Salary Summary For Taxation Students

AY 2015-16

Summary prepared for quick revision

Author – Pratik Kikani Facebook Page authorkikani-pratik@yahoo.co.in

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Edition: First

April, 2015 Edition

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Preface

Dear Friends,

Here I am presenting a book with Summary of Salary

head under the Income Tax for Taxation Students of India.

While preparing the summary, I kept in mind last

minute revision and thus this book will serve as revision

purpose. This book is prepared with five effective pages of

Summary which only you need to read to recapture the

concept covered in Salary Head. Do only print such five

pages and If you are reading it on digital media then its

best.

Go Green because it also Saves Money.

Thanks and warm Regards,

Dated: 18/04/2015 Pratik Kikani

Place: Ahmedabad

Author – Pratik Kikani Facebook Page authorkikani-pratik@yahoo.co.in

About the Author:

Pratik Kikani

Degree holder of Bachelor of Commerce.

Student of CA Final.

Has contributed Articles for “AADTIYAVAT” magazine

for CA Students of Ahmedabad.

Has been active member of Team WICASA Ahmedabad

for more than four years.

Has been awarded for “On the spot - Poetry Writing”

by HA College of Commerce, Ahmedabad.

Has been awarded for on the spot photography

competition on subject of "Heritage with Human" by

Ahmedabad Branch of WICASA.

Has been associated as Volunteer with many social

organizations like PETA, Red Cross, etc.

Has been regular Blood Donor.

For May & November 2015 Exam Summary of Salary Head Author = Pratik Kikani

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Sec 14 1) Salary 2) HP 3) PGBP 4) CG 5) IFOS

Sec 14A If any income is exempt from Tax then related Exps are not allowed at all.

Sec 15 Charging Section

Due basis or Receipt basis w.e. Earlier

Except Only on Receipt basis

Bonus, Advance Salary, Arrears of Salary Sub to relief Sec89(1) (Retrospectively increased), Salary in lieu of Notice period

Sec 16 Deductions

16(i) Std Deduction

16(ii) Entertainment Allowance = Govt. Employee only (Actual amt / 20% of Salary / Rs.5000 w.e. lower)

16(iii) Professional / Employment Tax = Whatever amt paid on this account by employee is deductible at all, whether received from employer or not.

Sec 17 Definition

17(1) Salary

It includes

- Basic Salary, Wages

- Annuity, Pension

- Gratuity, Provident Fund, Leave Encashment, Commuted Pension

- Allowances, Perquisites

- Bonus, Commission

- Advance Salary, Profit in Lieu of Salary, Sec 80CCD

17(2) Perquisites

- Rent Free Accommodation provided by Employer to Employee

- Concessional Rent Accommodation provided by Employer to Employee

- Value of any Benefit or amenity Only in case of Specified Employee# (Either free of cost or at Concessional rate)

- Obligation of the employee is met by employer

- Any sum paid to get assurance of Life of the Employee

- Any other Fringe Benefits provided by the Employer as may be prescribed under this act

- Employer’s Contribution in approved superannuation Fund in excess of Rs.100,000

- ESOP or Sweat Eq. Share , Employer gives shares for free or at concessional rate Taxable = FMV on exercise date (less) Recovered amount

# Specified Employee 1) Director of Comp. 2) Having Substantial Interest in concern in which he is employed (20% or more voting

power) 3) Employee getting monetary benefits over Rs.50,000pa*

*50,000pa includes all monetary benefits but excludes (a) Non Taxable / Exempted Monetary benefits (b) Perquisites, and after giving deduction us Sec16(ii) & Sec 16(iii)

17(3) Profit in lieu of Salary

- Any compensation due to or received by any present employer or former employer on account of Termination or Modification of Terms of the employment

- Any compensation due to or received by any person from any other person before the joining or after session of the employment

- Keyman Policy

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Retirement Benefits

Sec 10(10) Gratuity

Govt. Employee 100% Exempt

Non Govt. Employee

Covered under Gratuity Act 1972 Not- Covered under Gratuity Act 1972

1) Actual Amt. Least

Is Exempt

1) Actual Amt.

2) Max Rs.10,00,000 2) Max Rs.10,00,000

3) Half Month Salary (15/26 Days) on based on Last drawn Salary for Each completed yrs. of service or Part there of (Note- Round Off nearest)

3) Half Month Salary (15/30 days) on basis of Last 10 months Avg. Salary for each completed years of service. (Note-Backward Round-off)

Salary means = Basic + DA Salary means = Basic + DA (*if) + **%

*If covered under terms of Employment and forming part of Retirement benefits **% of commission on the basis of Turnover achieved by employee

1) Received during employment = 100% Taxable 2) Max limit of Rs.10,00,000 is for Lifetime Limit in together for all employment

Sec 10(10A) Commuted Pension

Govt. Employee 100% Exempt

Non Govt. Employee

Gratuity Received No Gratuity Received

1/3 of 100% Commuted Pension 1/2 of 100% Commuted Pension

Sec 10(10AA) Leave Encashment

Govt. Employee 100% Exempt

Non Govt. Employee 1) Actual Amt. received 2) Max Rs.3,00,000 3) Earned Leave Salary* 4) Max. 10 Month Salary*

