Professional Documents
Culture Documents
Income From Salary
Income From Salary
SUBMITTED BY
HARSHAD M. NAGARKAR
ROLL NO.
PROJECT GUIDE
PROF.MR. VIVEK H. BOHIR
[1]
ACKNOWLEDGEMENT
I, would take this opportunity to thank the University of Mumbai for providing
With great pleasure I take this opportunity to acknowledge people who have
made this project work possible. First of all I would sincerely like to express my
gratitude towards my project Guide Prof. VIVEK BOHIR for having shown
I would like to thank Principal Dr. V. S. Shivankar, and the coordinator of the
course Prof. K.G.Tapase for their indirect support throughout. Aniket Patil.
Without their support and conviction this project would not have been possible.
Signature
Harshad Nagarkar
[2]
DECLARATION
this project has not been submitted to any other University or institute for the
award of any degree, diploma etc. the information is submitted by me is true and
[3]
RAYAT SHIKSHAN SANTHA’S
CERTIFICATE
This is to certify Harshad Milind Nagarkar Student of M.com. Sem. - III has
2015
---------------------------
External
[4]
OBJECTIVES
[5]
• Types of commission an employee can get
• The concept of allowances
• Various income tax provisions for computing taxable value of allowances
• Computation of taxable value of allowances
RESEARCH METHODOLOGY
SECONDARY DATA
The secondary data has been collected from books, internet and research engine.
There has been immense and valuable data which put forth for the compulsion
of my project.
Index
[6]
1 Introduction to salary 1-9
8 Conclusion 38
39
Biligophy
[7]
Chaper1
INCOME FROM
SALART (U/S 15-
17)
INCOME FROM
HOUSE PROPERTY
U/S 22-27
U/S (28-44)
[8]
CAPTIAL GAINS
U/S (45-55)
INCOME FROM
OTHER SOURCE S
U/S (56-59)
[9]
Meaning of salary
The term salary usually refers to a payment for services. It means remuneration
for services rendered to another person.
Basis of charge
Outstanding salary is taxable on due basis i.e. salary is taxable in the year
in which it falls due.
[10]
Definition of salary
i) wages;
(vii) The aggregate of all sums that are comprised in the transferred balance as
referred to in sub-rule (2) of rule 11 of Part A of the Fourth Schedule of an
employee participating in a recognized provident fund, to the extent to which it
is chargeable to tax under sub-rule (4) thereof;
(viii) The contribution made by the Central Government [or any other
employer] in the previous year, to the account of an employee under a pension
scheme referred to in section 80CCD;
Characteristics of Salary
[11]
1. The relationship of payer and payee must be of employer and employee
for an income to be categorized as salary income. For example: Salary
income of a Member of Parliament cannot be specified as salary, since it is
received from Government of India which is not his employer.
2. The Act makes no distinction between salary and wages, though generally
salary is paid for non-manual work and wages are paid for manual work.
3. Salary received from employer, whether one or more than one is included in
this head.
4. Salary is taxable either on due basis or receipt basis which ever matures
earlier:
I) Due basis – when it is earned even if it is not received in the previous
year.
ii) Receipt basis – when it is received even if it is not earned in the previous
year.
iii) Arrears of salary- which were not due and received earlier are taxable
when due or received, whichever is earlier.
Chapter 2
Allowances
Extra compensation paid by the employer, apart from salary, due to presence of
some unusual conditions in rendering the service is called allowance.
[12]
Allowances by whatever name called is taxable. However following allowance
are exempt to certain extent.
Some common allowance, which are exempt to the extent of amount received or
the received other limit specified, whichever is less;
[13]
Other Special Allowances
Entertainment Allowance
[14]
Specific allowances that are fully exempt in the hands of employees
[15]
HOUSE RENT ALLOWANCE [Sec. 10(13A) Rule 2A]
Conditions for claiming exemption:
• Pays rent
Very Important:
situated.
• If the place of employment is the same for the whole year, then exemption
• If there is a change in place during the previous year, then it will be calculated
on a monthly basis
• Salary for the period during which rental accommodation is not occupied shall
not be considered.
employment)
[16]
CALCULATION OF TAXABLE HRA
T T
Amount received during the financial year for HRA XXX
Less: Exemption u/s 10(13A) Rule 2A Least of the
followings: xxx
[17]
GRATUITY
2. Non-Govt. Employee:
T T
Amount received as Gratuity XXX
Less: Exemption u/s 10(10)(ii)
completed
xxx
service or part thereof in excess of 6 months
10,00,000
(iii) Maximum Limit
Taxable Gratuity XXX
PENSION
[18]
Taxability of Commuted Pension:
(a) Pension is received in lump sum as per the terms of the employment on
retirement or superannuation.
percentage of commutation.
