23/02/2010 1

Remuneration taxability & compliances under Income tax act

Presented
by
Niranjan Swain, LLB,ACS,FICWA.
23/02/2010 2
Breaking News --------
Taxation system in India wins the contest
of 8
th
wonder of the world next to Taj
23/02/2010 3
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Indian Tax System
CST
Central
Excise Duty
Customs Duty
Service Tax
Income Tax
Wealth Tax
Tonnage Tax
CST /VAT/
Sales Tax
State Excise /
Luxury Tax
Entry Tax/Octroi
Stamp / Elect. Duty
LF/RDT/R&D Cess
State Tax
Centre-DT
Centre-Ind. Tax
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Jai Bharat !
Religion
Caste
Colour
Language
Culture
Taxation
Integration of minds is still possible ---
23/02/2010 6
Some Important Terms
Tax planning.
Tax Avoidance.
Tax Evasion.
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Objectives
Employees point of view
Remuneration received by
employees
is taxable in their hand at
concessional rate
minimization of tax liability
maximization of take home
salary.
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Different Sources of Income in the hands of
Employees.
Income from
Salary
House Property
Short Term Capital Gain
Long Term Capital Gain
Other Sources
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What Constitute Remuneration
Salary
Allowances
Perquisites
Monetary
Non Monetary
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What Constitute Salary and Allowances
Basic Pay,
Grade Pay,
Dearness Allowance,
House Rent Allowance
Thermal Allowance
Generation Incentive
Safety Incentive
Education Allowance /
Reimbursement
Hostel Allowance
Advance/Arrear Salary,
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What Constitute Salary and Allowances
Salary in lieu of notice,
Remuneration for extra
work
Gratuity
Leave encashment [exempt
up to a certain limit under
section 10(10A)]
Monthly Medical allowance
Messenger Reimbursement
Conveyance
Reimbursement
Contribution to PF
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Perquisites
Accommodation at
Concessional Rate.
Water supply
Electricity
Free education
Interest free / concessional
loan / Advances
Use of movable assets
Sale of movable assets at
nominal price

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Perquisites
Canteen Facilities
Club Facilities
Medical Reimbursements
News Paper
Reimbursement
Membership Fee
Reimbursement
Uniforms
Motor Cars

