employee+taxation

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EMPLOYEE TAXATION

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HEADS OF INCOME

WHICH FALL

UNDER TAX

FOR SALARIED EMPLOYEES:

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1. Income from Salaries

2. Income from House Property

3. Capital Gains;

a) Income from Short Term Capital Gains (STCG);b) Income from Long Term Capital Gains (LTCG)

4. Income from Other Sources

like Interest income, Dividends etc.,

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Salary

Basic + DA+Commission etc.

Normal components

Allowances

PerquisitesTaxable

Toemployee

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Income from Salaries• Gross Salary [As per definition U/s 17(1)]Basic Salary+ Wages+ Taxable portion of allowances+ Taxable portion of perquisites+ Taxable portion of gratuity, pension, etc.+ Fees, Commission , Profit in lieu of or in addition to any salary or wages+ Any Advance Salary + Leave Encashment+ Contribution to RPF in excess of 12% of salary made by employer+ Interest earned in excess of 8.5% on RPF+ Contribution made by Central Government or any other employer to the

account of an employee under Pension Scheme u/s 80CCD

GROSS SALARYLess: Deduction U/s 16:

16(ii) Entertainment Allowance16(iii) Professional Tax

= INCOME FROM SALARY







Basis of Charge• Chargeability: Section 15 to 17 of the Income Tax Act, 1961

provides for calculation of Income under the head “Salaries”.• For the purpose of chargeability of tax, salary consists of :a. Any salary due from an employer (or a former employer) to an

assessee in the previous year, whether actually paid or not;

b. Any salary paid or allowed to him in the previous year by or on behalfof an employer (or a former employer), though not due or before itbecame due ; and

c. Any arrears of salary paid or allowed to him in the previous year by oron behalf of an employer (or a former employer), if not charged toincome tax for any earlier previous year.

Remark: Salary income is chargeable to tax either on due basis or onreceipt basis, whichever is earlier.







ALLOWANCES

• Allowance is a fixed monetary amount paid by theemployer to the employee for meeting some particularexpenses, whether personal or for the performance ofhis duties.

• Certain allowances given by the employer to the employee are exemptu/s 10(14). All these exempt allowances are detailed in Rule 2BB ofIncome tax Rules and are briefly given hereinafter:

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Type of Allowances

HRA

Special Allowances

Entertainment Allowance

AllowancesExempt In

Case Of Certain Persons

Fully Taxable Allowances







House Rent Allowance (HRA) [Section 10 (13A) & Rule 2A]

Least of the following is exempt :i. Actual amount receivedii. Rent paid – 10 % of Salaryiii. 50 % of Salary if rented house is situated

in any one of the 4 metropolitan cities &40 % of Salary in other cases.







Notes :

1. Salary means Basic salary + D.A. if terms of employment soprovide. + Commission based on fixed % of turnover.

2. Where employee has not actually incurred expenditure on paymentof rent or stays in his own accommodation, no exemption of HRAavailable.

3. Salary is to be taken on due basis in respect of the period duringwhich the rented house is occupied by the employee. The salary ofany other period is not to be included even though it may bereceived and taxed during the P.Y. (e.g. arrears of salary receivedduring the P.Y.).








Note:

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No Exemption where an employee lives in his own house, or in a house for which he does not pay any rent (say in the house owned by parents, in-laws or spouse).

Rent paid up to Rs. 15,000/-PM

Original Rent paid receipt isMandatory

Rent paid > Rs. 15,000/- PMCircular No. 05/2001 dated 16.08.2001

a) PAN of the Landlord is mandatory.

b) If no PAN a declaration to this effect along with name & address of the landlord is to be furnished

c) Original Rent paid receipts are mandatory.

d) Copy of rental agreement.






Special Allowances [Section 10 (14) & Rule 2BB]

I. Some allowances are exempt to the extent ofleast of the following :

1.Actual amount received from employer.

2.Amount spent for the purpose for whichallowance received.







Special allowances[10(14)] & Rule 2BB

For official duties (after Reaching office)

Not directly relate toOfficial duty(General)

1.Official travel/transfer Allowance to meet the cost

2.Conveyance allowanceto meet customers

3.Daily allowance on officialTour/journey

4.Helper allowance to carryOfficial documents

5. Research allowance6. Uniform allowance to do

Official duty

To beSpent Fully OtherWise,

amountnot

Spenttaxable

See inthe

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II. Some allowances are exempt to the extentof least of the following :

1. Actual amount received fromemployer

2. Limit Specified







These allowances are as follows : Name Of Allowance Limit Specified

1. Children education allowance 1. Rs. 100 per month per child upto a maximum of 2 children

2. Hostel expenditure allowance 2. Rs. 300 per month per child upto a maximum of 2 children.

3. Transport allowance 3. To meet expenditure for thepurpose of commuting betweenplace of his residence and theplace of his duty.

Blind or orthopedicallyhandicapped with disability oflower extremities : Rs. 1,600per month

Other employees : Rs. 800per month


Note: Since these allowancesare exempt to the extent amountreceived or limit specified,which ever is less, hence actualexpenditure in this case have norelevance

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III. Allowances where exemption is allowed up to

certain % of amount received :Allowance allowed to transport employees :

If any fixed allowance is given to meetpersonal expenditure during duty then least ofthe following shall be exempt :

1.70 % of the amount received

2.Rs. 10,000/- Per Month

Note : Exemption will be allowed to transportemployees only when they are not in receipt ofdaily allowance.








