HEADS OF INCOME

INCOME FROM SALARY

SALARY
Wages annuity or pension any gratuity Any fees,commission,perquites,profits in lieu of any salary or wages Any advance of salary etc.

Fully taxable allowances

DA/DP Medical allowances Tiffin allowances Servant allowances Deputation allowances Overtime allowances CCA

Allowances exempted upto specified limit

HRA Entertainment allowances Travelling allowances Helper allowances Uniform allowamces Daily allowances Children education allownces Children hostel allowances Transport allowances 800p.m/1600p.m Hill allowances

Fully exempted allowances

Foreign allowances Allowances from U.N.O Any allowance to supreme court /high court judges.

HRA u/s 10(13A)

Actual HRA received Least of the following are exempted
Excess of rent paid over 10% of salary Actual HRA received i. 50% of salary for metro politan cities Ii.40% of salary for other cities XXX XXX

XXX

xxx --------------

Exempted

XXX

TAXABL XXX Salary:BP+DA(retirement benefit only )+fixed % of commission

ENTERTAINMENT ALLOWANCE u/s 16 (ii)

Government Employees only Least of these 1. Actual EA received 2. 1/5 of salary 3. Rs.5000 w.e.l Salary :means exclusive of any allowance,benefit or other perquisite

Children education/hostel allowance

Exempted 100 Rs /child maximum of 2 children Exempted 300Rs /child maximum of 2 children

Gratuity u/s 10 (10)

1. Government employees exempted 2. Other employees Least of the following are exempted Actual gratuity received months salary for every completed year of service ( 10 months average salary ) Rs 3,50,000 Salary:BP+DA(condition)+COMMISSION

Gratuity Act,1972
Least of thefollowing are exempted 1. 15 days wages for every completed year of service or part there of in excess of 6 months. 2. Rs 3,50,000 3. Actual gratuity received Salary :BP+DA+Commission(fixed % only) 15 days wages-15/26 x no.of year of service.

PENSION u/s 10(10A)

Commutation of Pension Govt. employeesFully exempted Non-Govt.employee following are exempted. 1. If he receives gratuity1/3 rd of commuted value of pension. 2. If he does not receives gratuity1/2 of the commuted value of pension. Uncommuted pension -- fully taxable for all kinds of employees.

Encashment of earned leave u/s 10(10AA)

Encashment during service-fully taxable. Encashment after retirementt. 1. Gov.employee-fully exempted 2. Non-govt.employee least of the following are exempted.

Salary:BP+DA+ Fixed % of commission

10 Months average salary. The amount of leave encashment actually received. The amount specified by the Govt.Rs 3,00,000. Cash equivalent of leave due at the rate of average salary (exemptions cannot exceed for 30 days )

PROVIDENT FUND
Provident fund means provide for the future . 1. Statutory PF :The Indian PF Act,1925 applies.Generally,this provident fund is maintained by Govt, Semi Govt.organisations. 2. Recognised PF :The chief commissioner of Income Tax recognises this fund ,only when he is satisfied that this fund fulfills the conditions set out in IT Act,1961.Generally this fund is maintained by scheduled banks ,factories and several business houses. 3. URPF 4. PPF

Types of PF
particulars Employees contribution Employers contribution SPF Part of salary,deduction u/s 80C Neither included in the employees salaries nor it is taxable. Not included in salaries,NT exempted RPF SAME URPF Own Contribution no deduction Not included in his income year to year

Excess of 12% of employee salary is taxable EXCESS of 9.5% is taxable exempted

Interest on the accumulated balance Lumpsum received

Taxable(employer) IOS (employee) taxable

PERQUISITES
Perquisites mean any casual emolument fee or profit attached to an office or position in addition to salary or wages . The perquisites may be in cash or in kind or in the form of benefits and amenities ,whether they are convertible into money or not. It may be provided voluantarily or under service contract by the employer.

Tax free perquisites

Medical benefits. Residential accommodation provided at site. Tea and snacks provided free in office or factory. Expenses on telephones including mobile phones. Scholarship to employees or their children paid by the employer.

Tax free perquisites

Laptops and computers provided by the employer for personal use of employee or any member of his household. Interest free or concessional loan ,if the amount of loan in aggregate does not exceed Rs 20,000 during the previous year. LTC. Periodicals and journals required for discharge of work. Facility of motor car

Taxable perquisites in case of all employees.

Rent free accommodation provided to the employee. Residential accommodation provided to the employee at a concessional rent. Any sum paid by the employer in respect of any obligation which,but for such payment would have been payable by the assessee.

PERQUISITES TAXABLE IN CASE OF SPECIFIED EMPLOYEES

Gas,Electricity,and Water. Education facility to the family members Sweeper,Watchman,Gardener,Attendant etc.

Valuation of perquisites
RFA: Govt.Employee: Licence fee determined by the Govt. xxx Add: 10% p.a of cost of furniture or hire charges xxx Less: Amount paid/payable by the employee xxx Value of Accommodation xxx

Non-Govt Employee
Accommodation owned by employer 1. 15%or 10% or 7.5% of salary as the case may be xxx 2. Add: 10% cost of furniture /H.C xxx 3. Less :value paid by the employee xxx Value of accommodation xxx 15%-more than 25 lakh population cities 10%-10-25 lakh population 7.5%- any other place

Accommodation taken on lease/rent by employer

Actual amount of lease or 15% of salary w.e.l Add:10% cost of furniture Less: Value paid by the employee value of accommodation

Education facility
Education institution owned by the employer the cost of facility taxable nil Institution not owned by the company 1000 Rs p.m. If the cost is more than 1000 Rs compare the cost with the other educational institution in the same locality

Valuation of motor car

Car owned or hired by the employer: car is used exclusively for official purpose Nil Car owned by the employer used for personal purpose Actual amount incurred for maintenance XXX Driver salary if any XXX 10% depreciation XXX

Valuation of motor car

Car is owned or hired by the employer use partly for official and partly for personal; If the expenses are met by the employer Small Car (less than 1.6 ltr ) 1200 p.m Large car ( CC of engine more than 1.6 ltr) 1600 P.m if chauffeur is provided 600 p.m

Valuation of motor car

If the expenses are met by the employee.used for his personal. Small car 400 p.m Large car 600 p.m Driver 600 p.m

Computation of Income from Salary

Salary (BP) Advance salary DA/DP Bonus Fees Commission Allowances(taxable part) Perquisites (taxable) xxx xxx xxx xxx xxx xxx xxx xxx

Computation of Income from Salary

Profit in lieu of salary ( compensation) xxx EEL received during service xxx RPF (employer excess 12%) xxx Interest on RPF ( excess of 9.5%) xxx On retirement of employee add: URPF Emplr contribution xxx Interest on URPF xxx

Computation of Income from Salary

Taxable part of gratuity xxx Taxable part of EL xxx Taxable pension xxx xxx GROSS SALARY XXX Less: entertainment allowance xxx ( govt. empl.only) Professional tax xxx xxx TAXABLE SALARY XXX