Chapter 3
[19]
Perquisite
Under section 17(2) of Income Tax Act, 1961 perquisite is defined as:
[20]
a) For Rent free Accommodation
10% of salary if
population is
between 10 to
25 lakhs.
7.5% of salary
if population is
below 10 lakhs.
If house is 10% per annum (1) Plus (2)
not owned 15% of salary or lease of cost of
by the rent, whichever is furniture or rent
employed lower payable
Note: Salary for the purpose of above includes basis, D.A, bonus, commission,
free and all taxable allowance by whatever name called, but doesn’t include
allowance which are exempt or doesn’t form part of salary for the calculation of
retirement benefit and also does not include the employer’s contribution to PF.
2. Car Facility
[21]
Car is Car is Used by Person
Taxable Value
owned by maintained by employees for chargeable
Official Not
Not a Perquisite
purpose applicable
Maintenance +
Personal Specified
Employer 10%
Purpose Employee
Depreciation
Rs. 1,800 /Rs.
Both Purpose
2,400 p.m
Official Not
Not a Perquisite
purpose applicable
Hire charges of
Employer Employee Personal
the car /10% Specified
Purpose
depreciation Employee
Both Purpose Rs.600/900 p.m
Official Not
Not a Perquisite
purpose applicable
Personal
Maintenance
Purpose
Employee Employer Actual
expenditure Specified
incurred - Rs Employee
Both Purpose
1,800 /2,400+
(Rs 900p.m. for
driver, if any)
Not
Employee Any Purpose Not a Perquisite
applicable
# depends on the cubic capacity of the car whether it exceeds 1.6 liters or not.
Employer may also provide gas, electricity or water supply to the employee
either free of cost or at concessional price.
[22]
Following will be the taxable amount.
Any premium borne by the employer to run an assurance on the life of the
employees’ taxable in the hands of the employee.
Chapter 4
The following two deductions from Gross salary are allowed vide section 16
[23]
(1) Entertainment allowance
(2) Professional tax
ENTERTAINMENT ALLOWANCE
PROFESSIONAL TAX
[24]
DEDUCTIONS UNDER CHAPTER VI A
1. SECTION 80C
Life insurance premium
Deferred annuity
Deferred annuity by government
Contribution to statutory P.F
Contribution to P.P.F
Contribution to recognized P.F
National saving scheme
National savings certificates
Unit linked insurance plan
P.O cumulative time deposits
Pension fund of UTI xxxxx
Housing finance deposits
New house
Tuition fees xxxxx
Infrastructure debentures xxxxx
Bank fixed deposits xxxxx
NABARD bonds xxxxx
P.O. 5 year time deposit____________________ XXXXX
TOTAL DEDUCTIONS
Chapter 5
[25]
Exemption from salary
LEAVE ENCASHMENT
1. Leave encashment while in service is fully taxable as income of previous year
in which it is enchased.
(a) an individual receives leave encashment on his retirement, then the amount
his employment:
received by him.
month of retirement.
Step 2 : Salary = Basic Pay + Dearness Allowance (forming a part of salary for
[26]
Step3 : This calculation is only applicable where the employer has sanctioned
leave to the employee in excess of 30 days for every completed year of service.
Particulars Amount
[27]
Taxable Leave Salary on Retirement:
PROVIDENT FUND
[28]
Provident fund scheme provides for monthly contributions from the
the credit of such accounts also earns interest. The entire balance is paid to an
credited annually and balance paid on retirement depends upon the type of
[29]
SR NO. TOTAL INCOME RATE OF TAX
1. Where the total income Nil
200000
2. Where the total income 10 % of the amount by
500000
3. Where the total income Rs. 30000 plus 20% of
1000000. 500000
4. Where the total income Rs. 130000 plus 30% of
1000000.
Rates of tax for every individual, resident in India, who is of the age of sixty
years or more but less than eighty years at any time during the financial
year.
250000
[30]
2. Where the total income 10 % of the amount by
500000
3. Where the total income Rs. 25000 plus 20% of
1000000. 500000
4. Where the total income Rs. 125000 plus 30% of
1000000.
