Income Salaries Provident Funds

Income from Salaries
Dr. NGPASC
COIMBATORE | INDIA
Dr. N.G.P. ARTS AND SCIENCE COLLEGE
(An Autonomous Institution, Affiliated to Bharathiar University, Coimbatore)
Approved by Government of Tamil Nadu and Accredited by NAAC with 'A' Grade (2nd Cycle)
Dr. N.G.P.- Kalapatti Road, Coimbatore-641048, Tamil Nadu, India
Web: www.drngpasc.ac.in | Email: info@drngpasc.ac.in | Phone: +91-422-2369100
Dr. R. PREMA
Associate Professor in Commerce CA

Dr. NGPASC
COIMBATORE | INDIA
Provident Fund

Dr. NGPASC
COIMBATORE | INDIA
PROVIDENT FUNDS

Dr. NGPASC
COIMBATORE | INDIA
PROVIDENT FUNDS
Meaning of Salary for PF:
BP + DA + Commission
Employer’s Contribution to RPF =
Exempted upto 12 % of salary
Interest credited to RPF Balance =
Exempted upto 9.5 % on Balance

Dr. NGPASC
COIMBATORE | INDIA
Question
Page No. 2.14 Illustration 5
Calculate the taxable amount of annual accretion to RPF if the
following information is provided by assessee:
1. Pay – ₹40,000 p.m.
2. Commission received by him on the basis of turnover
achieved by him – ₹1,36,000
3. Employers contribution to RPF @ 13% of salary
4. Interest credited during the year to RPF balance @12% is
₹64,000.

Dr. NGPASC
COIMBATORE | INDIA
Computation of Taxable portion of annual accretion for the P/Y 2019-20
Page No. 2.14 Illustration 5
Particulars ₹ ₹
i) Employers Contribution to RPF @ 13 % of Salary
Salary = (BP+DA+ Commission)
= 40,000 x 12 = 4,80,000 + 1,36,000
=6,16,000 x 13/100
Less: Exempted upto 12 %
Taxable Portion
ii) Interest credited to RPF balance @ 12 %
Less: Exempted upto 9.5 %
=64,000 x 9.5/12
Taxable Portion
Taxable portion of annual accretion
80,080
73,920
64,000
50,667
6,160
13,133
19,493

Dr. NGPASC
COIMBATORE | INDIA
Question
Calculate the taxable amount of annual accretion to RPF
if the following information is provided by assessee:
• Salary @ ₹48,000 p.m.
• Commission @ 1% of turnover of ₹80,00,000 achieved by him
during the previous year
• Employers contribution to RPF @ 7,000 p.m.
• Interest credited to RPF balance @ 12% p.a. is ₹72,000
Page No. 2.14 Qn. No. 3

Dr. NGPASC
COIMBATORE | INDIA
Computation of Taxable portion of annual accretion for the P/Y 2019-20
Particulars ₹ ₹
i) Employers Contribution to RPF (7,000 x 12)
Less: Exempted upto 12 % of salary
Salary = (BP+DA+ Commission)
BP= 48,000 x 12 = 5,76,000
Commission = 80,00,000 x 1/100 = 80,000
Salary = 5,76,000 + 80,000 = 6,56,000 x 12/100
Taxable Portion
ii) Interest credited to RPF balance @ 12 %
=72,000 x 9.5/12
Taxable Portion
Taxable portion of annual accretion
84,000
78,720
72,000
57,000
5,260
13,133
15,000
20,280

Dr. NGPASC
COIMBATORE | INDIA
Question
Mr. A Joined a new job on 1.4.2018 at ₹ 15,000 p.m. due on last
day of the month. He started contributing to URPF @2,500 p.m. His
employer was also contributing same amount. The fund was
recognized from 1-8-2019. Interest credited during 2018-2019 at
the rate of 11% was ₹4,400 and for the period 1-4-2019 to
31.7.2019 was ₹3,300. Compute the amount of transferred balance
of URPF to RPF as on 1-8-2019 and its taxable portion.