Deduction for any sum paid towards tax on employment (section 16 (iii)).

Number of the Employees during the month in respect of whom the tax is payable is as under (in the State of Andhra Pradesh):

If the professional tax is paid by the employer on behalf of the employee, it isfirst included in the salary of the employee as a “perquisite” (since it is anobligation of the employee discharged by the employer) and then the sameamount is allowed as deduction on account of “professional tax” from grosssalary.

If the professional tax is paid by the employer on behalf of the employee, itbecomes taxable whether the employee is a ‘specified employee’ or not.

Employees whose monthly salaries or wages or both are

Rate of Tax per Month Rs.

i) Up to Rs. 5,000/- Nilii) Range from Rs. 5,000/- to Rs. 6,000/- 60iii) Range from Rs. 6,001/- to Rs.10,000/- 80iv) Range from Rs.10,001/- to Rs. 15,000/- 100v) Range from Rs.15,001/- to Rs. 20,000/- 150vi) Range above Rs.20,000/- 200

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PERQUISITE [Sec. 17(2)]

• Perquisite may be defined as any casualemolument or benefit attached to an officeor position in addition to salary or wages.

• Need not be in kind. It can be in cash.• What are the conditions to be fulfilled to

become a perks?







1.Allowed byEmployer to

Employee4.Personal advantage

To theemployee

5. Derived by Virtue of

Employer’sauthority

3.DirectlyDepend

upon service

2.Allowed duringContinuance

Of employment

Conditions

To becomePerquisites


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1.Rent FreeAccommodation

Providedby Employer

4.Personal obligations of

Employeemet by

Employer

5. Funds paidBy employer Other than

RPF/Insurancefund

3.Value of Benefits provided

Like Furniturein the accommodation

2.ConcessionalAccommodation

providedby employer

PerquisitesIncludes

6.Other BenefitsAllowed

to Employees

Accommodation Related(1-3)Including sweeper, gardener, watchman, gas,

electricity,


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Valuation of Rent free unfurnished accommodation (Private Sector employees or other employees)

Where accommodation is owned by the Employer


Where accommodation is taken on lease or rent by the employer

i. 15% of the salary – where population>25 lakhs.

ii.10% of the salary - where population> 10 lakhs < 25 lakhs

iii.7.5% of the salary- in other cities.

Lower of : i. 15% of the salaryii. Actual amount of rent payable by the employer.

As reduced by the rent if any, paid by the employee.

Salary= Basic salary +D.A +Bonus +Commission +Fees +all other taxable allowances (excluding amount not taxable) and any monetary payment.

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Valuation of Rent Free Furnishedaccommodation Provided by the

employer

If owned

10% of originalCost of furniture

If rented

Actual hire charges

payable







Accommodation is provided in a Hotel

Stay is for transfer of location


Stay is for other than transfer of location

a. The hotel accommodation is provided fora period not exceeding in aggregate 15 days;And

b. Such accommodation is provided on anemployee’s transfer from one place to another.

Perquisite (lower of the following)

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Not a perquisite

a) 24% of Salaryb) Actual charges paid or payable to such hotel






Motor Car benefitsMotor car Owned/hired by the employer :


Owner of the Car

Expenses met by

Purpose Taxable value of perquisite

1(a) Employer

Employer Fully official use

Not a perquisite, provided the documents specified in Rule 3(2)(B) * As per note below

1(b) Employer

Employer Fully personal use

a. Actual expenditure on carb. Remuneration to Chauffeur c. 10% of the cost of the car

Aggregate of aboveLess: Amount charged from employee

1(c )(i) Employer

Employer Partly for official and partly for Personal use

a. Cubic capacity of car engine upto 1.6litres: Rs.1800 p.m + Rs900 p.m forchauffeur

b. Above 1.6 litres : Rs.2400 p.m +Rs900 p.m for chauffeur

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Owner of the Car

Expenses met by


1(c )(ii) Employer

Employee Partly for official and partly for Personal use

a. Cubic capacity of car engine upto 1.6 liters: Rs.600 pm + Rs. 900 pm for chauffeur.

b. Above 1.6 liters: Rs.900 pm + Rs.900 pm for chauffeur.

2(i)Employee


Not a perquisite, provided the documents specified in Rule 3(2)(B)* are maintained .

2(ii)Employee


Subject to Rule 3(2)(B)*Actual expenditure incurred lessi. Cubic capacity of car engine upto

1.6 liters: Value as per 1(c )(i).ii. Cubic capacity of car engine upto

1.6 liters: Value as per 1(c )(i).


Motor Car benefits …. contd

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Owner of the Car

Expenses met by


3 (i) Employee owns other automotive but not car


Not a perquisite, provided the documents specified in Rule 3(2)(B) *.

3 (ii) Employee owns other automotive but not car


Subject to Rule 3(2)(B)*Actual expenditure incurred by employerLess: Rs.900 pm


* Note: Rule 3 (2)(B): Documents required for claiming ‘Not Taxable Perquisite’ orhigher deduction wherever applicable:a. Employer should maintain complete details of journey undertaken for official

purpose, which includes date of journey, destination, mileage and amount ofexpenditure incurred thereon.

b. Certificate of supervising authority of the Employee, wherever applicable, to theeffect that expenditure was incurred wholly and exclusively for performance ofofficial duties, should be provided.

