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What is Salary:
Income under heads of salary is defined as remuneration received by an individual for services rendered by
him to undertake a contract whether it is expressed or implied. According to Income Tax Act there are
following conditions where all such remuneration are chargeable to income tax:
• When due from the former employer or present employer in the previous year, whether paid or not
• When paid or allowed in the previous year, by or on behalf of a former employer or present
employer, though not due or before it becomes due.
• When arrears of salary is paid in the previous year by or on behalf of a former employer or present
employer, if not charged to tax in the period to which it relates.
What is Annuity:
It is an annual income received by the employee from his employer. It may be paid by the employer as
voluntarily or on account of contractual agreement. It is not taxable until the right to receive the same arises.
Under section 56, Income Tax Act, 1961 other annuities come under a will or granted by a life insurance
company or accruing as a result of contract which comes as income under from other sources.
What is Gratuity:
It is salary received by an individual paid by the employee at the time of his retirement or by his legal heir in
the case of death of the employee.
What is Allowance:
It is the amount received by an individual paid by his/her employer in addition to salary. Under section 15 of
the Income Tax Act, 1961 these allowance are taxable excluding few condition where they are entitled of
deduction/ exemptions.
Entertainment Allowance:
It is the amount paid by employer for availing entertainment services. Under section 16(ii) of Income Tax
Act, 1961 it is entitled to deduction in tax from is salary. But in this case deduction is given to his gross
salary which also includes entertainment allowance. Deduction in tax against this allowance can be divided
into two parts :
• Allowance given to a citizen of India, who is a government employee, for rendering services outside
India
• Allowances given to Judges of High Courts
• Allowance given Judges of Supreme Court
• Allowances received by an employee of UNO
What is Perquisite
Under section 17(2) of Income Tax Act, 1961 perquisite is defined as:
• Amount paid for the rent-free accommodation provided to the assessee by his employer
• Any concession in the matter of rent respecting any accommodation provided to the assessee by
his employer
• Any benefit or amenity granted or provided free of cost or at concessional rate in any of the
following cases:
1. By a company to an employee, who is a director thereof
2. By a company to an employee being a person who has a substantial interest in the
company
3. By any employer to an employee whose income under the head 'Salaries' exceeds
Rs.24000 excluding the value of non monetary benefits or amenities
4. Any sum paid by the employer in respect of any obligation which, but for such payment,
would have been payable by the assessee
5. Any sum payable by the employer whether directly or through a fund, other than a
recognised provident fund or EPF, to effect an assurance on the life of the assessee or to
effect a contract for an annuity
• Medical facility
• Medical reimbursement
• Refreshments
• Subsidised Lunch/ Dinner provided by employer
• Facilities For Recreation
• Telephone Bills
• Products at concessional rate to employee sold by his/ her employer
• Insurance premium paid by employer
• Loans to employees by given by employer
• Transportation
• Training
• House without rent
• Residence Facility to member of Parliament, judges of High Court/ Supreme Court
• Conveyance to member of Parliament, judges of High Court/ Supreme Court
• Contribution of employers to employee's pension, annuity schemes and group insurance
Subsequently, work was undertaken on drafting a Direct Taxes Code to replace the current
Income-tax Act, 1961 and the Wealth-tax Act, 1957. In his speech in Parliament on 6th July,
2009, while presenting the Union Budget for 2009-10,
The finance ministry on Wednesday released the draft ofdirect taxcode that seeks to simplify
the current tax provisions.
Formerfinanceminister and now the home minister, P Chidambaram, who had initiated work
on the proposed code during his tenure, said thedirect taxcode was outdated and it needed a
revamp.
Thedirect taxcode would replace the Income Tax Act 1961, Chidambaram said. Adding
thatthe newdirect taxcode would become a law only by 2011, Chidambaram saidthe newtax
codewould be a vast improvement over I-T Act 1961.
Finance Minister Pranab Mukherjee said tax reform is a process, not an event. To moderate
tax rate and simplifytaxlaws
, all direct taxes including FBT and income tax would be brought under one code, he said.
The newcode is aimed at eliminating the scope of litigation as far as possible, Mukherjee
said, adding thatthe governmentwill have informed discussion with stakeholders on thetax
code.
Finally The finance ministry on Wednesday (Today) released the draft of direct taxcode that
seeks to simplify the current tax provisions.
The direct tax code would replace the Income Tax Act 1961, Chidambaram said. Adding
that the new direct tax code would become a law only by 2011, Chidambaram said the
new tax code would be a vast improvement over I-T Act 1961.
Finance Minister Pranab Mukherjee said tax reform is a process, not an event. To moderate
tax rate and simplify tax laws, all direct taxes including FBT and income tax would be
brought under one code, he said. The new code is aimed at eliminating the scope of litigation
as far as possible, Mukherjee said, adding that the government will have informed discussion
with stakeholders on the tax code.
Finance Minister on Wednesday commenced essential tax reforms through a draft code that
intends at toning down income tax rates.
So I am giving New Income Tax slab under New Direct Tax code 2009. However, it is
proposed right now, and if it gets approval it will be applicable to A.Y. 2011-2012.
The finance ministry in consultation with tax experts is drafting the new Direct Tax Code which
will be introduced in 2008. It will be placed for discussion in the monsoon session of
Parliament and replace the existing Income Tax Act which has become so complicated with the
amendments made every year that it could only be comprehended by tax professionals and
practitioners.
The main objective of drafting the new code is to make the law simple and easy for taxpayers
while bringing in major policy changes regarding corporate taxation, non resident taxation,
SEZ exemption, EET method of taxation and many more. The powers of CBDT will also be
restructured making it a policy making board in alignment with the tax boards of countries like
UK, US and Australia. The whole emphasis would be to make the new code short and light by
Arthshastra have mention of it. However, in modern India the Income tax came into existence
in 1860 and since then many Acts have been implemented, the most important being Income
While the government efforts to make the tax laws simple and taxpayer-friendly are certainly
commendable, only time will reveal how successful the new tax code will be in meeting its
objective. But going by the track record (recently the new complicated ITR forms), one really
doubts whether the benefits will flow to the tax professionals or the tax payers.