500000
2. Where the total income 20 % of the amount by
1000000
3. Where the total income Rs. 100000 plus 30% of
[31]
exceed Rs. 1000000. the amount by which the
1000000
Name of assesses
[32]
Assessment year 2013-14
Particular Amount
Income from salary
1. salary
gross- net + deductions
due/ deemed to accrue in India
advance/ arrears received
voluntary payments
2. allowances
dearness allowances
entertainment allowances
leave travel allowances( less
exempt u/s10(10) )
house rent allowances ( less
XXXXX
exempt u/s 10(13) )
expenses allowances ( less
10(13))
4. Pension
uncommented (monthly)
commuted
less:- commuter pension exempt u/s
10(10A)
govt employee – fully
exempt
non govt :-
a. gratuity, 1/3 of full
XXXXX
commuted value
[33]
b. otherwise, ½ of full XXXXX
commuted value
5. Gratuity (gross loss: exempt u\s
10(10)
govt employee – fully exempt
employee under payment of
year of service.
b) Rs. 10,00,000
c) Gratuity actually received.
of service XXXXX
b. Rs. 10,00,000
c. Gratuity actually received.
6. Fees and Commissions
7. Perquisites
Perquisites taxable for all
employees
Perquisites not taxable at all.
termination of employment
Compensation for
modification of terms of
[34]
employment
Employer’s contribution to
PF + interest thereon
Less:-
XXXXX
Compensation to
XXXXX
workman/ VRS
Payment from statutory
P.F
Payment from
superannuation fund.
XXXXX
9. Leave encashment ( gross less
exempt
Non govt employee – least of
Encashment of earned leave
10 x average salary for last
10 months
Rs. 300000
Amount actually received
Entertainment allowances
Govt.Empolyee – least of
a. 1/5th of Basic salary
b. Rs.5,000
c. Actual allowance
[35]
Professional tax XXXXX
LESS DEDUCTION)
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
[36]
IIIustration 1(Retiring Employee)
Mr. X retired from the services of M/s Y ltd. On 31.01.2013 after completing
service of 30 years and one month. He had joined the company in 1982 at the
age of 30 years and received the following on his retirement:
1) Gratuity Rs.6, 00,000. He was covered under the payment of gratuity act,
1972.
2) Leave encashment of Rs. 3, 30,000 for 330 day leave balance in his
account. He was credited 30 days leave for each completed year of
service.
3) As per the scheme of the company, he was offered a car which was
purchased on 01.02.2010 by the company for Rs. 5, 00,000. Company has
recovered 2,00,000 from him for the car. Company depreciated vehicles
at the rate of15% on straight line method.
4) An amount of Rs. 3, 00,000 as commutation of 2/3 of his pension.
5) Company presented him a gift voucher worth Rs.6,000 on his retirement.
6) His colleagues also gifted him a television ( LCD) worth 50,000 form
their own contribution.
[37]
Following are the other particulars;
1) He has drawn a Basis salary of Rs. 20,000 and 50% Dearness allowance
per allowance per month for the period from 01.04.2012 to 31.01.2013.
2) Received pension of 5,000 per month for the period 01.02.2013 to
31.03.2013 after commutation of pension.
Compute his total income from the above for Assessment Year 2013-14.
Solution:
Particular Rs.
Basic Salary (20,000 *10) 2,00,000
DA (2,00,000*50%) 1,00,000
Gift voucher (6000-5000) 1000
Motor car ( WN) 56,000
Uncommitted Pension (Sec 17(1)( (5,000*2) 10,000
Commuted pension (Sec10(10A)) 1,50,000
Gratuity (Sec10(10)) 80,789
Leave salary ( Sec 10(10A)) 1,30,000
Working notes:
1.
[38]
Motor car ( 17(2)(viii)rule3(7)(viii) cost 5,00,0000
Less: Depreciation @20%
01.02.2010-31.01.2011 1,00,000
01.02.2011-31.01.2012 80,000
01.022013-31.01.2013 64,000
WDV 2,56,000
Less: Amount Recovered 2,00,000
Perquisite value of Car 56,000
2.
1. Rs.3,30,000
2. Rs. 10*20,0000 =2,20,000
3. Rs.3,00,000
4. 330/30*20,000 =2,20,000
[39]
Received = Rs. 3, 30,000
Exempt = Rs. 2, 00,000
Taxable = Rs. 1, 30,000
CONCLUSION
1. The employee or individual who earn salary has to pay tax on income of
previous year in the assessment year.
2. They can also get benefits of deduction which help them to reduce tax
liability.
3. The individual has to pay tax in advance if his tax liability is more than
Rs. 10000 in previous year through assumption .
[40]
Bibliography
www.google.com
[41]