SALAR Y

Presentation On

What is Salary?
Income under heads of salary is defined as remuneration received by an individual for services rendered by him to undertake a contract whether it is expressed or implied. According to Income Tax Act, there are following conditions where all such remuneration are chargeable to Income Tax: When due from the former employer or present employer in the previous year, whether paid or not. When paid or allowed in the previous year, by or on behalf of a former employer or present employer, though not due or before it becomes due. When arrears of salary is paid in the previous year by or on behalf of a former employer or present employer, if not charged to tax in the period to which it relates.

Income under the Head of Salary

Under section 17 of the Income Tax Act, 1961 there are following incomes which comes under head of salary: Basic Salary (including advance salary) Wages Fees Commissions Pensions Annuity Gratuity Annual Bonus
Income From Provident Fund

Leave Encashment Allowance Awards Perquisite

PERFORMA OF SALARY

NAME OF ASSESSEE:PREVIOUS YEAR:/COMPANY

ASSESSMENT YEAR:LEGAL STATUS: - INDIVIDUAL

RESIDENTIAL STATUS:-

SR NO. I.

PARTICULARS SALARY Basic salary Advance salary Arrears of salary Bonus Leave salary Commission Pension Gratuity

(RS) xxx xxx xxx xxx xxx xxx xxx xxx

(RS)

XXX

II.

ALLOWANCES Dearness allowances House allowances Conveyance allowances xxx xxx xxx

Special allowances Lunch allowances Fixed medical allowances Entertainment allowances

xxx xxx xxx xxx XXX

III.

PERQUISITE TAXABLE

XXX

IV.

PROFIT IN LIEU OF SALARY Compensation received from the employer Employers contribution to provident fund xxx xxx XXX

GROSS TOTAL INCOME (I. +II. +III. +IV.)

XXX

LESS:DEDUCTIONS Entertainment allowance Professional tax NET TAXABLE SALARY xxx xxx XXX XXX

Tax implications of salary components Component Taxable Income

Basic House Rent Allowance Conveyance Lunch coupons Medical reimbursement Leave travel allowance Company s contribution towards PF Telephone reimbursement Car reimbursement Annual bonus Mediclaim contribution Gratuity Fully taxable Fully taxable Partially exempt Fully Exempt Partially exempt Partially exempt Partially exempt Fully Exempt Fully Exempt Fully taxable Fully Exempt Partially exempt

COMPONENTS OF SALARY

 Bonus:
Bonus is taxed in the year of receipt, it is not taxed on due basis. Advance Salary {Section 17(1) V}: when any salary paid in advance is taxed on receipt basis (in the yr. of receipt) it can t be taxed again on the due basis (in the yr. in which it becomes due). Arrear of Salary: Arrear of Salary received by an assessee is charged to tax on receipt basis (if it was not taxed earlier on due basis).

 Retrenchment Compensation {Sec. 25F (b)}: Compensation received at the time of retrenchment, is exempt from tax to the extent of lower of the following: 15 day s average pay for each completed yr. of services or any part in excess of six months. Maximum amt. 5, 00,000. Actual amount received. Fees & Commission: Fees & Commission paid to an employee are taxed as salary income.

Leave Encashment
Particulars Exemptions Encashment of leave during the continuation of It is charged to tax. service Encashment of leave at the time of retirement 1. If there is Central or State Govt. Employees 2. For any other employees Fully exempt from tax u/s 10(10AA)(i) Whichever is less of following 1. Period of earned leave in months X Avg. monthly salary 2. Avg. monthly salary X 10 3. Maximum amt. 3,00,000 4. Actual received. Note: Period of leave in month

Gratuity :
Particulars
Gratuity recd. By Govt. & Local Authority Employees

Exemption
Fully exempt u/s 10(10) (i)

Lower of following amount. 1. 15 days salary X yrs of Gratuity in case of employees covered by Payment of Gratuity Act, service 2. Max. amt. 3, 50,000. 1972 3. Actually received. Lower of following amount. Gratuity in respect of any other employee. 1. 1/2 months salary for each completed yr of service. 2. Max. amt. 3, 50,000. 3. Actually received. Note: In A.Y. 2011 - 12 i.e. Max. Amt. is 10, 00,000.

Pension

COMPONENTS OF ALLOWANCES

Name Allowances
HRA

of Sec. Rule Provisions

1. 1/2 of Salary. 10(13A) 2A

Exempte d Amt.
Whichever is less

Conveyance

10(14)

Children Education Hostel Accomodation Transport

10(14) 10(14) 10(14)

2BB 2BB 2BB

Special Compensatory

10(14)

2BB

2. Actual received 3. Rent paid in excess of 10% of Salary. 1. The amount of allowance Whichever received is less 2. The amt. spent for that purpose Rs. 100 per month per child up to max. of two children. Rs. 300 per month per child up to max. of two children. Rs. 800 per month & 1600 per month in case of an employee, who is blind, orthopedically handicapped. Exemption varies from 300 p/m to 7000 p/m.

