1. The document discusses various types of salaries, allowances, and perquisites that are taxable or exempt from income tax for government and non-government employees. 2. It covers leave encashment, gratuity, pension received by government employees, voluntary retirement schemes, retrenchment compensation, and various allowances such as HRA, transport allowance, children education allowance etc. 3. It also discusses deductions available under section 16 and specifies which perquisites are taxable or exempt for employees. Maximum exemptions for various allowances are also provided.

1. SALARIES1LEAVE SALARYLeave EncashmentDuring continuityOf employementAt the time ofRetirement or Leavig the jobGovernmentEmployeeNon-govtemployeeCGE/SGENGE/LA/PSUExemptLeast ofExempt U/S10(10AA)TaxableCash equivalent of Leave salary(b) [10m(Basic P.M +DA for Retirement) + fixed % Comm in T.O] / 10 x leave to the credit<_ 30 days P.AAmount Specified by govt =300000Actual leave encashmentॐ1

2. NOTES:Leave to the credit should be for each completed year of service.Leave salary paid to the legal Heirs of deceased employee is not Taxable as “salary” but taxable as “IFOS”Leave salary received by family of govt employee who died in harness is not taxableAverage salary should be calculated on the basic of salary for immediately preceding 10 months of the retirementIt is a death cum retirement benefit payable on the basic of duration of servicesGRATUITY: [Sec10(10)(2)Exempt U/S10(10)(i)CGE/SGE/LACovered by payment of Gratuity Act 1972GRATUITYExempt Least of15 day’s salary for every completed year of service or part there of in excess of 6 months =BASIC + DA (P.M) x15/26 x NNOTE -> In case of seasonal employees =BASIC + DA (P>M) x 7/26 x N(b) Maximum 10,00,000(c) Actual gratuity receivedNot covered by ACT 1972Exempt least of(a) Maximum 10,00,000(b) Half month’s avg salary for each completed year of service =10(BASIC + DA for ret)+ comm on T.O/10 x ½ x N(c) Actual gratuity receivedॐ2

3. PENSION (Sec 17(1)(ii)(3)Pension is a perodical payment received by an employee after his retirementUncommuted PensionPerodical payment Of pensionFully Taxable=GE/NGECGE/SGE/LA/STATE CROP/SCJ/HCJEXEMPTED U/S10((10A)(i)PENSIONUncommuted pension =(Pension P.M x M) xxx(b) Uncommuted part of full pension =(FPPM x(100/c%) x bal of months from commuted date) xxx ----- xxx(c) Commuted pension commuted value received xxx (-) exempt (i) if grautity is received CV x 100/c% x 1/3 xxx OR (ii) if grautity is not received CV x 100/c% x ½ xxx ___ Total taxable pension xxx Lumpsum paymentIn lieu of perodical paymentCommutedpension=NGETaxable pension CALCULATIONॐ3

4. NOTE:pension received from united nations organisation->Exempted(2) Family pension received by family members of an employee after his death-> not taxable as salary but taxable as GFOS U/S 56(4) VRS Compensation[Sec 10(10)]-> Max exemption 5,00,000-> Exemption allowed only once. Conditions/Guideline to be satisfied as per rule 2 B.A of IT RulesApplicable if employee has completed 10 years of service or age of 40 years exepct for employee of public sector coApplicable to all employeesVRS should caused due to VRS should not be filled up nor the retiring employee br employed in another concern of same managementAmount under VRS should be- Less than or = to 3 months’s salary for every completed year of service OR ( Salary less or = at the time of retirement) x Balance months of service left before the date of retirement Where, salary = salary last drawn P.M = Basic + DA for retirement + fixed% comm on TONOTE: ->Relief can be claimed U/S 89ॐ4