Dr. NGPASC
COIMBATORE | INDIA
Computation of Transferred balance and Taxable Portion thereof
Particulars ₹ ₹
Employee’s Contribution (2500x12)
Employer’s Contribution (2500x12)
Interest on Balance
Employee’s Contribution(2500x4)
Employer’s Contribution(2500x4)
Interest on Balance
Transferred Balance to RPF on
1.8.2019
30,000
30,000
4,400
10,000
10,000
3,300
87,700
Particulars ₹ ₹
Employer’s Contribution (2500x12)
Less: Exempted upto 12 % of Salary
15,000 x 12 = 1,80,000 x 12 /100
Interest credited at 11 %
4,400 x 9.5 / 11
Employer’s Contribution(2500x4)
Less: Exempted @ 12 % of salary
15,000 x 4 = 60,000 x 12 /100
Interest credited @ 11 %
3,300 x 9.5/11
30,000
21,600
4,400
3,800
10,000
7,200
3,300
2,850
8,400
600
2,800
450
12,250
Previous Year 2018-19 Previous Year 2018-19
Previous Year 2019-20 upto
31.07.2019 (4 months) :
Previous Year 2019-20 upto
31.07.2019 (4 months) :

Dr. NGPASC
COIMBATORE | INDIA
Allowances

Dr. NGPASC
COIMBATORE | INDIA
House Rent Allowance

Dr. NGPASC
COIMBATORE | INDIA
House Rent Allowance (Sec 10(13 A))
Meaning of Salary: BP + DA + Commission

Dr. NGPASC
COIMBATORE | INDIA
Question
Mr. Hari is employed at Amritsar on a salary of ₹30,000 p.m. The
employer is paying HRA of ₹8,000 p.m. but the actual rent paid by
him (employee) is ₹ 12,000 p.m. He is also getting 2% commission on
turnover achieved by him and turnover is ₹ 50,00,000. Calculate his
gross salary.

Dr. NGPASC
COIMBATORE | INDIA
Computation of Gross Salary for the P/Y 2019-20
Particulars ₹ ₹
Basic Pay (30,000 x 12)
Commission (50,00,000 x 2/100)
House Rent Allowance Received (8000 x 12)
Less: Exemption u/s 10(13A):
(Least of the Following is Exempted)
i) Actual HRA Received 96,000
ii) Rent Paid – 10 % of Salary
1,44,000 – 46,000 98,000
iii) 40 % of Salary 1,84,000
Gross Salary
96,000
96,000
3,60,000
1,00,000
Nil
4,60,000
Rent Paid = 12000 x 12 = 1,44,000
Salary = BP + DA (Enters) + Commission
= 3,60,000 + 1,00,000 = 4,60,000
10 % = 46,000 40 % = 1,84,000

Dr. NGPASC
COIMBATORE | INDIA
Question
Compute Gross salary from information given below for situation separately:
• Salary - ₹30,000 p.m.
• DA – ₹6,000 p.m.
• CCA – ₹1,000 p.m.
• HRA – ₹8,000 p.m.
• Commission on turnover achieved by him is ₹ 40,000.
Situation
a) Living in own house
b) Living in rented house at Delhi and DA enters into pay for retirement benefits
and rent paid is ₹ 7,000 p.m.
c) Living in rented house at Chandigarh and DA does not enters into pay for
retirement benefits and the rent paid is 10,000 p.m.

Dr. NGPASC
COIMBATORE | INDIA
Particulars ₹ ₹
Basic Pay (30,000 x 12)
DA (6,000 x 12)
CCA (1,000 x 12)
Commission
Gross Salary
3,60,000
72,000
1,200
40,000
5,80,000

Dr. NGPASC
COIMBATORE | INDIA
Particulars ₹ ₹
Basic Pay (30,000 x 12)
DA (Enters) (6,000 x 12)
CCA (1,000 x 12)
Commission on Turnover
84,000 – 47,200 36,800
iii) 50 % of Salary 2,36,000
Gross Salary
96,000
36,800
3,60,000
72,000
12,000
40,000
59,200
5,43,200

Dr. NGPASC
COIMBATORE | INDIA
Particulars ₹ ₹
Basic Pay (30,000 x 12)
DA (6,000 x 12)
CCA (1,000 x 12)
Commission on Turnover
1,20,000 – 40,000 80,000
iii) 40 % of Salary 1,60,000
Gross Salary
96,000
80,000
3,60,000
72,000
12,000
40,000
16,000
5,00,000

Dr. NGPASC
COIMBATORE | INDIA
Question
Mr. Ramesh swain is employed at Hyderabad at a Basic Salary of ₹25,000 p.m. and he is also getting following
allowances:
1. Dearness Allowances - ₹2,000 p.m.
2. Lunch allowance - ₹1,000 p.m.
3. Servant allowance (He is paying ₹1,200 p.m. to a servant) - ₹ 1,000 p.m.
4. Transport allowance - ₹ 2,000 p.m.
5. Education allowance @ 200 p.m. per child for three children
6. Hostel allowance to one child - ₹ 500 p.m.
7. Conveyance allowance - ₹ 800 p.m.
8. Overtime allowance - ₹2,000 p.m.
9. Officiating allowance - ₹2,000 p.m.
10. Cash allowance - ₹1,200 p.m.
11. Entertainment allowance - ₹2,000 p.m.
12. Medical allowance - ₹800 p.m.
13. City Compensatory allowance - ₹600 p.m.
14. House rent allowance - ₹ 5,000 p.m.
He is having a family house at the place of his posting but he is living in a rented house and is paying a rent of
₹7,000 p.m. Find out his gross salary.

