Professional Documents
Culture Documents
Salaries
and
Deductions under Chapter VIA ]
Contents
1 Heads of Income and Calculation of Total Income
2 Salary
2a Basis Of Charge
Computation
Other Sources of Total House Property
Income
5. Perquisites
1. Basis of
Charge
4. Deductions
Sec 15 to 17
2. Profit
in lieu of
3.Allow Salary
ances
and
Exemp
tions
2a. Basis of Charge – Sec 15 and 17
and
Includes
• wages,
• annuity or pension,
• gratuity,
• fees,
• commission,
• perquisites or
• profits in lieu of salary,
• advance salary,
• leave encashment, etc.
2b. Profits in lieu of Salary – Sec 17 (3)
Exemption Conditions
Sr.No Sec and Rule Nature of Allowance Exemption Conditions 2009-10 2010-11
Sec 10(14) The amount of exemption is the amount of allowance or the amount utilised for
4 rule 2BB
Special Allowances the specific purpose.
Exemption up to Rs.1060pm up to
15000 feet altitude and Rs.1600 for
j High Altitude Allowance altitude above 15000 feet Same
Other Allowances
Sec 10(14)
6 rule 2BB Tiffin Allowance Wholly taxable
Allowance to High Court & Supreme Not taxable u/s 22A(2) & 22C of High
9 Court Judges Court Act
Exemption Conditions
Sr.No Sec and Rule Nature of Allowance Exemption Conditions 2009-10 2010-11
Dictionary Meaning :
v. any sum payable either directly or through a fund by employer (other than
recognised PF, approved superannuation fund etc.) to effect an assurance on
the life of the employee or to effect a contract for an annuity.
2e. Perquisites – cont’d
Determination of the value of prescribed fringe benefit or amenity
Value of perquisite w.e.f. 1-4-2000, of the loan given to the employee or any
member of his household shall be at the rates charged by State Bank of India
in respect of the loans for the same purpose advanced by the employer, on the
maximum outstanding monthly balance as reduced by interest actually paid by
employee – However, perquisite value for loans (net of amount reimbursed
under medical insurance scheme) given for medical treatment of specified
disease or petty loans up to Rs. 20,000 is not taxable.
2e. Perquisites – cont’d
ESOP Objective
– Attract, encourage and retain talented employees.
– Compensation in terms of ownership and profit share.
– A risk-based compensation – need for lower taxation.
– Nurtures entrepreneurship.
ESOP – Flow of Events
Grant of Options Tax Trigger
Valuation of Shares
Vesting of Options on date of Vesting
Exercise of Options
“Provided that nothing contained in this sub-clause shall apply to the value of
any benefit provided by a company free of cost or at concessional rate to its
employees by way of allotment of shares, debentures, or warrants directly
or indirectly under any Employees’ Stock Option Plan or Scheme of the
company offered to such employees in accordance with the guidelines
issued in this behalf by the Central Government.”
Taxation of ESOPs - Pre Finance Act 2007 –
Cont’d
The new proviso sought to introduce the following:
• Single point taxation at the time of sale of shares in case of ESOP
compliant with Central Government guidelines
• Character of income – Capital Gains in the hands of the employee
• No responsibility on the employer to report and/or withhold tax
However, if the Plan did not satisfy the Central Government Guidelines, the
income continued to be taxed as a perquisite in the hands of the employee
at the time of exercise.
Tax implication on ESOP when allotment or transfer of
shares is made on or after April 1, 2009.
• Case – Mr. Vijay , an employee was allotted 10
shares.
• Market value of shares on allotment date 15-Apr-09- @ 1,000 - Rs. 10,000
• Less: Purchase Price of Mr. Vijay - @ 500 Rs. 5,000
• Taxable Perquisite for Mr. Vijay Rs. 5,000
• Assuming Mr. Vijay is in highest tax bracket Tax @ 30.90 % Rs. 1,545
1 Sec 80 C LIP
PF/SAF/PPF/RPF
ULIP
NSC
Deposits National Housing Bank 100% of the amount invested /paid or Rs.100000/-
Same
whichever is less.
Annuity/Pension Schemes
Mutual Fund