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Motor Car benefits …. contd






Leave Travel Assistance


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Leave Travel Assistance• Leave travel assistance may be provided by the employer to the employee and

his family:a. In connection with proceeding on leave to any in India, while in service.b. Proceeding to any place in India after retirement or termination from serviceConditions for benefit:a. An individual can avail the benefit of LTA offered by his employer, twice in

block of four years.b. The present block of four years applicable for Assessment year 2013-14 is

Calendar years 2011-14 (Present Block)c. If an individual has not availed the benefit twice in a block of four years, the

first LTA availed in the next 4 years block can be taken for the previous block.d. This exemption is available only for two children of an individual born after

1.10.1998. There is no restriction for children born before 1.10.1998 and alsoin case of multiple births after one child.







• Computation of Exemption for LTA : The maximum amount of exemption isthe cost of travel on the shortest route. The exempt amount for varioustravelling modes are calculated in the following manner:


Mode of travel Class of travel Amount exemptEconomy class Travel charges on shortest route collected

by National AirwaysI Class AC Travel charges on the shortest route

Deluxe class Travel charges on the shortest route

- I class AC as per Railways, equivalent for the distance for shortest route

When taxable:

a. LTC encashed without performing journey is fully taxable.b. Expenses incurred other than the Fare (like boarding or lodging) is fully taxable.c. Amount received from Employer in excess of the cost of travelling on the shortest route

is taxable.

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Other Facilities and PerquisitesSweeper, Gardner, Watchman and personal attendant


Amount of salary paid to such personincurred by the employer as reduced bythe amount, if any, recovered from theemployee.

2.

Supply of gas, electric energy or

water for employee’s household

consumption

Using the resources owned by the

employer without purchasing from the

outside agency

Manufacturing cost per unit incurred by the

employer as reduced by the amount, if any, actually paid by the

employee.

Any other case

Actual amount incurred by the employer to the agency supplying the resources as reduced by the amount, if any, actually paid by the

employee.

1.

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Other Facilities and PerquisitesFree or concessional

education facilities for any member of household


Where educational institution is itselfmaintained and owned by the employer Orsuch facilities are allowed in othereducational institute by reason of his beingin employment of that employer

In any other case

The cost of education in similar institution inor near the locality. However, if the facilitiesare provided to the children of theemployee, the value of benefit shall be NIL ifthe cost of such education per child does notexceed INR 1,000 pm.

Actual amount incurredby the employer, asreduced by amount, ifany, actually paid by theemployee.

3.

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Other Facilities & PerquisitesTravelling, touring, accommodation and

any other facility provided by the employer for the personal purposes, other than leave travel concession.


Where such facility ismaintained by theemployer, and is notavailable uniformly toall employees.

Where any official tour is extended as a vacation In any other case

Value at which suchfacilities are offered byother agencies to thepublic as reduced byamount, if any,actually paid by theemployee.

Actual amount incurred bythe employer in relation tosuch extended period ofstay or vacation asreduced by amount, if any,actually paid by theemployee.

Actual amountincurred by theemployer asreduced byamount, if any,actually paid bythe employee.

4.

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Other Facilities and PerquisitesNature of Perquisite Taxable value of Perquisite

5. Free food and non-alcoholic beverages

i. Actual amount incurred by the employer as reduced by amount,if any, actually paid by the employee.

ii. If food and non-alcoholic beverages are provided during workinghours at office or business premises or through non –transferrable paid vouchers usable only at eating joints, to theextent of INR 50 per meal is exempt from tax.

iii. Tea and snacks provided during working hours and free food ornon-alcoholic beverages during working hours exempt from tax.

6. Gift/Voucher/ Tokenin lieu of gift

Actual amount of gift shall be considered as a perquisite. However,the value perquisite is NIL in case the value of gift is below INR 5000in aggregate during the previous year.

7. Credit card expensesincluding membershipand annual fees

Actual Expenditure to EmployeeLess: Amount recovered from employee

Note: If it is incurred for official purpose and supported by necessarydocuments, then it is not a taxable perquisite







Other Facilities and PerquisitesNature of Perquisite Taxable value of Perquisite

8. Club expenses Actual expenditure incurred by the EmployerLess: Amount recovered from employees

Note: i. If it is incurred for official purpose and supportedby necessary documents, then it is not a taxable perquisiteii. Initial Fee of Corporate membership of a club is not ataxable perquisite

9. Health club,sports and similarfacilities

If such facilities are provided uniformly by the employer toall the employees, the value of perquisite will be NIL.

10. Free use ofmoveable propertyowned by theEmployer

10% PA of Actual cost if owned by employer, or Actualrental charge paid/ payable by employerLess: Amount recovered from employee







Other Facilities and PerquisitesNature of Perquisite

Taxable value of Perquisite

11. Transfer of any moveable assets

Particulars Computer &

Electronic gadgets

Car Other moveable assets

Method of depreciation WDV WDV SLMRate of depreciation for every completed year

50% 20% 10%

Actual CostLess: Depreciation for completed yearsLess: Sale value taken from employee

XX

XX

XX

XX

XX

XX

XX

XX

XX

Taxable value ofperquisite

XX XX XX







Notes:• Electronic gadgets include computer, digital

diaries and printers, but exclude Washingmachines, microwaves ovens, mixers, hotplates, etc.

• Transfer of moveable assets which are 10years old shall not attract taxability

• Completed year means actual completedyear from the date of acquisition of the assetto the date of transfer of such asset to theemployees.







Taxability of Medical FacilitySome instances of perquisites exempt from tax are given below:Provision of medical facilities, etc. (Proviso to Sec. 17(2))1) Value of any medical treatment provided to the employee or his family in;

a) Hospital maintained by the employer.b) in any hospital maintained by the Government or any local authority orapproved by the Government.c) Value of medical treatment for prescribed diseases or ailments in anyhospital approved by the Chief Commissioner of Income-tax.

