IS---INCOME FROM SALARY

DEFINITION:

“ANY AMOUNT RECEIVED (CASH BASIS) BY THE EMPLOYEE FROM THE EMPLOYER FOR THE
EMPLOYMENT.”

ASSUME THAT

IF A FRESH GRADUATE HIRED ON 1ST JULY 2018, PER MONTH SALARY Rs.50,000.

WHAT WILL BE HIS TAXABLE SALARY INCOME FOR TAX YEAR 2019?

SALARY INCLUDES:

1. SALARY/PAY/ WAGE/COMMISSION/OVERTIME/BONUS/LFA (LEAVE FARE ASSISTANCE)/LEAVE

ENCASHMENTS/ EX-GRATIA PAYMENTS. (FULLY TAXABLE)
2. ALLOWANCES (CASH BENEFITS)
 ALL THE ALLOWANCES ARE FULLY TAXABLE EXCEPT THE FOLLOWING:
i. TA/DA OR OFFICIAL/SPECIAL DUTY ALLOWANCE (travelling or distance)(FULLY EXEMPTED)
ii. MEDICAL ALLOWANCE

ILLUSTRATION # 1:

BASIC SALARY Rs.30,000 p.m

Conveyance allowance 5,000p.m
Cola Rs.7,000 p.m (cost of living allowance)
Rent allowance 5,000 p.m
Dearness (inflationary) allowance 3,000p.m.
TOTAL SALARY Rs. 50,000 p.m.

REQUIRED: COMPUTE THE TAXABLE SALARY INCOME

ILLUSTRATION # 2

BASIC SALARY Rs.30,000 p.m

Conveyance allowance 5000p.m

Cola Rs.7,000 p.m(cost of living allowance)

Medical allowance 5000p.m

Dearness (inflationary) allowance 3,000p.m.

TOTAL SALARY Rs. 50,000 p.m.

Computation of taxable salary income:

Basic salary (Rs.30,000 *12m) 360,000

Conveyance allowance 5,000p.m*12m 60,000

Cola Rs.7,000 p.m* 12 m 84,000

Dearness (inflationary) allowance 3,000p.m.* 12m 36,000

Medical allowance 5,000p.m*12 m= 60,000

Less:10% * 360,000 (36,000) 24,000

MEDICAL FACILITY:

1. FREE HOSPITALIZATION OR REIMBURSEMENT OF MEDICAL EXPENSES (FULLY EXEMPTED)

(NTN OF MEDICAL PRACTITIONER & ALL THE INVOICES ARE ATTESTED BY THE CO.)
2. MEDICAL ALLOWANCES
LESS: (EXEMPTED) 10% OF BASIC SALARY
THE REMAINING AMOUNT (IF ANY) WILL BE TAXABLE
3. IF BOTH THE FACILITIES GIVEN BY THE CO/EMPLOYER:
 FREE HOSPITALIZATION OR REIMBURSEMENT (FULLY EXEMPTED)
 MEDICAL ALLOWANCES ( FULLY TAXABLE)

3. PERQUISITES/FRINGE BENEFITS: (NON-CASH BENEFITS):

(VALUATION INTO CASH FORM)
A. VEHICLE PROVIDED BY THE CO.
a. FOR OFFICIAL USAGE (0%)
b. FOR DEPENDANTS’ USAGE (10% OF COST OF CAR-IF PURCHASED OR 10% OF FMV- IF
CAR WAS ON LEASE)
c. FOR BOTH PURPOSE (5% OF COST OF CAR-IF PURCHASED OR 5% OF FMV- IF CAR
WAS ON LEASE)
B. RENT FREE ACCOMODATION:
45% OF MTS (MINIMUM TIME SCALE) OR BASIC SALARY
OR
FMR /ALV / ARV

(WHICHEVER IS HIGHER)

GRADE 17 EMPLOYEE (BPS) BASIC PAY SCALE (Rs.16,000-2000-45,000)

BASIC SALARY Rs.30,000

C. INTEREST FREE OR CONCESSIONAL LOAN PROVIDED BY THE COMPANY

 LOAN AMOUNT IF EXCEEDING Rs.1,000,000
 BENCH MARK RATE IS 10%
 FORMULA :

TAXABLE INTEREST BENEFIT= LOAN AMOUNT * INTEREST RATE (10% - co’s interest rate)

= Rs.1,100,000 * 10%

= Rs. 110,000

D. LOAN AMOUNT PAYABLE TO EMPLOYER BUT WAIVED BY THE EMPLOYER.

E. LOAN AMOUNT PAYABLE TO ANY OTHER PERSON BUT PAID BY THE EMPLOYER.
F. UTILITIES PAID BY THE EMPLOYER
G. GARDNER/COOK/ DRIVER/SERVANTS’ SALARIES PAID BY THE EMPLOYER
H. ANY ASSET PROVIDED BY THE CO/EMPLOYER:
FMV OF THE ASSET XXXX
LESS: ANY AMOUNT PAID BY THE EMPLOYEE (XXXX)
TAXABLE AMOUNT XXXX
4. PROFITS IN LIEU OF SALARY
A. PROVIDENT FUND(P.F)
B. GRATUITY AMOUNT

A. PROVIDENT FUND:

CASES RECOGNIZED P.F UNRECOGNIZED P.F.

