income from salary
Post on 10-Apr-2015
9.167 Views
Preview:
DESCRIPTION
TRANSCRIPT
Page | 1
PROJECT FOR DIRECT & INDIRECT TAXES
COMPUTATION OF INCOME FROM SALARYA CASE STUDY OF ANY EMPLOYEE
Page | 2
CERTIFICATE FROM THE ORGANIZATION
This is to certify that:
Has/ have successfully completed a study on Procedure of Computation of Income from Salary - A case of State Bank of India and have submitted the project report on the same.
The study conducted was satisfactory. We wish them all the best.
Sign of the officer
Page | 3
TABLE OF CONTENTS
Executive Summary.................................................................................................4
Remuneration: what is it? ....................................................................................5
Components of Remuneration System………………………………………….7
What is deducted from salary? ........................................................................10
What exemptions are made in salary? ……………………………………......11
Case Study: State Bank of India…………………………………………………...13
Acknowledgements ...…………………………………………………………………20
Bibliography………………………………………………………………………………21
Page | 4
Executive Summary
The following case study acquaints the reader with the Remuneration System of the Public Sector Bank – State Bank of India.
It gives the reader a brief insight about the fundamentals of what constitutes a salary structure for an employee.
Then through a Balance Sheet of the Company we will explain the various elements listed and their relevance. Notes are mentioned for the same.
In conclusion we have prepared a sample salary slip to show how SBI remunerates its employees.
Page | 5
Remuneration: what is it?
Remuneration is pay or salary, typically monetary payment for services rendered, as in an employment. Pay is described in employment legislation as "wages". The employer has a duty to pay wages, which are generally dealt with as an express termin the contract of employment.
Wages comprise the basic rate of pay plus any other monetary element (e.g. overtime, bonus, commission etc.). Wages may be paid in the form of an annual salary, where it is usual to pay on a monthly basis, or, for hourly paid employees, at weekly intervals.
Salaried employees are usually paid one-twelfth of their annual salary each month. Hourly paid personnel are usually paid for the number of hours worked during the relevant week.
The basic salary or rate of pay may be supplemented by any overtime, bonus or commission earned. This then becomes gross wages from which the employer is required to deduct the appropriate national insurance contributions and income tax due.
What is included in salary?
According to Section 17(1) salary includes:1. wages and salaries including advance of salary 2. fees and commission3. perquisites4. addition to salaries or wages 5. payment received by an employee in respect of any period of leave not
availed of by him, i.e. leave encashment6. annual accretion to the balance at the credit of an employee participating in a
recognize provident fund to the extent it is taxable
Page | 6
Perquisites
It is a personal advantage or benefit derived by virtue of employment office or position. A perquisite denotes an additional monetary benefit going into the pocket of or enriching the employee. Some perquisites are taxable while some are non taxable. The taxable perquisites should be included in salary income.
Page | 7
Components of a Remuneration System
Page | 8
Direct Compensation
Basic pay
It’s the monthly base amount a person is entitled to. This is the biggest part of the pay, typically 50-60 per cent of the cost to the company (CTC). The basic tends to form a higher portion of the salary at junior levels. At senior levels, the proportion of basic goes down and variable pay components such as target-linked bonuses come into the picture. Basic determines the other components of an employee’s pay such as provident fund (PF) contribution (both by employee and employer) and house rent allowance, entitlement to loans by employers and, sometimes, designations and salary grades are linked to the basic.
Dearness allowance
Dearness allowance is a part of a person’s salary in India. It is calculates as a percent of the basic salary. The amount calculated is then added to the basic pay as well as the HRA to get the total salary. It is calculated on the basis of consumer price index. Dearness allowance is basically given by the company so that rise in prices of consumer price index will be compensated by increase in dearness allowance. As consumer price index is very volatile and variable dearness allowance is has a separate heading in salary slip.
City compensatory allowance
City Compensatory allowance is an additional allowance. It is not exempted from tax like HRA. It enables the employee to bear the high cost of living prevailing in an urban area or a city. If an employee is stationed at a bigger city, the person is required to spend more therefore the employer compensates the employee with this allowance.
Page | 9
Indirect Compensation
Travelling allowance
It depends on area to area. Conveyance allowance is basically paid to cover an employee’s work-related travel needs. An employee has to travel during the job so this takes care of the transportation expenses. Up to Rs 800 is exempt from tax every month. This component helps make the pay more tax-efficient and influences the take home pay of those at lower levels of pay.
Provision for newspaper
In certain factories/establishments the employees are reimbursed the cost of Newspapers while in some other factories/establishments the employees are paid monthly newspapers allowance instead of reimbursement of the cost of the Newspapers. This allowance is called newspaper allowance.