5. (5) RETRENCHMENT COMPENSATION [Sec 10(10B)]Exempt -> least ofAmt calculated as per Industrial Disputes act 1972 =15 days avg pay for each completed year of service or part there of in excess of 6 monthsAmt notified by Govt = 5,00,000Actual Retrenchment compensation received-> NOTE: No limit if compensation paid under govt approved schemeDifferent forms of Allowances(1)City compensatory allowanceTaxable(2)House rent allowanse[sec 10(13A)]Exempt least ofIf Resedential house is in Bombay , Delhi , Calcutta , Madras=50% of BASIC + DA for ret +fixed % comm on TO(a)If at any other place =40% of (BASIC+DA for ret +fixed %commonTO) Actual HRA received for period of occupationExcess of rent paid over 10% of salary on due basis =Rent paid (-) 10% of (BASIC + DA for ret +fixed %comm on TO)NOTE: No exemption if employee lives in his own house or in a house where he does not pay any rentॐ5

6. (3) Allowance where exemption depends upon actual exependiture by the employee (Sec10(14))Amount of allowance->In case of followingexemption=lower oforActual exp by employeeTravelling allowance or transfer allowanceConveyance allowanceDaily allowanceHelper allowanceResearch allowance-granted for encouraging academic or professional researchUniform allowance-granted to meet exependiture on purchase or maintenance of uniform(4)Allowance where exemption does not depends on actual exependiture of employee [sec 10(14)]Amount of allowance orAmount specified in rule2 BBIn case of following allowanceExemption = lower ofSpecial compensatory (Hill area) allowance  Exemption 800 P.MBoarder area allowance/remote area/disturbed area allowance Exemption 200P.M to 1300 P.Mॐ6

7. (3) Tribal area/Scheduledd area allowance Max Exemption =200 P.MAllowance for transport employee i e an employee engaged in a transport co. Exemption = least of (a) 70% of allowance (b) 10,000 P.M (5) Children Education Allowance Max exemption 100 P.M per child to MAX of 2 children (6) Hostel expenditure allowance Max exemption 300 P.M per child to MAX of 2 children (7) Compensatory field area allowanceMax exemption = 2600 P.M NOTE: If this exemption is taken, no exemption allowed for border area allowance (8) Compensatory modified area allowance Max exemption 1000 P.M NOTE: If this exemption is taken, no exemption allowed for border area allowance ॐ7

8. (9) Counter insurgency allowanceMax exemption =3900 P.M Exemption allowed to member of armed forces Available if employee is away from permenant location for more than 30 days Transport allowance Granted for going from place of residence to place of duty Max exemption --For normal employee 800 P.M --For blind or orthopardically handicapped employee 1600 P.M(11) Underground allowance For example –Employee in caol mines Max exemption =800 P.M(12) High altitude allowance Granted to employee of armed forcesAltitude above 15000 ftAltitude of9000-15000ft1060 P.M1600 P.Mॐ8

9. (13) Highly active field area allowanceFor member of armed forces Max exemption=4200 P.M(14) Island duty allowance For members of armed forces In Andaman Nicobar & Lakshdeep Max exemption =3250 P.M(5)Allowance to govt employees outside india[Sec 10(7)] Totally exempt for an indian citizen(6) Tiffin allowance Taxable(7) Fixed medical allowance Taxable(8) Servant allowanceTaxable(9) Allowance to high court and supreme court judgesExempt(10) Allowance received from united nations organization(UNO)Exemptॐ9

10. Deduction U/S 16Standard deduction  Not available nowEntertainment allowanceNGE = No deductionCGE/SGEDeduct =least of the followingRs 500020% of basic salaryEntertainment allowance granted during PYNOTES:E A  should be added in Gross salaryProfesional tax  (Tax on employment) It should br added to gross salary only if it is paid by Employer on behalf of employeeॐ10