Note: For claiming this benefit the employee needs to maintain a certificate fromthe hospital specifying the disease or ailment and receipt for the amount paid.

2) Group Medical Insurance Paid U/s 36(1)(ib)3) Medical Insurance paid U/s 80DNote for 2 & 3 above: health insurance schemes to be approved by the

Government or the Insurance Regulatory and Development Authority.







3)Any other Medical Expenditure reimbursed subject to a maximum of Rs. 15,000/-.4) Premium of Accident Insurance policy.5) Medical Treatment abroad: Expenditure incurred by the employer on medical treatment of

the employee or his family member for medical treatment outside India. This includestravel and stay abroad of the employee or the family member plus one attendant whoaccompanies the patient in connection with the medical treatment. This exemption issubject to the condition that:

Note: The expenditure excluded from the perquisite value shall be to the extent permittedby the Reserve Bank of India; and


Gross Total Income, before including reimbursement of Foreign Travel Expenditure

Tax Treatment

Upto Rs. 2,00,000/- Fully ExemptAbove Rs. 2,00,000/- Fully Taxable

Taxability of Medical Facility






Taxation of Retirement Benefits

GratuityLeave Salary encashmentPensionRetrenchment CompensationVoluntary Retirement Compensation







GRATUITY Sec 10(10)

During Continuation Of Service

On Termination Of Service

Fully Taxable

Fully Exempt

Covered Under PGA

Minimum of following exempted1) Actual Gratuity Received2) Rs. 10,00,000/-3)1/2 month Avg. Salary X Completed Year of Service

Minimum of following exempted1) Actual Gratuity Received2) Rs. 10,00,000/-3) P.M. Salary X Completed Year of Service X 15/26

If Non Government Employee

NO

YESYES

NO

Note:* PGA= PAYMENT OF GRATUITY ACT*SALARY= BASIC+D.A, last drawn.*COMPLETED YEAR includes every completed year & period in excess of 6 months shall be treated as a year

Note:*AVG. SALARY= (10 MONTHS BASIC SALARY+D.A.+TURNOVER BASED COMMISSION) / 10*COMPLETED YEAR ignores any fraction of year.


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LEAVE SALARY ENCASHMENT Sec10(10AA)

During Continuation Of Service

On Termination Of Service

Fully Taxable

Fully Exempt

Minimum of following exempted1) Actual leave encashment received2) Rs. 3,00,000/-3) 10 Months average salary4) 30 days average salary for every completed year of service, subject to leave availed during the tenure of service.


NO

YES

Note:*AVG. SALARY= (10 MONTHS BASIC SALARY+D.A.+TURNOVER BASED COMMISSION) / 10

[LAST 10 MONTHS EXACT FROM THE DATE OF RETIREMENT.]*COMPLETED YEAR ignores ANY FRACTION







PENSION Sec10(10A)

Uncommuted Pension

Fully taxable

Fully Exempt

Assessee received gratuity

½ of total pension commuted shall be exempted.

1/3 rd of total pension commuted shall be exempted.


NO

YESYES

NO

Commuted Pension







RETRENCHMENT COMPENSATION Sec10(10B)

In any other CaseIf Compensation Paid Under Any Scheme

Approved By The Central Government.

Nothing Shall Be Taxable.

Minimum of following shall be exempted:a) Actual amount receivedb) Rs.5,00,000/-c) Any amount calculated under

Industrial Disputes Act,1947 i.e15 days average pay for everycompleted year of continuousservice or any part thereof inexcess of 6 months.


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VOLUNTARY RETIREMENT COMPENSATION Sec. 10(10C)

In any other CaseReceived from specified employers

Minimum of following shall be exempteda) Actual amount received as per V.R.S guidelines* or b)Rs.5,00,000/-

Fully taxable

*GUIDELINES:-a)COMPLETED AGE OF 40 YEARS OR COMPLETED 10 YEARS OF SERVICE (IT IS NOT APPLICABLE ON PUBLIC SECTOR COMPANY)b)THIS IS FRAMED TO REDUCE THE STRENGHT OF EMPLOYEES.c)THE VACANCY CAUSED BY VRS IS NOT TO BE FILLED UP d)THE RETIRING EMPLOYEE IS NOT EMPLOYED IN ANOTHER COMPANY BELONGING TO THE SAME MANAGEMENTe)* THE AMOUNT OF COMPENSATION DOES NOT EXCEED = 3 MONTHS SALARY FOR EACH COMPLETED YEAR OF SERVICE or SALARY AT THE TIME OF RETIREMENT x BALANCE MONTHS OF SERVICE LEFT

Note: Exemption once allowed under this section, it cannot be claimed by the employee in relation to any other assessment year.