Least is exempt

*On basis of immediately preceding 10 months Avg. Salary *Salary = Basic + DA(if) + %

Maximum 30days leave allowed in a year

Sec 10(10B) Retrenchment Compensation

1) Act. Amt. 2) Max. Rs.5,00,000 3) Amt. Calculated as per Industry Dispute Act,1947

Least is Exempt

If approved by Govt. then Fully Exempt

Once in Lifetime available

Sec 10(10C) Voluntary Retirement Compensation

1) Act. Amt. 2) Max. Rs.5,00,000 3) Higher of (a) & (b)

(a) Remaining months of Service X Last Drawn Salary* (b) Completed Yrs. Of Service x 3 x Last Drawn Salary

Least is Exempt

Once in Lifetime available

*Salary = Basic + DA(if) + %

Sec 10(10CC) Tax on Perquisites Born by Employer not taxable in hands of Employee

Provident Fund SPF PPF URPF RPF

1 Employer’s Contribution

Not Taxable

- Not Taxable Excess of 12% Taxable When Withdrawn taxable as Salary

2 Employee Contribution 80C No 80C Hence Not tax when withdrawn 80C

3 Interest credited to PF Not Taxable Not Taxable Excess of 9.5% Taxable When

Withdrawn On Employer Contri. Taxable as Salary

On Employee Contri. Taxable as IFOS

4 Withdrawal Exempt 10(11) Taxable Exempt 10(12)

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Allowances

Allowances 100% Tax Free Any allowances in hands of Salary Allowance Perquisites

SC / HC Judges Taxable Exempt Taxable

UNO employee Exempt Exempt Exempt

Employee working for Indian Embassy Taxable Exempt Exempt

Allowances 100% Taxable Dearness , City Compensatory, Tiffin / Lunch, Non- Practicing, Warden/ Proctor, Deputation, Over-time, Fixed Medical, Servant, Family, Project, Marriage, Holiday, Telephone, etc.

Partly Tax free Allowance Children Education Allowances = 100Rs. Per Month Per Child ( subject to Max 2 Children)

Hostel Allowances = 300Rs. Per Month Per Child ( subject to Max 2 Children)

Sec 10(13A) House Rent Allowances Conditions

1) Do not have house in that city 2) Living on Rent and Actually paying Rent

Least is allowed 1) Actual Rent 2) Rent Paid - 10% of Salary* 3) 50% of Salary for Metro City

40% of Salary for Non-Metro *Salary = Basic + DA(if) + % (for the relevant period)

Depending upon actual Exp. Uniform Allowances

Travelling Allowances for Official Tour and Transfer - Including payment of transfer, packing

Daily Allowances

Helper Allowances - Used for performing official duties

Academic Allowances - Used for Academic Research & Training purpose

Conveyance Allowances

Special Compensatory Allowances

Hill Area Allowance = (300pm to 7000pm)

Border Area Allowances = (200pm to 1300pm)

Tribal / Schedule Area Allowances = Rs.200pm

Transport Allowances to Employee working in Transport System (Similar to DA) 70% of such allowance or Rs10,000pm w.e. least

Transport Allowance = Rs.800pm For Blind / Handicap = Rs.1600pm

Sec 10(7) Allowances / Perquisites paid outside India by the Govt. to a citizen of India for rendering service outside India.

Here Salary Taxable but only allowances / Perquisites not taxable

Sec 10(5) Amount received as Leave Travel Concession from Employer

Upto actual Spent is exempt

1) Via Air = Economy Class + short rout

2) Via Rail = 1st Class AC + short rout

3) Via other = 1st class deluxe fare of public transport (if not available then 1st class AC rail fare)

- Two journeys in block of four calendar years

- Family includes = Spouse, Child (max 2) + Wholly dependent parents & siblings

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Valuation of Perquisites (Normally in kind but can be in cash)

Note- Amt. charged from Employee to be deducted from Taxable value of Perquisites

Medical Facility

In India Outside India

In Govt. / Approved / Owned Hospital> = 100% Not Taxable Treatment + Lodging = upto limit permit by RBI

Any Other Hospital = upto Rs.15000 Not Taxable Travelling = If GTI is upto Rs200,000 = Not Taxable

*Family covers= Spouse, children, and Dependent Parents, Dependent siblings.

Rent Free Unfurnished Accommodation

Govt. License Fees ( Taxable)

Non Govt.

Owned by Employer Not Owned by Employer

City Having Population Least of the following Taxable Rent

or 15% of Salary Upto 10 Lacs 10 to 25 Lacs Above 25 Lacs

7.5% of Salary 10% of Salary 15% Salary

Rent Free Furnished Accommodation

Owned by Employer = 10% of Actual Cost Not Owned = Hire Charges

Concessional Rent Accommodation = Value of Furnished

Note-1 In case of Transfer from 1place to another = aggregate 15days of Transports for Transfer = Free Accommodation

Note-2 For 1st 90days of Transfer when accommodation has been provided to both new and old place of employment , taxable only lower value of the home accommodation

Note-3 Salary = All monetary Taxable Value not Include PF & DA(if not in terms of employment)

Domestic Servant (gardener, Sweeper, Cook, Watchman, Guard, etc.)

