SALARY BENEFITS TO AN EMPLOYEE.

The company ‘DELTA LTD.’ deals with various business activities in the country which includes manufacturing and production of industrial items like cement, steel, metal rods and pipes. It also functions in the telecom sector, hospital line, education sector and consultancy services.

This is a salary package that is allowed to a specific employee by the company. The following package is designed in such a way that it gives maximum tax benefits to the employee from taxable income point of view.

Mr John Fernandes is an employee working in the firm’s main office in the position of ‘Assistant Manager’ in Panaji branch, Goa. He is working in the company from the last 6 years. He pays a rent of 7,500 p.m. for a flat in Panaji.

Salary package of Mr. John Fernandes.

Taxable amt .

1. Basic salary – 30,000 p.m 3,60,0002. Dearness allowance – 10,000 p.m 1,20,0003. Employer’s contribution towards Statutory Provident Fund – 90,000 NIL4. House rent allowance – 40,000 Less exempt u/s 10(13A) [W.N-1] – 40,000 NIL5. Transport allowance – 9600 Less exempt – 9600 NIL6. Food and non-alcoholic beverages – 15,600 Less exempt – 15,600 NIL7. Diwali gift (in kind) – 5000 Less exempt – 5000 NIL8. Children education allowance in employer’s institute (3 children) – 36,000 Less exempt – 36,000 NIL9. Children hostel expenditure allowance (3 children) – 10,800 Less exempt – 7,200 360010. Travelling allowance for official purpose – 20,00011. Leave travel concession (LTC) – 30,00012. Profession tax paid by employer – 5,000 500013. Medical expense incurred by employer in his own hospital – 50,00014. Reimbursement of travelling expenditure for official use – 3,50,00015. Helper allowance – 30,00016. Uniform allowance – 12,00017. Daily allowance (Rs. 100 per day) – 31,200

Gross total 488600

Less deduction u/s 16(iii) 5000

Taxable amount 483600

Working note 1House rent allowance [sec. 10(13A) and rule 2A] Least of the following is exempted1. Amount equal to 40%of the salary 2,00,0002. House rent allowance received by the employee in respect of the period during which rental accommodation is occupied by the employee during the previous year. 40,0003. The excess of rent paid over 10% of salary. 90,000 – 50,000 = 40,000

Working note 2Transport allowance 2BBTransport allowance is granted to an employee to meet his expenditure for the purpose of commuting between the place of his residence and the place of his duty.Exemption upto 800 per month. 800*12= 9600

Working note 3Food and non-alcoholic beverages (refreshments)Food and non-alcoholic beverages provided in working hoursNot Taxable if the cost of the same to the employer does not exceed Rs.50 per meal.50*26*12=15,600Note: Taxable only if the employer is an individual (i.e., sole proprietor), HUF, Government, a political party, a person whose income is exempt under section 10(23C), a charitable institute (which is subject to registration under section 12AA), RBI, SEBI or any other person not liable for fringe benefit tax.

Working note 4Gift Gifts up to Rs.5,000 in aggregate during the previous year is not taxable.

Working note 5Children education allowance in employer’s institute (3 children)

Educational facilities provided to the children’s of the employees in employers instituteWhere cost of education does not exceed Rs.1000 per month per child(no restriction on No. of childrens

1000*3*12=36,000

Wrknd nte6 Children hostel expenditure allowance (3 childrenAny allowance granted to an employee to meet the hostel expenditure on his child.RS. 300 per month per child up to a maximum of two children300*3*12=10800Exempt- 300*2*12=7200Taxable amount- 3600