Name of Allowances
Border Area

Sec.
10(14)

Rule Provisions
2BB Exemption varies from 200 p/m to 1300 p/m. Rs. 200 p/m in case of prescribed tribal area. Exemption is limited to Rs. 800 p/m. Exemption is up to Rs. 1060 p/m or 1600 p/m depending upon height of altitude. Exemption is up to Rs. 4200 p/m. Exemption is up to Rs. 3250 p/m.

Exempte d Amt.

Tribal/Scheduled Area 10(14) Under Ground High Altitude Area 10(14) 10(14)

2BB 2BB 2BB

Highly Active Field Area Island Duty

10(14)

2BB

10(14)

2BB

COMPONENTS OF PERQUISITES

Rent Free Accommodation

1. In case of Central Govt. employee then License Fee will be exempt. 2. In case of any other employee Population of the city Exceeding 25 Lakh Nature of Accom. Owned by the Employer 15 % of Salary Rented by the Employer Lower of a) 15% of Salary or b) rent paid/payable by the employer Same as above Same as above

Between 10 - 25 Lakh Less than 10 Lakh

10 % of Salary 7.5 % of Salary

Note: Salary for this purpose 1. Basic Salary 2. D. A. (not in terms)

PERQUISITE VALUE OF MOTOR CAR PROVIDED FOR OFFICE USE AND PERSONAL USE
Circumstances Engine Cubic capacity does not Engine exceed 1.6 litres. litres. Cubic capacity

exceeds

1.6

If motor-car is used No value if specified documents No value if specified documents are wholly and exclusively are maintained by the maintained by the employer. in the performance of employer. his official duties.

Circumstances

Engine Cubic capacity does not Engine Cubic capacity exceeds 1.6 litres. exceed 1.6 litres Actual amount of expenditure incurred by the employer on the running and maintenance of motorcar (+) remuneration, if any, paid by the employer to the chauffeur (+) depreciation of the car and (-) any amount charged by the employer for such use by the employee Actual amount of expenditure incurred by the employer on the running and maintenance of motorcar (+) remuneration, if any, paid by the employer to the chauffeur (+) depreciation of the car and (-) any amount charged by the employer for such use by the employee

If car is used exclusively for private or personal purposes of the employee or any member of his household & the running and maintenance are met or reimbursed by the employer

Medical Facilities
Medical facility
Medical treatment in India

Exemption

Situation- I Fully exempted 1. Treatment in hospital maintained by the employer.(For any diseases.) Fully exempted 2. Treatment in my hospital  Maintained by Government (Central or state)/ local authority; or  In a hospital approved by Government for medical treatment of its employees. (For any diseases) 3. Treatment in any hospital approved by the Fully exempted Chief Commissioner of income tax for prescribed disease.

Situation II Treatment in any other hospital (i.e. private hospital)

a. Actual expenses incurred or reimbursed by employer ; or b. Rs. 15,000 in aggregate per annum (which ever is less)

Leave Travel Allowances (LTA):

Different situations
1. Journey is performed by Air

Amount of exemption
Amt. of ecenomy class air fare of the national carrier by the shortest route or the amt.spent, whichever is less. Amt. of air conditioned first class rail fare by the shortest route or amount spent, whichever less. Amt. of air conditioned first class rail fare by the shortest route or the amount spent, whichever is less.

2. Journey is performed by Rail 3. Places of origin of journey & destination are connected by rail & journey is performed by any other mode of transport.

4. Places of origin of journey & destination are not connected by rail A. Where a recognised public transport First class or deluxe class fare by the shortest system exists route or the amount spent, whichever is less. B. Where no recognised public transport systems exist. Air conditioned first class rail fare by the shortest route (as if the journey had been performed by rail) or the amount actually spent, whichever is less.

Deductions from salary (Section 16)

 Standard Deductions {Section 16(i)}:

This deduction is not available from the A. Y. 2006 07.

Entertainment Allowance {Section 16(ii)}:

This allowance is first included in salary income under the head Salary & thereafter deduction is given on the basis enumerated in the following: In the case of Govt. employee:
Rs. 5000. 1/5 of basic salary. Actual amount received.

Whichever is less is eligible for deduction. In the case of other employee, no deduction is available from A.Y. 2002 03.

Professional Tax or Tax on Employment {Section 16(iii)}:

Deduction is available in the year in which professional tax is actually paid. If Professional Tax is reimbursed by the employer, then Professional Tax reimbursed by the employer will first be included in salary as perquisite & then the same amount is allowed as deduction under section 16(iii) from gross salary.

Tax Slabs
Income tax slabs 2011-2012 (for Men) Income Tax Slab (in Rs.)
0 to 1,80,000 1,80,001 to 3,00,000 3,00,001 to 5,00,000 Above 5,00,000

Income tax slabs 2011-2012 (for Women)

Tax
No Tax 10% 20% 30%

Income Tax Slab (in Rs.) Tax

0 to 1,90,000 1,90,001 to 3,00,000 3,00,001 to 5,00,000 Above 5,00,000 No Tax 10% 20% 30%

Income tax slabs 2011-2012 (for Senior Citizens) in India: Income Tax Slab (in Rs.)
0 to 2,50,000 2,50,001 to 5,00,000 5,00,001 to 8,00,000 Above 8,00,000

Tax
No Tax 10% 20% 30%

EFFORTS BY
Kumail Mukadam

Thank You