# SPECIFIED EMPLOYERS :-a)COMPANY b)LOCAL AUTHORITY c)CO-OPERATIVE SOCIETY d)ANY AUTHORITY ESTABLISHED UNDER CENTRAL/STATE/PROVINCIAL ACTe)SPECIFIED UNIVERSITY f)INDIAN INSTITUTE OF TECHNOLOGY(IIT)g)STATE GOVERNMENT h)CENTRAL GOVERNMENT i)NOTIFIED INSTITUTIONj)NOTIFIED INSTITUTION OF MANAGEMENT (IIM)







Sec10(11,12,13) Any sum received from PF,RPF,SAFType of fund

Employer Contribution principal)

Employer’s contribution interest)

Employee's Contribution principal)

Employees Contribution interest)

Amount withdrawn on retirement

SPF Exempt Exempt Deduction U/s 80C

Exempt Exempt u/s 10(11)

RPF Exempt up to 12% of salary

Exempt up to 9.5%

Deduction U/s 80C

Exempt up to 9.5%

Exempt subject to condition. If not then RPF treated as URPF

URPF Exempt Exempt No Deduction us 80 C

Exempt Employees contribution exempt. Interest on employee taxable under IOS. Employer contri taxable as salary

PPF NA NA Deduction us 80C Exempt Exemptu/s 10(11)

Approved Super Annuation fund

Exempt Exempt Deduction us 80C Exempt Exemptu/s 10(3)

Approved gratuity fund

Exempt Exempt NA NA Exemptu/s 10(10)

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Deductions U/c VIA of the Income Tax Act:

S. No.I.T. Sec.

Nature of Deduction Amount of deduction

1. 80 C Life Insurance Premia, PF, PPF, NSC, ELSS, Units of MutualFund referred to U/s. 10(23D), Tuition Fees (max. 2Children), Repayment of Principal of Housing loan, BankFixed Deposit of 5 yrs period, notified Bonds of NABARD,Deposit in an account under Senior Citizens SavingsScheme rules, 5 year time deposit in an account underPost Office Time Deposit Rules, 1981 etc.Premium paid towards approved Pension Fund (like LIC’sJeevan Suraksha) max. 1 lakh.Contribution to Central Government Pension Schemes.Upto 10% of salary with matching contribution fromGovernment.

Maximum overallDeductions

allowed u/s. 80C,80CCC & 80CCDis Rs. 1,00,000(Employer

contribution to NPS is deductible without any limit from FY

2011‐12)

2 80 CCF

Amount paid/deposited as subscription to long‐terminfrastructure bonds being notified by the CentralGovernment. (Available only for the AY: 2011‐12 & 2012‐13 only).

Rs. 20,000







Deductions U/c VIA of the Income Tax Act

S. No. I.T. Sec. Nature of Deduction Amount of deduction

3 80 D (a) Medical Insurance Premium paid by an individual/HUFby any mode of payment other than cash to effect or keepin force an insurance on the health of the assessee (self) orhis family(spouse & dependent children) for policies takenfrom General Insurance Corporation /other approvedInsurance Regulatory and Development Authority or anycontribution made to the Central Government HealthScheme.(b) Medical Insurance Premium paid by an individual/HUFby any mode of payment other than cash to effect or keepin force an insurance on the health of his/her parent orparents for policies taken from General InsuranceCorporation /other approved Insurance Regulatory andDevelopment Authority or any contribution made to theCentral Government Health Scheme.

Upto Rs.15,000 (Rs. 20,000 in case of senior

citizen)

Upto Rs.15,000 (Rs. 20,000 in case of senior

citizen)

4. 80D Preventive Medical Check-up (AY: 2013-14) (sublimit under Sec 80D)

Rs. 5,000/‐







Deductions U/c VIA of the Income Tax Act:S. No.

I.T. Sec. Nature of DeductionAmount of deduction

5. 80 DD (a) Any expenditure for Medical, Nursing & Rehabilitationincurred on dependant suffering from permanentdisability including blindness, mental retardation, autism,cerebral palsy or multiple disabilities(b) Deposits under LIC, UTI’s Scheme & other IRDAapproved insurers for the benefit of physicallyhandicapped dependent

Note: Suffering from permanent physical disability or metalretardation including blindness, loss of voice, autism,cerebral palsy & multiple disabilities as per Rule 11D

Rs.50,000 (Rs.1,00,000 if the disability is severe

ie., > 80%)

6. 80 DDB (a) Actual expenditure incurred on Medical treatment of Selfor dependant or a member of HUF suffering from terminaldiseases like Cancer, AIDS, Renal failure etc.(b) For Senior Citizens(self or dependent on whomexpenditure on medical treated is taken).Note: Neurological diseases, cancer, AIDS, Chronic RenalFailure, Hemophilia, Thalassaemia.

Upto Rs.40,000Upto Rs.60,000

7. 80 E Interest on loan taken from Financial/Charitable Institutionsfor Self/Spouse/Children for pursuing Higher Education (for amax. period of 8 yrs)

Actual Interest repaid

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Deductions U/c VIA of the Income Tax Act:

S. No.I.T. Sec.

Nature of Deduction Amount of deduction

8.

80 G (a) Donations made to National Defense Fund, PrimeMinister’s Relief Fund, approved Funds of reputedEducational Institutions, National Trust for Welfare ofpersons with Autism, Cerebral Palsy etc.(b) Donations made to Jawaharlal Memorial Fund, PM’sDrought Relief fund, Any approved CharitableInstitution/Trust, Religious Institutions, a corporationestablished by the Government for promoting interestof the members of a Minority Community. Prohibitionof cash donations in excess of ten thousand rupees.(W.E.F 01.04.2013 i. e. A.Y. 2013‐14 onwards

100% of Donation50% of Donationrestricted to 10% ofAdjusted Gross TotalIncome

9. 80 GG Deduction in respect of rents paid, provided theassessee is not in receipt of HRA and no house is ownedby self, spouse, minor child or HUF in the place of worksubject to filing of declaration in Form No.10BA