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Taxability in the hands of Employees.
Grade Pay
Salary in lieu of notice
Generation Incentive
Thermal Allowance
Safety Incentive
Dearness allowance
Taxable
Basic Pay
Position Different items
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Taxability in the hands of Employees.
Taxable Messenger Reimbursement
Exempted to the extent spent Conveyance Reimbursement
Taxable Monthly Medical Allowances
Taxable Salary in lieu of notice
Taxable Extra Work
Taxable on receipt basis if not taken
earlier
Advance Salary / Arrear Salary
Exempted to the extent Rs.3,00,000/- Leave Encashment
Exempted to the extent of Rs.3,50,000/- Gratuity
Taxable
Bonus
Tax Treatment Different items
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Taxability in the hands of Employees.
Non specified Hospital- Taxable in excess of
Rs.15,000
Specified Hospital - Exempted
Medical Expenses
Exempted to the extent spent Tour expenses
Use of Laptop Computers exemted
Other cases 10% of original cost
Use of Assets
Exempted Supply of Uniforms
Rs.300/- per month maximum 2 children Hostel Expenditure
Rs.100/- per month maximum 2 children
Tution fees
Tax Treatment Items
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Tax Incident in the hands of Employees.
Taxable = difference between SBI rate less interest
charged by OPGC (Loan upto Rs.20,000/- is exempted)
SBI Rate=Car Loan 12%
Two Wheeler Loan 16.25%
Housing Loan 10.5%
Education loan 11.75%,13.25% / 12.5%
Computer Loan 16.5%
Loan for medical treatment Rule 3A - exempted
Interest free/
concessional
loans
Maintenance expenditure in excess of Rs1000/- PM per
child
Free Education
Taxable at the cost to employer - recovery Electricity
Taxable at the cost to employer - recovery Water Supply
Tax Treatment Different items
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Tax Incident in the hands of Employees.
7.5% of salary during which accommodation
Occupied less recovered from employee.
House Accommodation
Non specified Hospital- Taxable in excess
of Rs.15,000
Specified Hospital - Exempted
Medical Expenses
Exempted to the extent spent Tour expenses
Use of Laptop Computers exemted
Other cases 10% of original cost
Use of Assets
Tax Treatment Different items
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Obligation of Tax Payer
Allotment of PAN
Payment of Advance Tax / Monthly deduction
Submission of correct data to DDO
Quote PAN in returns, certificates &
correspondences of certain transaction u/s 139A.
Cooperate with assessment / reassessment.
Avoid best Judgment Assessment.
Avoid penalties / precautions.
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Obligations of DDO
DDO is required to deduct the tax at source from
salary.
Tax to be deducted on the basis of estimated Income.
It is optional to declare other Incomes than salary for
deduction at source.
Contribution U/S 80G will not be allowed except
some specified Scheme.
DDO should satisfy genuineness before allowing
any exemption or deduction.
23/02/2010 21
General points for discussion
Please submit the genuine documents / certificates
while claiming exemption & deduction.
False deduction and submission along with return is
liable to penalties / prosecution .
Avoid huge cash transactions.
Do not claim dues from employer in cash if
exceeding Rs.20,000/-as the same is covered u/s 40
(A) for disallowance.
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Advance Tax
100% 100% March 15th
60% 75% Dec-15
th
30% 45% Sept-15
th
0 15% June-15
th
non Corporate
Assessee
Corporate
Assessee
Tax payable Due date of payment
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Computation of Income
XXX Taxable Income from Salary
XXX X Professional Tax
X Entertainment Allowances
Less Standard Deduction
XXX Gross Salary
X Perquisites ( Annexure -1)
X Allowances ( Annexure-1)
X Gross Salary ( Annexure-1)
Income From Salary : A
Amt.
in Rs.
Amt.
in Rs.
Amt.
in Rs. Particulars
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Computation of HP.
Positive or
Negative Always negative Taxable Income
Max.Rs.30,000
on repair etc.
No Limit.
Max. Rs.30,000/-- on
repair etc.
Rs.1,50,000/- for
construction
Interest on Borrowed
Capital
30% NAV NIL Standard Deduction
Less: Deduction U/S-24
XXX NIL NAV
XX NIL Less: Municipal Tax
XXXX NIL Gross Annual Value
Let Out Self Occupied Particular
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Computation of Income
XXX Taxable Income from House Property
X X b) Interest on borrowed Capital
X a) Standard Deduction
Less - Deduction U/s-24
XXX Net Annual Value
X Less- Municipal Tax.
XXX Gross Annual Value .
Income from House Property: B
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Computation of Income
XXX Taxable Income from Capital Gain
x x Expenses
x
Cost of Improvement /
Index Cost of Imp.
x Cost of acquisition / Index of CA
Less:
XXX xxx Consideration
Income from Capital Gain C.
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Computation of Income
xxx xxx Total
xxx b) Payment of L.I. Premium etc.
XXX a) Employee Cont. to EPF
Deduction U/S 80C & 80CCC etc
Less: Deduction Under Ch -VI A C
XXX Gross Total Income( A+B+C+D ) B
XXX x x Less Expenses
XXX xxx Others
xxx Interest on Investment Deposit
Income from Other Sources D
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Computation of Income
XXXXX Less Relief U/S 89(1)
XXXX Total Payable
XXX Add Interest 1 month @ 1%
XXXX Balance Tax to be Payable
XXX Less: Tax Deducted at Source.
XXXX Total Tax to be Payable
X Add Education Cess
XXX Tax On Total Income.
XXXXXX Total Taxable Income (E - F ) D
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Deduction Under Chapter VIA
U/S-80C
U/S-80CCC-Contribution to
pension fund
U/S-80D-Medical Insurance
Premium
U/S-80DD-Maintenance of
Physical handicapped
dependant
U/S-80DDB-Medical treatment
of dependant
U/S-80G- Donation
U/S-80GG-Rent paid
U/S-80-Person with Disability
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Deductions fro Gross Total Income
Two Children 1,00,000 Tution Fee 80C
1,00,000
Contribution to
Superannuation fund 80C
Lock in period 1,00,000 Contribution to PPF 80C
In excess of 12%
is taxable 1,00,000 Contribution to E PF 80C
Policy should
continue for 3 years 1,00,000 LIC Premium 80C
Remarks Maximum
Particulars of Investment /
Scheme Section
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Deductions fro Gross Total Income
Ownership
should be 5 years 1,00,000
Exp. on Acquisition of House
including Registration fee. 80C
Ownership
should be 5 Yrs. 1,00,000
Principal Repayment of BHL /
HBA 80C
Lock in period 1,00,000 Notified MF 80C
SpecifiedScheme 1,00,000 ULIP 80C
Lock in period 1,00,000 National Savings Scheme 80C
Lock in period 1,00,000
NSC including Accrued
Interest 80C
Remarks Maximum
Particulars of Investment/
Scheme Section
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Deductions fro Gross Total Income
Receipt of
annuity is taxable 10,000 Deposit under any annuity plan 8CCC
Minimum 5 Yrs.
Scheme formed
by Central Govt. 1,00,000 Term deposit 80C
Lock in period 1,00,000
Approved debentures/ equity
in specific Public Company 80C
Remarks Maximum
Particulars of Investment/
Scheme Section
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Deductions fro Gross Total Income
For self & dependant.
Not to be allowed by
DDO. Reimbursesmt.
will be deducted
40,000 /
60,000
Incurred expenditure on
treatment of Specified
Disease 80DDB
Specific disability
certification from
specific authority.
50,000 /
75,000 /
1,00,000
Deposit with scheme of
insurer or incurred
expenditure including
Nurshing & Rehabilitation 80DD
Rs.15,000/- for Senior
Citizen. 10,000 Medical Insurance premia 80D
Remarks Maximum
Particulars of Investment /
Scheme Section
23/02/2010 34
IMOSSIBLE IS NOTHING
The more faith you have
The more you believe
The more goals you set
The more you will achieve
So reach for the stars
Pick a mountain to climb
Dare to think big
And give yourself a time
And remember no matter
How futile things seem
With faith, there is dream
No impossible dream
- A. J. Davidson
23/02/2010 35
Thank You for your Co-operation
A presentation
by
Niranjan Swain