Telephone allowance
All officers of SMGS III and above, all Branch Managers and other functionaries who are permitted by competent authority are eligible for this allowance.
In addition to free calls, reimbursement will be as under:
TEGS VII – 2000 calls per monthTEGS VI – 1500 calls per monthSMGS IV & V – 800 calls per monthMMGS II & III – 300 calls per monthJMGS I – 200 calls per month
Page | 10
What is deducted from salary?
Deductions under section 16
Entertainment allowance : sec 16 (2)-It is only given to the government employees -It is initially included in the gross taxable salary -Thereafter section 16(2) allows a deduction from salary to the government employees to the least of the following:
(a) 1/5th of the basic salary (it would include dearness allowance excluding bonus, perks, allowances) (b) Rs. 5000(c) Amount of entertainment allowance actually received
- A non- government employee is no entitled to any deduction for EA
Professional tax : sec 16(3)
Section 16 (3) allows a deduction from salaries of the amount of a tax on employment by or under any law by the state government under article 276 of the constitution
Deductions under section 80
Deduction under sec80C(a) Life insurance premium: payment of premium which is in excess of
20% of actual capital sum assured shall not be included in gross qualifying amount.
(b)contribution to statutory provident fund (c) National saving certificates
Deduction under sec80D
Medical insurance premium paid:
The maximum amount of deduction is rs.15000 for normal citizen and rs.20000 for senior citizen
Page | 11
What exemptions are made in salary?
Exemptions under section 10
Leave travel concession : sec 10(5)It is exempt to the following extent:
-in the case of an individual-the value of any travel concession or assistance received by or due to him-From his employer for himself and his family, in connection with his proceeding on leave to nay place in India.
Encashment of leave salary : sec 10(10AA)
- It means cash received by an employee against leave earned but not taken and accumulated.- Leave encashment while in service is taxable
In case of government employee:
Any payment received by an employee of the central govt or state govt as the encashment of the earned leave to his credit at the time of his retirement, is wholly exempt from tax
In case of other employees:
Leave salary is exempt to the extent of the least of the following amounts:
-Encashment of the earned leave, not exceeding 30 days per each completed year of service -10 months average salary on basis of basic salary drawn for 10 months immediately preceding the date of retirement -The amount notified by the government which is 3, 00,000-And the amount actually received
Payment from statutory / public provident fund : sec 10(11)
-A provident fund to which the provident funds act, 1925 applies -Or from the provident fund set up and notified by the central government
Page | 12
Payment from recognized P.F : sec 10(12)
-The accumulated balance due and becoming payable,-To nay employee participating in a recognized provident fund -To the extent provided in rule 8 of part A of the 4th schedule to the act
House rent allowance : sec10 (13A)
-Any special allowance granted to an employee by his employer to specifically meet expenditure actually incurred on the payment of rent for residential accommodation occupied by him -Where as no exemption is available:
1. When such accommodation occupied by the Assesse is owned by him
2. The Assesse has not actually incurred any expenditure on payment of the rent in respect of such accommodation occupied by him.
Page | 13
CASE STUDY: STATE BANK OF INDIA
Salary slips of different management levels
Grade JMGS – I JMGS – I JMGS – I
DesignationAssistant Manager
Assistant Manager
Assistant Manager
Basic pay 10000 14880 21040
Dearness allowance 18 27 38
City compensation allowance
400 540 540
House Rent Allowance
850 1265 1788
Provision for newspaper 350 350 350
Travelling allowance
2750 2750 2750
Gross 14368 19812 26506
PF (Employers contribution) 1000 1488 2104
Net [Gross + employers
contribution to PF]15368 21300 28610
PF (Employeescontribution) 1000 1488 2104
CTC (per month) 16368 22788 30714
Annual CTC 196416 273456 368568
Page | 14
Grade MMGS - II MMGS – II MMGS - II
DesignationDeputy
ManagerDeputy
ManagerDeputy
Manager
Basic pay 13820 19360 22920
Dearness allowance 25 35 41
City compensation allowance 540 540 540
House Rent Allowance
1175 1646 1948
Provision for newspaper 500 500 500
Travelling allowance 3025 3025 3025