Appoint Employee Employer

Obligation Employer Employer

Use Employee Employee

Pay Employer Employer

Taxable in all cases Taxable in case of Specified Employee

Value of Perquisites = Amt. Actually paid by Employer

Gas , Water , Heater, Electricity

Appoint Employee Employer

Obligation Employer Employer

Use Employee Employee

Pay Employer Employer

Taxable in all cases Taxable in case of Specified Employee

Value of Perquisites

Owned Resources Outside Agency

Cost of Production Amt. Actually Paid by Employer

Free Education

Refresher Course = Tax Free to Employee To employees Family members

Owned College Outside / Other College

Fee Charged by Same type of College in nearby area

Actual amt. paid by Employer

Limit of Rs.1000 pm per child and No number of Child limits apply.

Free / Concessional Journey / Transports

Owned Normal Value of Ticket Railway / Airline 100% Exempted

Life Insurance Premium Paid by Employer = Taxable under Salary on due basis & allowed us 80C on payment basis

Staff Group insurance = Fully Exempted

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Fringe Benefits

1 Free Lunch During Working Hours

Not covered Breakfast, Tea, Snacks, and Supper (Means not taxable at all)

Dinner covered if working at night Shift

Upto Rs.50 per meal. i.e. Rs.60 lunch means Rs.10 Taxable

2 Gift In Kind = Taxable in Excess of Rs.5000 as Salary In Cash = Fully Taxable as Salary

3 Club Membership Fees

Not Taxable = Corporate Membership , Common facility to all employees

4 Credit Card Exps.

Including add on cards Reimburse by Employer

Except used for official purposes

Telephone Facility = Personal or Official = Tax Free (Telephone Allowance = Taxable)

5 Interest Free or Concessional Loan

Loan can be = Personal Loan, Car Loan, House Loan, Educational Loan, Other Loan

On Maximum outstanding monthly balance

Charged on as on last date of each month

Rate as charged by SBI on relevant PY’s 1st April

Not covered Loan amounting in total upto Rs.20,000

Loan for Medical Treatment of Specified Disease

6 Use of Movable Assets (except cars) = 10% of Actual Cost or Hire Charges

Not Taxable = Computer & Laptop given to use

7 Transfer of Movable Assets

Asset Type Computer / Laptop / Electronic Gadgets Cars Others

Depreciation 50% pa (WDV) 20%pa (WDV) 10%pa (SLM)

*pa means completed year. i.e 2years 11 months and 29 days then take 2years.

8 Car Facility

Owned By Exps. Incurred By Wholly used for Personally Partly for Personal & Partly for Business

Employee Employee - -

Employee Employer Exp. incurred by Employer Spent by Employer (-) upto 1.6ltr (-) above 1.6ltr + Driver Facility

XXXX (1800pm) (2400pm)

900pm

Employer Employee 10% of Actual Cost as Wear & Tear (like Depreciation)

+ upto 1.6ltr + above 1.6ltr + Driver Facility

600pm 900pm 900pm

Employer Employer Exp. incurred by Employer +

10% of Actual Cost

+ upto 1.6ltr + above 1.6ltr + Driver Facility

1800pm 2400pm 900pm

Notes

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Author = Pratik Kikani Slab Rates for AY 15-16

For Individual below 60 years of

age

&

HUF / AOP / BOI

For Resident Senior Citizens

(Age 60 years or more but less

than 80 years)

For Resident Senior Citizens

(Age 80 years or more)

Income Level Tax Rate Income Level Tax Rate Income Level Tax

Rate

Upto Rs. 2,50,000 Nil Upto Rs. 3,00,000 Nil -

Rs. 2,50,001 - Rs.

500,000 10%

Rs. 3,00,001 - Rs.

500,000 10% Upto Rs. 5,00,000 Nil

Rs. 500,001 - Rs.

10,00,000 20%

Rs. 500,001 - Rs.

10,00,000 20%

Rs. 5,00,001 - Rs.

10,00,000 20%

Above Rs. 10,00,000 30% Above Rs. 10,00,000 30% Above Rs. 10,00,000 30%

Flat Rate

Domestic Company / Firm 30% Foreign Company 30%

LTCG 20% STCG (STT) 15%

Lottery etc. 30% Education Cess 2% & Secondary & Higher

Education Cess 1% levied on all taxes after

considering Surcharge.

Surcharge

Total Income Exceeds Domestic

Company

Foreign

Company

Individual / HUF / AOP/ BOI / Local

Authority / Co-operative Society

1cr. 5% 2% 10%

10cr. 10% 5% Marginal Relief available to all Types

of Assessee.