25% of incomeor rent paid in excessof 10% of incomeor ceiling of Rs.24,000p.a whichever is less







Deductions U/c VIA of the Income Tax Act:S. No. I.T. Sec. Nature of Deduction Amount of deduction10. 80 U Persons suffering from Permanent Physical Disability as

specified in Rule 11DRs.50,000 (Rs.1,00,000in case of severedisability)

11. 80TTA Interest on Savings Bank Account (AY: 2013‐14) Rs. 10,000/‐

12. 80CCG Investment made under any Equity Saving Scheme(subject to a maximum investment of Rs. 50,000) ‐Applicable from AY: 2013‐14: Deduction under thissection is available to a resident individual, if his grosstotal income does not exceed Rs. 10 Lakhs. EligibleInvestment to claim:

a) If the assessee is a new retail investor asspecified in the notified scheme.

b) The investment should be locked in for 3 yearsc) The amount of Deduction is 50% of amount

invested in equity shares.

Rs. 25,000/‐







RATES OF INCOME TAX:-

• Income Tax Rates/Slab for Assessment Year 2012-13 (F Y 2011-12):

Note: Education Cess and Secondary Higher Education Cess @ 3% on the above will be added.


Particulars Rate (%)

Up to Rs. 1,80,000/‐Up to Rs. 1,90,000/‐ (for women assessee)Up to Rs. 2,50,000/‐ (for resident individual attaining of 60 years till 80 years)Up to 5,00,000/‐ (for resident individual of 80 years and above)

NIL

Rs. 1,80,001/‐ to Rs. 5,00,000/‐ (except for resident individual of 80 years and above)

10

Rs. 5,00,001/‐ to Rs. 8,00,000/‐ 20

Rs. 8,00,001/‐ upwards 30

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RATES OF INCOME TAX:-

• Income Tax Rates/Slab for Assessment Year 2013-14 (F Y 2012-13):

Note: Education Cess and Secondary Higher Education Cess @ 3% on the above will be added.


Particulars Rate (%)

Up to Rs. 2,00,000/‐Up to Rs. 2,00,000/‐ (for women assessee)Up to Rs. 2,50,000/‐ (for resident individual attaining of 60 years till of 80 years)Up to 5,00,000/‐ (for resident individual of 80 years and above)

NIL

Rs. 2,00,001/‐ to Rs. 5,00,000 (except for resident individual of 80 years and above)

10

Rs. 5,00,001/‐ to Rs.10,00,000/‐ 20

Rs. 10,00,001/‐ upwards 30

52






Tax Deducted At Source (TDS)

• Any person responsible for paying any income chargeable under the head‘salaries’ shall at the time of payment deduct the income-tax on the estimatedincome of the employee under the head “salaries” for that financial year. Thetax has to be deducted at the average rate of income tax computed on the basisof the rates applicable for that particular financial year.

• Where employee also has any other income (not loss) for the same financialyear, chargeable under any other head, he may furnish the statement of suchother income and tax deducted thereon to his employer to take them intoconsideration while deducting the tax from the salary.

• But the loss under the head income from house property can be taken intoconsideration for the purpose of determining the amount of tax to be deductedfrom the income of the employee.







• The person responsible for making the payment under the ‘salary’ at the timeof making any deduction of tax, increase or decrease the amount to bededucted under the this section for the purpose of adjusting any excess ordeficiency arising out of any previous deduction or failure to deduct during thefinancial year. (section192 (3))

• Where during the financial year an assessee is employed simultaneously undermore than one employer or has changed the employment during the previousyear he may furnish to the employer of his choice or subsequent employersuch details of the salary received by him from other employer(s) and otherparticulars in form 12B.The present employer or the employer so chosen bythe employee will then deduct tax at source on aggregate amount of salary.


Tax Deducted At Source (TDS) …

contd






Relief When Salary Paid in Arrear or Advance:

• Under sub-section (2A)of section 192 where the assessee,being a Government servant or an employee in a company,co-operative society, local authority, university, institution,association or body is entitled to the relief under Sub-section (1) of Section 89, he may furnish to the personresponsible for making the payment such particulars inForm No. 10E duly verified by him, and thereupon theperson responsible as aforesaid shall compute the relief onthe basis of such particulars and take the same into accountin making the deduction.







Section 206AA:• Finance Act (No. 2) 2009, w.e.f. 01/04/2010 has inserted sec. 206AA in the

Income-tax Act which makes furnishing of PAN by the employee compulsoryin case of payments liable to TDS. If employee (deductee) fails to furnishhis/her PAN to the deductor , the deductor shall make TDS at a higher of thefollowing rates:

• i. at the rate specified in the relevant provision of this Act; or• ii. at the rate or rates in force; or• iii. at the rate of twenty per cent.• The deductor has to determine the tax amount in all the three conditions and

apply the higher rate of TDS . This section applies to any person entitled toreceive any sum or income or amount, on which tax is deductible underChapter XVII-B of Income Tax Act. As chapter XVII-B covers all Paymentsincluding Salaries, Salaries are also covered by Section 206AA.







• According to the provisions of section 203, every person responsible fordeducting tax at source is required to furnish a certificate in Form 16 to thepayee to the effect that tax has been deducted and to specify therein theamount deducted and certain other particulars. The certificates in Forms 16specified above shall be furnished to the employee by 31st day of May ofthe financial year immediately following the financial year in which theincome was paid and tax deducted.

• The certificate in Form 16 shall specify:


a) PAN of deductee c) Challan Identification No.

b) TAN of the Deductor d) Receipt No.