Dr. NGPASC
COIMBATORE | INDIA
Particulars ₹ ₹
Basic Salary (25,000 x 12)
Dearness Allowance (2,000 x 12)
Lunch Allowance
Servant Allowance (Taxable if servant is for his personal use)
Transport Allowance
Education Allowance Received
Less: Exempted 100 x 2 x 12
Hostel Allowance Received (500 x 12)
Less: Exempted (300 x 12)
Conveyance Allowance (800 x 12)
Overtime Allowance (2000 x 12)
Officiating Allowance (2000 x 12)
7,200
2,400
6,000
3,600
3,00,000
24,000
12,000
12,000
24,000
4,800
2,400
9,600
24,000
24,000

Dr. NGPASC
COIMBATORE | INDIA
Particulars ₹ ₹
Cash Allowance (1,200 x 12)
Entertainment Allowance (2,000 x 12)
Medical Allowance (800 x 12)
City Compensatory Allowance (600 x 12)
ii) 40 % of Salary 1,20,000
iii) Rent Paid – 10 % of Salary 54,000
Gross Salary
60,000
54,000
14,400
24,000
9,600
7,200
6,000
4,98,000

Dr. NGPASC
COIMBATORE | INDIA
Rent Free Accommodation

Dr. NGPASC
COIMBATORE | INDIA
Rent Free Accommodation
Accommodation for
Residence of the
Employee
Accommodation is
given to the employee
without any charge
Not in cash but in kind
as Perquisites.
Accommodation is
Rent Free to the
Employee

Dr. NGPASC
COIMBATORE | INDIA
Calculation of Rent Free House
RFA
Unfurnished
Accommodation
Furnished
Accommodation

Dr. NGPASC
COIMBATORE | INDIA
Unfurnished
Accommodation
Govt.
Employees
Other
Employees

Dr. NGPASC
COIMBATORE | INDIA
Unfurnished
Accommodation
Govt.
Employees
Other
Employees
(NGE)
Whether accommodation is
owned by employer or not
License fee or Rent
fixed by Govt. is
taxable

Dr. NGPASC
COIMBATORE | INDIA
Other
Employees
(NGE)
15% of salary or Actual rent
paid by employer whichever
is less
A) Owned
by Employer
B) Hired by
Employer
Population - more
than 20 lakhs
Population –
Exceeding 10 lakhs &
but not exceeding 20
lakhs
Population – 10
lakhs & less than
10 lakhs
15% of salary
10% of salary
7.5% of salary
Unfurnished
Accommodation

Dr. NGPASC
COIMBATORE | INDIA
Furnished
Accommodation
Value of
Furnished
RFA
Value of Unfurnished RFA
If furniture is
owned by
employer
10% of actual cost of
furniture
= +
Note: Govt. employee or
Non govt. employee

Dr. NGPASC
COIMBATORE | INDIA
Furnished
Accommodation
Value of
Furnished
RFA
Value of Unfurnished RFA
If furniture is
hired by
employer
Actual hire charges of
furniture paid by employer
= +
Note: Govt. employee or
Non govt. employee

Dr. NGPASC
COIMBATORE | INDIA
Hotel Accommodation
For less than 15 days on
transfer from one place to
another
HA
For more than 15 days on
transfer from one place to
another
24% of salary or actual bill
whichever is less is
taxable
Fully Exempted

Dr. NGPASC
COIMBATORE | INDIA
Meaning of salary
 Basic pay, pay, wages
 Dearness pay, Dearness allowance which enters
 Commission
 Bonus
 Fees
 Value of all taxable allowances
 Any other monetary payment which is chargeable to tax
 Leave encashment of salary only if it pertains to the leave
earned during the previous year in which RFH is provided
to the employee
Salary

Dr. NGPASC
COIMBATORE | INDIA
Question
Mr. R is working in a central government office at Shimla. His salary particulars are
as follows:
Salary - 3,60,000
DA(fully enter into pay for retirement benefits) - 96,000
Hill Compensatory Allowance - 24,000
Transport Allowance - 24,000
Rent Free House: Annual License Fee - 72,000
Cost of furnishing - 3,00,000
Calculation of Rent free House.

