
HUF than any member of HUF.
4. The assessee has to submit a certificate in Form 10I from
neurologists, an oncologists, a urologist, a hematologists, an
immunologists or such other specialists as prescribed,
working in Government Hospital.
5. Amount of Deduction is Rs. 40,000 or expenditure actually
incurred whichever is lower and expenditure incurred is in
respect of senior citizen then deduction is Rs. 60,000 or
expenditure actually incurred whichever is lower.
DEDUCTION UNDER CHAPTER VIA:
6.) DEDUCTION IN RESPECT OF PAYMENT OF INTEREST ON LOAN
TAKEN FOR HIGHER STUDIES

The salient features of the provisions of section 80E are as follows:
1.
2.
3.
4.
5.
6.
7.

– U/S 80E
The tax payer is an individual.
He has taken loan from any bank, financial institution or an
approved charitable trusts.
The loan is taken for the purpose of pursuing higher education
pursued after passing the Senior Secondary Examination.
The loan was taken for pursuing higher studies for his own, his
spouse or any child.
Amount is paid by the individual by way of interest on loan
during the previous year.
Such amount is paid from income chargeable to tax.
Entire amount of interest paid is allowed as a deduction in
assessment year in which he starts paying and is available for
succeeding 7 assessment year.
Documents: Copies of Sanction Letter, Loan Account Statement and a
Certificate from Bank regarding interest payment.
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13. 28/01/2014
DEDUCTION UNDER CHAPTER VIA:
7.) DEDUCTION IN RESPECT OF INTEREST ON LOAN TAKEN FOR
RESIDENTIAL HOUSE PROPERTY

The salient features of the provisions of section 80EE are as follows:
1.
2.
3.
4.
5.

– U/S 80EE
The tax payer is an individual.
He has taken housing loan from bank or housing finance
company in financial year 2013 – 2014.
The loan amount should not exceed Rs. 25 lakhs and Property
Value should not exceed Rs. 40 lakhs.
The Assessee does not own any residential property on the date
of sanction of loan.
If all above conditions are satisfied interest payable on above
loan up to Rs. 1,00,000 is allowed as deduction in AY 2014 –
2015. If interest payable is less than Rs. 1,00,000 than balance
amount is allowed as deduction in AY 2015 – 2016.
Documents: Copies of Sanction Letter, Loan Account Statement and a
Certificate from Bank regarding interest and payment of principal.
DEDUCTION UNDER CHAPTER VIA:
8.) DEDUCTION IN RESPECT OF DONATION TO CERTAIN FUNDS,
CHARITABLE INSTITUTIONS
– U/S 80G

This deduction is available to individual, HUF,
Firm and Company.

There are Donations that are available for 100 %
deduction and there are donations that are
available for 50 % deduction.

In some donation there is a ceiling of 10 % of
Adjusted Gross Total Income.

Donations above Rs. 10,000 are not eligible for
deduction if they are made in cash.
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14. 28/01/2014
DEDUCTION UNDER CHAPTER VIA:
9.) DEDUCTION IN RESPECT OF DONATION FOR SCIENTIFIC
RESEARCH OR RURAL DEVELOPMENT
– U/S 80GGA

This deduction is available to individual, HUF,
Firm and Company not having Business Income.

Donation should be given to approved research
association, university, college or institution.

100% of aforesaid
deduction.

Donations above Rs. 10,000 are not eligible for
deduction if they are made in cash.
donation
is allowed
as
DEDUCTION UNDER CHAPTER VIA:
10.) DEDUCTION IN RESPECT OF A PERSON WITH DISABILITY – U/S
80U

This deduction is available to individual who is
resident in India.

Person suffers 40 % or more of disability like
blindness, low vision, leprosy cured, hearing
impairment,
locomotor
disability,
mental
retardation and mental illness.

The tax payer has to furnish a certificate in Form
No 10IA from medical authority or form notified
under Persons with Disabilities Act, 1995.

Deductions will Rs. 50,000 and Rs. 1,00,000 in
case disability is 80% or more.
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15. 28/01/2014
REBATE:

Rebate of Rs. 2000 for resident individual
having total income up to Rs. 5 Lakhs – U/s
87A
1.
2.
3.
Tax payer is a resident individual.
His Total Income or Net Taxable Income is
Rs. 5,00,000 or less.
If above conditions are satisfied rebate will be
entire amount of tax or Rs. 2000 whichever is
lower.
INTEREST ON LOAN TAKEN FOR ACQUISITION OR CONSTRUCTION
OF RESIDENTIAL HOUSE PROPERTY- SECTION 24(B)TE:
1.
The deduction is allowed only in case of house property which is owned and is
in the occupation of the employee for his own residence.
2.
The quantum of deduction allowed as per table below:
No.
Purpose of borrowing capital
Date of Borrowing
Capital
Max Deduction
allowable
Any time
Rs. 30,000/-
1
Repair or renewal or reconstruction of the house
2
Acquisition or construction of the house
Before 01.04.1999
Rs. 30,000/-
3
Acquisition or construction of the house
On or after 01.04.1999
Rs. 1,50,000/-
In case of Serial No. 3 above
a) The acquisition or constructing of the house should be completed within 3 years from the
end of the FY in which the capital was borrowed. Hence it is necessary for the
Employer to have the completion certificate of the house property against which
deduction is claimed either from the builder or through self-declaration from
the employee.
b) Further any prior period interest for the FYs up to the FY in which the property was
acquired and constructed shall be deducted in equal installments for the FY in question
and subsequent four FYs.
c) The employee has to furnish before the employer a certificate from the person to whom any
interest is payable on the borrowed capital specifying the amount of interest payable.
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16. 28/01/2014
THANK YOU
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