11. PERQUISITIES“Perquisities may be defined as any casual emolument/benefit attached to an office or position in addition to salary”Perquisities are taxable under the head “Salaries” only if they are:(a) Allowed by an employer to his employee,(b) Allowed during continunance of employment(c) Directly dependent upon service,(d) Resulting in the nature of personal advantages to the employee,(e) Derived by virtue of employee’s authority i.e. employee is authorized to enjoy such perquisite.Specified employeeA speceified employee means A director employee : An employee who is a director in the employer company for any time during the PY OR An employee : Who has a substantial interest in the employer company i.e. an employee who is benefical owner of equity shares carrying greater then 20% voting power in such company An employee : Drawing in excess od Rs 50000 i.e. Gross salary xxx (-) all non monetary benefits xxx (-) all monetary benefits exempt U/S16 xxx (-) deduction U/S16 greater then 50000 xxxॐ11

12. Following perquisities are not taxable for any type of employee:-Provision of Medical facilitiesTOTALLYEXEMPTEmpolyer’s hospitalHospital maintained/approved by Govt/local Authority whether reimbursed or paid by employer.Medical facilities provide to Employee OR any member of his familyTreatement of prescribed disease in aHospital approved by Chief CommissionorWhether reimbursed or paid by employerPayment or reimbursement of group Insurance or Mediclaim insurance by the employerPartially ExemptedMedical facilities in a private clinic Max exempt RS 15000 p.a

13. Medical facilities outside india:

14. Medical treatment—exemption=exependiture permitted by R.B.I

15. Cost on travel--- exempt it G.T.I. ≤200000

16. Cost of stay abroad---exemption=exependiture permitted by R.B.Iॐ12

17. (2) Refreshment provided by employer to all employees during working hours in office permises. It includes -tea or snacks during office hours; -free meals during working hours in a remote area or in an offshore installation; -free meals during working hours through paid non-transferable voucher not exceeding Rs 50 per meal -Taxable if employee of NON FBT EMPLOYEE(3) Amount spent on training of employee of fees paid for refresher management course (4) Goods manufactured by the employer and sold to the employee at the concessional rates(5) Perquisities allowed outside india by govt to a citizen of india for rendering service outside india (6) Employer’s contribution to staff group insurance schemeॐ13

18. (7) Leave Travel Concession:Available to indianas well as foreign citizen

19. Journey may be performed while in service or after retirement;

20. Available for employee and his family( family means individual spouse and children, and his/her parents, brother and sister wholly dependent on him)Condition PrescribedAmount of exemptionLower or air economy fair of National carrier by shortest Route or amount spendJourney performed by airJourney performed by railLower of A.C First Class railFair by shortest route or amount spentWhere rail transport is available but JourneyIs performed by any other modeLower of A.C First Class railFair by shortest route or amount spentWhen no rail transport is available butFirst class deluxe class fair on shortest routeOr amount spent(a) Recoginized public transport exist(b) Where no public transport existsLower of A,C First class rail fair as if journeyIs performed by rail or amount spendExemption is available only in respect of two journey performed in a block of 4 calendar years commencing from 1986If exemption is not availed in relevant 4 year block ,it can be claimed in the first calendar year of next blockॐ14

21. (8) Free telephone including mobile phone  exempted(9) Transport facility to railway employee or employees of airlines Exempt But if facility is provided by private transport undertaking its employees,then Taxable perquisities = Value of benefit (-) Amt received from the employee [NOTE; Taxable for employee of NON FBT employer](10) Payment of annual premium by employer on personal accident policy effected by him on his employee(11) Free educational facility provided in an institute owned/maintained by employer to children of employeeMax exemption 1000 per month(12) Gift in kind uptoRs 5000 per year Exempt but gift in cash and cheque  Taxable(13) Computer/laptop given(not transferred) to an employee for official/personal purpose (which is owned or hired by employer) Not taxable(14) Transfer of movable asset(other than computer,electronicitem,car) by employer to an employee after using it for 10 years or more without considerationNot Taxable(15) Interest free loan for medical treatment specified in rule 3A  Not taxable(16) Initial fees paid by employer for acquiring corporate membership of clubNot taxable(17) Use of health club etc. provided uniformally to all employees by the employer->Not Taxable(18) Perodicals and journals provided for dis charge of workNot taxable(19) Conveyance facility provided to high court and supreme courtNot taxable(20) Conveyance facility provided to an employee to cover the journey between office and residence Not taxable(21) The value of any benefit provided free of cost or at concessional rate by a company to its employees by the way of allotment of shares debentures or warrents under employee stock plan Not taxableॐ15