57







Section 80QQB: Deduction in respect of royalty Income of Authors.Person: Individual resident in India.He is an author or joint author.Book authored by him is work of literary, artistic or scientific nature. Books shallnot include brochures, commentaries, dairies, guides, journals, magazines,newspapers, pamphlets, textbooks for schools. Etc.Need to furnish a certificate in Form No. 10CCD from the person responsible forpaying the income.Deduction not available unless it is claimed in the ROI.Amount of Deduction:

Rs. 3,00,000 or,Amount of Consideration received on account of such ROYALTIES orCOPYRIGHT fees including advance received, which is not returnable.

Other Conditions:Royalty income not received in lump sum, than 15% of value of suchbooks sold during the PY shall be ignored.Income earned outside India;

i) It should remitted within six months from the end of the relevantPY or within such time as extended by RBI

ii) A certificate from prescribed authority in FORM 10H should besubmitted with the ROI

iii) A Certificate from payer in FORM 10CCD should also be obtained.No deduction shall be allowed under any other provision of this Act in respect ofsuch Income.

58





Download From :www.simpletaxindia.netSBS AND COMPANY - Chartered Accountants - www.sbsandco.com; [email protected]

Particulars Paper Form (Manual)

e-filing withoutDSC)

e-filing with DSC

Taxable Income </= Rs. 10L

Optional Optional Optional

Taxable Income >Rs. 10L

N A (e-filing is mandatory)

Optional Optional

Submission of Physical Forms

Concerned IT Department

ITR – V Acknowledgement to be sent to CPC Bangalore

Not Necessary

Time Period Within due date of filing ROI

Within 120 days from the date of filing

N A

Address to file/Send

Concerned IT Department

CPC, Post Bag No.1, Electronic City Post Office, Bangalore –560 100 by ORDINARY/ SPEED POST

Concerned IT Departmentthrough online

59

Mode of Submission of the Return of Income:







No enclosures to the return:- Rule 12(2) of the I.T Rules provides that the returnof income required to be furnished in prescribed Form shall not be accompanied by astatement showing the computation of tax payable on the basis of return, or proof oftax, if any, claimed deducted or collected at source or the advance tax or tax on self-assessment, if any, claimed to have been paid or any document or copy of anyaccount or form or report of audit required to be attached with the return of incomeor return of fringe benefits under any provisions of the Act.

For timely delivery of refunds; ensure correct address and Bank account numberon your Return of Income – From 1.10.07 onwards, all income tax refunds to theAssessee's residing in specified places will be delivered by the Refund Banker directlyat the communication address mentioned on the Return of Income. Taxpayers arerequested to fill in the correct address (available during working hours for delivery) toensure speedy delivery of refunds. In the case of taxpayers who opt for refundsthrough ECS, it will be credited directly to the bank account for which correct MICRcode/ Bank Account Number has to be furnished on the Return

60







Normally the employer shall deduct TDS from the salaries on monthly basis. If anyemployee is having other incomes like Income from House Property, Capital Gains andIncome from Other Sources then the advance tax is to be calculated by him and paythe same to the government account. If total tax payable is more than Rs. 10,000/-,then liability for payment of advance tax arises.

The due dates for payment of advance tax in Installments:

Note: If any amount is paid before 31st March, such payment is also considered as Advance Tax for the period.

S. No.

Advance Tax % of Tax

1st On or before 15th September >= 30%

2nd On or before 15th December >= 60%

3rd On or before 15th March Entire Balance

61

DUE DATES FOR PAYMENT OF ADVANCE TAX & FILING OF RETURN:







FORMS TO BE USED: - The forms to be used for filing the return of income onwards are mentioned below:-

ITR 1(SAHAJ) – Income from salary/pension: or Income from one houseproperty (excluding where loss brought forward from previous year): or Incomefrom other sources (excluding winnings from lottery and income from raceshorses).

ITR 2 – Individual who cannot file SAHAJ (ITR 1) above and where the totalincome does not include any income chargeable to income-tax under the head“Profits or gains of business or profession”.

Challan to be used for making Tax payment:

Challan Number: 280 for Advance Tax and Self-Assessment Tax.Challan Number: 281 for payment of TDS by the employer.

DUE DATE FOR FILING OF INCOME TAX RETURN:a) On or before 31/07/2012 for the assessment year 2012-13;b) On or before 31/07/2013 for the assessment year 2013-14.

62

ITR Forms and other related matters







Person having total taxable income up to Rs 5 lakh Salary income from one employerincluding saving bank interest up to Rs 10,000/- is exempted from Income tax returnfor Assessment Year 2012-13 & 2013-14.

Who can Claim Exemption?a) This exemption is available to Individual assessee only (resident or not).b) Total Income (after deduction 80C to 80U) of Individual must be up to Rs.5L.c) Income must be earned from Salary and/or Saving Bank Interest up to Rs. 10Kd) Pension is also covered under salary head.e) Individual must have reported his PAN to his employer.f) He has earned salary only from one employer during the year.g) He has reported his income from saving Bank Interest to his employer for TDS

deduction purposes.h) Employer has deducted the tax on his Full income, salary plus interest {taxable if

any}, and TDS has been deposited in Govt account by the employer.i) No refund is Due to an Assessee.j) Individual has received Form 16 Form the employer, which mentions PAN, Income

detail and Tax deducted and deposit detail.k) The above notification for exemption is optional for Assessee and he may or may

not avail this exemption.