Dr. NGPASC
COIMBATORE | INDIA
Computation of RFH for the P/Y 2019-20
Particulars ₹ ₹
For Government employee the value of RFH is
License Fee
Add: 10% of cost of furnishing (10% of
3,00,000)
72,000
30,000
Value of rent free furnished house 1,02,000

Dr. NGPASC
COIMBATORE | INDIA
Question
Mr. Y gets a salary of ₹33,000 p.m. and he has been provided with
rent free furnished accommodation at Karnal (Population 7.5 lakhs).
The FMV of the unfurnished house is ₹60,000 p.a. He gets DA @ 40%
of salary which is given as per terms of employment. He gets
education allowance of ₹500 p.m. for education of his son. The cost
of furnishing of the house is ₹2,30,000. The employee has been
provided with hired air conditioner for five months and hire charges
of ₹1,000 p.m. are paid by the employer.

Dr. NGPASC
COIMBATORE | INDIA
Computation of Gross salary for the P/Y 2019-20
Particulars ₹ ₹
Salary 33,000*12
DA (40% of salary)
Education allowance 500*12
(-) Exempted
Value of Rent Free House: House owned by employer at
Karnal
7.5% of salary
(3,96,000+1,58,400+4,800=5,59,200)(5,59,200*7.5/100)
Add: 10% of cost of furnishing
Add: Rent of air conditioner 1000*5
6,000
1,200
41,940
23,000
5,000
3,96,000
1,58,400
4,800
69,940
Gross Salary 6,29,140

Dr. NGPASC
COIMBATORE | INDIA
Question
Mr. Arun has furnished following particulars:
i) Salary @25,000 p.m.
ii) Dearness Allowance @5,000 p.m. (It enters into pay for retirement benefits)
iii) Entertainment allowances @600 p.m.
iv) Bonus 16,000
v) Cost of furnishing 1,20,000
Calculate the value of rent free house if
Case I. Mr. Arun is Govt. employee and rent of house fixed by Govt. is 2,500 p.m.
Case II. Mr. Arun is working in a Semi-Govt. undertaking at Chennai (population more than
25 lakhs) and FMV of the house is 8,000 p.m.
Case III. Mr. Arun is working in private sector at Chandigarh (population below 10 lakhs) and
rent of the house hired by employer is 6,000 p.m. are paid by employer.
Case IV. Mr. Arun is working in private sector at Delhi(population above 25 lakhs) and actual
rent of the house not owned by employer is 6,000 p.m. Rent charged by employer
is only 3,000 p.m.

Dr. NGPASC
COIMBATORE | INDIA
Computation of Rent Free House for the P/Y 2019-20
Particulars ₹ ₹
CASE I: Govt. Employee
Value of Rent Free House:
Rent fixed by Govt.
1,20,000)
30,000
12,000 42,000
Value of rent free furnished house 42,000

Dr. NGPASC
COIMBATORE | INDIA
Particulars ₹ ₹
CASE II: Semi Govt. Employee
Value of Rent Free House at Chennai
Salary of the employee =
3,00,000+60,000+16,000+7,200=3,83,200
15% of salary
1,20,000)
57,480
12,000 69,480

Dr. NGPASC
COIMBATORE | INDIA
Particulars ₹ ₹
CASE III: Any other Employee (City having population below
10 lakhs)
Value of Rent Free House hired by employer:
3,00,000+60,000+16,000+7,200=3,83,200
15% of salary = 57,480 or
Actual rent paid by employer= 72,000 w.e is less
Add: 10% of cost of furnishing (10% of 1,20,000)
Add: Actual hire charges of refrigerator
57,480
12,000
7,200 76,680

Dr. NGPASC
COIMBATORE | INDIA
Particulars ₹ ₹
CASE IV: Any other Employee (City having population above
25 lakhs)
Value of Rent Free House at Delhi:
3,00,000+60,000+16,000+7,200=3,83,200
15% of salary = 57,480 or
Actual rent paid by employer= 72,000 w.e is less
Add: 10% of cost of furnishing (10% of 1,20,000)
57,480
12,000
Value of rent free furnished house
Less: Rent charged by employer @3,000 p.m.
69,480
36,000
Value of concessional accommodation 33,480