22. (22)Tax on perquisities-in-kind paid by the employer Not taxable(23) Rent free accomodation Provided in a remote area to an employee working at a mining site or oil exploration site etc Not taxable provided on transfer of an employee in a hotel for not exceeding 15 daysNot taxable provided to high court judge,supreme court judge,official of parliament,union minister, leader of opposition Not taxableFollowing Perquisities are TAXABLE in hands of both SPECIFIED as well as NON-SPECIFIED EMPLOYEES:(1) Rent free AccomodationAccomodation includes house ,flat,farm house or part there ofaccomodation in hotel ,motel service apartment,guest house carvan, mobile home, ship or any other floating structureRent free accomodation may be UNFURNISHED or FURNISHEDॐ16

23. Valuation of rent free UNFURNISHED accomodation:- (i) CGE/SGETaxable value = liscense fee determined by Central State Govt (ii) NGE Population in CityAccomodation owned by EmployerAccomodation taken on lease or Rent by the EmployerHaving population 0 to 10 lakh7.5% of salary for period of occupation of accomodation Which ever is lower is takenAmount of lease rent paid or 15% of salaryHaving population 10 to 25 lakh10% of salary for period of occupation of accomodationHaving population25 lakh and above15% of salary for period of occupation of accomodationFor the purpose of valuation of rent free unfrunishedaccomodation, Salary includes= (BABC SALARY) Basic+DA(for ret)+Bonus+comm+all taxable allowances and all taxable monetary payments but does not include employer’s contribution to PF all Allowances which are exempt from tax value of perquisitiessalary shall be determined accrual basissalary from one or more employers for period of occupation shall br taken into accountॐ17

24. (B) Valation of rent free FURNISHED accomodation:-Taxable value is calculated as underTaxable value of rent free unfurnished accomodationxxxxAdd: 10% of original cost furniture, if furniture is owned by the employer xxxxORActual hire charges of furniture is hired by the Employer xxxxTaxable value of rent free furnished accomodationxxxxNote: (a) Furniture includes radio sets, television sets, refrigerators, air- conditioner and other housrhold appliances.(c) Valuation of perquisities if accomodation is provided in a hotel for more than 15 days:-Taxable value=24% of salary or actual charge of hotalwhich ever is lessNote: If hostel accomodation is provided on employees transfer nothing is taxableॐ18

25. (d) Valuation of perquisitie if accomodation is provided at concessional rent:-Taxable value=Taxable value of rent free Unfurnished/Furnished house xxxxxxLESS : Rent payable by the employee xxxxxxTaxable value of accomodation. At concessional rent xxxxxx(2) Gas, electricity or water supply provided free of cost to an employeePurchased by employer from outside agency Taxable value= Amount paid by employer to such agency (-) Any amount recovered from the employeeIf supplied out of own sources Taxable value = Manufacturing cost per unit incurred by the employerImportant note: If gas electricity or water supply connection is taken in the name of employer and the employer also bears expenditure thereonperquisities is taxable only in the hands of specified employeesॐ19

26. (3) Perquisities in respect of credit card provided to the employeeTaxable for employee of NON FBT employer(a) Taxable value = Amount paid or remibursed by employer (-) Amount recovered from employee(b) Running & maintenance expenses met by EMPLOYER Used wholly for official purposeNil if employer maintains complete details of journey and gives certificate for official useUsed wholly for private purpose

27. Owned by employer

28. Hired by employerTaxable value =Actual exependiture of employer(+) 10% of cost of car (+)salary of chauffeurTaxable value = Hire charges (+) Chauffeur’s salaryTaxable value= 1800 p.m if cc ≤ 1.6 litres OR 2400 p.m if cc ≥1.6 litres (+) 900 p.m if chauffer is providedUsed partly for official and partly for private purposeॐ20