63

Exemption from filing of ITR







FORM No.26AS: Assessee’s can view their Annual Tax Statement (Form No.26AS)online by logging on to www.incometaxindiaefiling.gov.in or www.tin-nsdl.com orthrough their bank account login mode.

Belated Return: Section 139(4) provides that a return which has not been furnishedby the due date may still be furnished as a belated return before the expiry of one yearfrom the end of the assessment year or before the completion of assessment, whicheveris earlier. However, on any return of income that has not been filed by the end of therelevant assessment year, penalty of Rs.5,000/- U/s 271F may be levied.

Revised Return: If a person having filed his return within the due date; discovers anyomission or wrong statement therein, he may file a revised return before the expiry ofone year from the end of the assessment year or completion of assessment whichever isearlier.

64

Form 26AS and other related matters







(i) INTEREST U/S 234A:Delay in filing of income tax return within due date (31st July) shall attract a simpleinterest @ 1% for every month or part thereof on the tax payable. If the TDScovered fully/ Taxes paid fully then Interest under this section will not attract.

(ii) INTEREST U/S 234B:If the advance tax is not paid/ TDS is not covered, Interest on the tax payable @1% for every month or part thereof from 1st April to till the date of payment. If theTDS covered fully/ Taxes paid fully then Interest under this section will not attract.

(iii) INTEREST U/S 234C:For deferment of advance tax payment; If advance tax paid is less than specifiedpercentage and/or not paid within due date, simple interest @ 1% per month orpart thereof is payable on tax determined on returned income as reduced byTDS/TCS/Amount of advance tax already paid or tax relief, if any, under Double TaxAvoidance Agreement with forgoing contribution.

(iv) INTEREST U/S 234D:Interest @ 0.5% is levied under this Section when any refund is granted to theassessee u/s 143(1) and/or on regular assessment if it is found that either norefund is due or the amount already refunded exceeds the refund determined onregular assessment. The said interest is levied @ 0.5% on the whole or excessamount so refunded for every month or part thereof from the date.

65

Payment of Interest







Intimation U/s 143(1): The Finance Act 2008 has reintroduced provisions in respect ofcorrecting arithmetical mistakes or internal inconsistencies at the stage of processing ofreturns. It has, thus been provided that, during the stage of processing, the total incomeshall be computed after making adjustments in respect of any arithmetical error in thereturn or any incorrect claim apparent from information in the return and if on suchcomputation, any tax or interest or refund is found due on adjustment of TDS or advancetax or self-assessment tax, then an intimation specifying the amount payable shall beprepared/generated or issued to the assessee. If any refund is found due, it is to be sentalong with the intimation to such effect. If no demand or no refund arises, theacknowledgement of the return is deemed to be treated as intimation. Such intimation isto be sent within one year from the end of the financial year in which the return is filed.

Assessment u/s 143(3): If the Assessing Officer, on the basis of the return filed by theassessee, considers that it is necessary to ensure that the assessee has not understatedhis income, he shall serve on the assessee a notice u/s 143(2) and, after obtaining suchinformation as he may require, complete the assessment (commonly referred as scrutinyassessment) u/s 143(3).

Rectification of mistake u/s 154: If any order passed by an income tax authoritysuffers from a mistake apparent from record, the assessee may make an application forrectifying the same before the expiry of four years from the end of the financial year inwhich the above order was passed. The Finance Act 2001 has provided that where anapplication for rectification under this Section is made by the assessee on or after1.6.2001, the same shall have to be acted upon by the income tax authority within aperiod of six months from the end of the month in which the application is received.

66

Communication with IT Dept.






Name of the I T Building

ParticularsIncome declared

> Rs. 20L Income declared

< Rs. 20L AA

YAKA

R BH

AVAN

Pensioners & Salaries Employees of Banks,Insurance Corporations Including LIC, AllOrganizations/ Establishments/ Institutions/Hospitals & Medicals Institutions in Private SectorsIncluding Companies, Missionary Bodies & PrivateEducational Institutions.

Circle ‐ 12(1) Range ‐ 12

AAYAKA

R BH

AVAN

Pensioners & Salaries Employees of Central &State Government Departments including Central& State Govt Undertakings and Local Authorities/Autonomous Bodies, All Agencies/ Bodies/Organization like ICRISAT, etc., Income Tax Dept inAP State, Cantonment Board & Municipalities.

Circle ‐ 13(1) Range ‐ 13


67

SALARY CASES - JURISDICTION OF HYDERABAD INCOME TAX OFFICES






Residential status

Residential status

Resident

Resident and Ordinarily Resident

(ROR)

Resident but Not Ordinarily Resident(NOR)

Non Resident(NR)

Residency is determined by number of days stay in India







Residential status …..Cont’d

None of the

conditions satisfied

Any one of the two

conditions satisfied

ROR / NOR NR

Basic conditions:

• 182 days or more in a financial year• 60 days* or more in a financial year plus 365 days or more in four

financial years preceding the relevant financial year

* 60 days gets substituted for 182 days only in the year of departure for an Indian citizen proceeding abroad for the purposes of employment. In the year of arrival to India for resuming employment, the threshold limit is 60 days.







Residential status …..Cont’dAdditional conditions:• “Resident” in India in atleast two out of ten financial years

preceding the relevant financial year; and• Present in India for 730 days or more during the 7 financial year

preceding the relevant financial year

ROR NOR

Both the conditions satisfied

One or none of

the condition

s satisfied

Generally, an expatriate coming to India for the first time will qualify as ROR in the 3rd or 4th year.








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71

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