Gross 19085 25106 28974
PF (Employers contribution)
1382 1936 2292
Net [Gross + employers
contribution to PF]20467 27042 31266
PF (Employeescontribution)
1382 1936 2292
CTC (per month) 21849 28978 33558
Annual CTC 262188 347736 402696
Page | 15
Grade MMGS - III MMGS - III MMGS - III
Designation Manager Manager Manager
Basic pay 18240 21040 23520
Dearness allowance 33 38 42
City compensation allowance 540 540 540
House Rent Allowance
1550 1788 1999
Provision for newspaper
500 500 500
Travelling allowance 3300 3300 3300
Gross 24163 27206 29901
PF (Employers contribution) 1824 2104 2352
Net [Gross + employers
contribution to PF]25987 29310 32253
PF (Employeescontribution)
1824 2104 2352
CTC (per month) 27811 31414 34605
Annual CTC 333732 376968 415260
Page | 16
Grade SMGS - IV SMGS - IV SMGS - IV
DesignationChief
ManagerChief
ManagerChief
Manager
Basic pay 20480 23520 24140
Dearness allowance 37 42 43
City compensation allowance
540 540 540
House Rent Allowance 1741 1999 2052
Provision for newspaper
700 700 700
Travelling allowance
3575 3575 3575
Gross 27073 30376 31050
PF (Employers contribution)
2048 2352 2414
Net [Gross + employers
contribution to PF]29121 32728 33464
PF (Employeescontribution)
2048 2352 2414
CTC (per month) 31169 35080 35878
Annual CTC 374028 420960 430536
Page | 17
Grade SMGS - V SMGS - V SMGS – V
DesignationAssistant General Manager
Assistant General Manager
Assistant General Manager
Basic pay 24140 25380 26620
Dearness allowance 43 46 48
City compensation allowance
540 540 540
House Rent Allowance 2052 2157 2263
Provision for newspaper
700 700 700
Travelling allowance
3850 3850 3850
Gross 31325 32673 34021
PF (Employers contribution)
2414 2538 2662
Net [Gross + employers
contribution to PF]33739 35211 36683
PF (Employeescontribution) 2414 2538 2662
CTC (per month) 36153 37749 39345
Annual CTC 433836 452988 472140
Page | 18
Grade TEGS - VI TEGS - VI TEGS – VI
DesignationDeputy General Manager
Deputy General Manager
Deputy General Manager
Basic pay 26620 28660 29340
Dearness allowance 48 52 53
City compensation allowance 540 540 540
House Rent Allowance
2263 2436 2494
Provision for newspaper
900 900 900
Travelling allowance 4125 4125 4125
Gross 34496 36713 37452
PF (Employers contribution)
2662 2866 2934
Net [Gross + employers
contribution to PF]37158 39579 40386
PF (Employeescontribution)
2662 2866 2934
CTC (per month) 39820 42445 43320
Annual CTC 477840 509340 519840
Grade TEGS - VI TEGS - VI TEGS – VI
DesignationDeputy General Manager
Deputy General Manager
Deputy General Manager
Basic pay 26620 28660 29340
Dearness allowance 48 52 53
City compensation allowance 540 540 540
House Rent Allowance
2263 2436 2494
Provision for newspaper
900 900 900
Travelling allowance 4125 4125 4125
Gross 34496 36713 37452
PF (Employers contribution)
2662 2866 2934
Net [Gross + employers
contribution to PF]37158 39579 40386
PF (Employeescontribution)
2662 2866 2934
CTC (per month) 39820 42445 43320
Annual CTC 477840 509340 519840
Page | 19
Grade TEGS – VII TEGS – VII TEGS – VII
DesignationGeneral Manager
General Manager
General Manager
Basic pay 29340 31600 32600
Dearness allowance 53 57 59
City compensation allowance
540 540 540
House Rent Allowance 2494 2686 2771
Provision for newspaper
1000 1000 1000
Travelling allowance
4400 4400 4400
Gross 37827 40283 41370
PF (Employers contribution)
2934 3160 3260
Net [Gross + employers
contribution to PF]40761 43443 44630
PF (Employeescontribution) 2934 3160 3260
CTC (per month) 43695 46603 47890
Annual CTC 524340 559236 574680
Page | 20
Acknowledgements
We as a group hereby give our sincere thanks to Prof. Mr. Sandeep L. Chopde for giving us this opportunity to use our knowledge in the subject of “Accountancy” and improve our knowledge in the subject of “Taxation”.
We would like to thank Mr. Suhas Phalnikar, Branch Manager of SBI, Fort and Mrs. Pratima Avasare, Branch Manager, Andheri for providing us with valuable information regarding the project.
We also thank Mumbai Education Trust for providing us with the books, notes, the invaluable information and help.
Page | 21
Bibliography
Varsha Ainapure, Mukund Ainapure Direct and Indirect taxes. Mumbai: Manan Prakashan, 2000
A.M. Sharma Understanding Wage System. Delhi: Himalaya Publication House, 2004
State Bank of India Officers’ Association (Mumbai Circle), Service Conditions at a Glance, 2008
State Bank of Indiahttp://www.statebankofindia.com/http://www.onlinesbi.com/
Income Tax Departmenthttp://www.incometaxindia.gov.in/
Googlehttp://www.google.co.in/
top related