1. EMPLOYEES’ NO TREATMENT NO TREATMENT
CONTRIBUTION
TOWARDS P.F
2. EMPLOYER’S CONTRIBUTION AMOUNT XXX FULLY TAXABLE
CONTRIBUTION LESS: EXEMPT THE LESSOR OF:
TOWARDS P.F. Rs.150,000
OR
10% OF(B.S +D.A) (XXX)
TAXABLE AMOUNT XXXX

3. INTEREST CREDITED INTEREST AMOUNT XXX FULLY TAXABLE

TOWARDS P.F. LESS: EXEMPT THE LESSOR OF:
1/3 OF (B.S + D.A)
OR
16% OF ACCUMULATED P.F BALANCE (XXX)
TAXABLE AMOUNT XXX

4. WITHDRAWAL FULLY EXEMPT FULLY EXEMPT

FROM P.F

B. GRATUITY AMOUNT:
1. GOVT. EMPLOYEES /APPROVED GRATUITY FULLY EXEMPT
2. UNAPPROVED GRATUITY
 GRATUITY AMOUNT XXXXX
LESS: EXEMPT THE LESSOR OF:
Rs.75,000
OR
50% OF THE GRATUITY AMOUNT (XXXX)
TAXABLE AMOUNT XXXX

B.S BASIC SALARY

D.A DEARNESS ALLOWANCE

EXTRACT OF TAX RATES FOR SALARIED INDIVIDUAL

Sr. Taxable Income Rate of Tax
No.
1. Upto Rs. 600,000 0%

2. Rs. 600,001----- Rs. 1,200,000 5% of the amount exceeding Rs.600,000

3. Rs. 1,200,001 ----- Rs. 1,800,000 Rs. 30,000 + 10% of the amount exceeding Rs.
1,200,000

4. Rs. 1,800,001 ---- Rs. 2,500,000 Rs. 90,000 + 15% of the amount exceeding Rs.
1,800,000

5. Rs.2,500,001 ----- Rs. 3,500,000 Rs. 195,000 + 17.5% of the amount exceeding Rs.
2,500,000

6. Rs.3,500,001 ----- Rs. 5,000,000 Rs. 370,000 + 20% of the amount exceeding Rs.
3,500,000.

7. Rs.5,000,001 ----- Rs. 8,000,000 Rs. 670,000 + 22.5% of the amount exceeding Rs.
5,000,000.

8. Rs.8,000,001 ----- Rs. 12,000,000 Rs. 1,345,000 + 25% of the amount exceeding Rs.
8,000,000.

9. Rs.12,000,001 ----- Rs. 30,000,000 Rs. 2,345,000 + 27.5% of the amount exceeding Rs.
12,000,000.

10. Rs.30,000,001 ----- Rs. 50,000,000 Rs. 7,295,000 + 30% of the amount exceeding Rs.
30,000,000.

11. Rs.50,000,001 ----- Rs. 75,000,000 Rs. 13,295,000 + 32.5% of the amount exceeding
Rs. 50,000,000.

12. OVER Rs.75,000,000 Rs. 21,420,000 + 35% of the amount exceeding Rs.
75,000,000.
FTR- FINAL TAX REGIME
(Full & Final tax discharge liability)

FTR ITEMS:
1. PROFIT ON PLS A/C 10%
2. PROFIT ON DEBT 10%
3. DIVIDEND INCOME 20%
4. PRIZE BOND & WINNING LOTTERY
a. PRIZE BOND 25%
b. GAME SHOW OR WINNING LOTTERY 20%
TAX CREDITS & TAX REBATE
(REDUCTION IN TAX LIABILITY)
TAX REBATE:
1. SENIOR CITIZEN
(PERSON SHOULD BE 60 OR MORE YEARS ON THE FIRST DAY OF CURRENT TAX YEAR)
REBATE:
50% TAX LIABILITY WILL BE REDUCED IF TAXABLE INCOME IS UPTO Rs. 1 Million
2. DISABLED PERSON
REBATE:
50% TAX LIABILITY WILL BE REDUCED IF TAXABLE INCOME IS UPTO Rs. 1 Million
3. FULL TIME TEACHER OR RESEARCH SCHOLAR IN AN APPROVED INSTITUTE UNDER HEC.
REBATE:
25% TAX LIABILITY WILL BE REDUCED

TAX CREDITS:
FORMULA: A/B *C
WHERE A= TAX LIABILITY BEFORE ANY REDUCTION
B = TAXABLE INCOME
C = LESSOR AMOUNT
1. DONATIONS TO AN APPROVED INSTITUTE U/S 61.
a. ACTUAL AMOUNT OF DONATIONS
b. 30% OF TAXABLE INCOME (20% IF COMPANY)
2. DONATIONS TO APPROVED PENSION FUNDS.
a. ACTUAL AMOUNT OF DONATIONS
b. 20% OF TAXABLE INCOME
3. INVESTMENT IN PUBLIC LISTED CO. SHARES
a. ACTUAL AMOUNT OF INVESTMENT
b. 20% OF TAXABLE INCOME
c. Rs.2,000,000.
4. INVESTMENT IN HEALTH INSURANCE
a. ACTUAL AMOUNT OF INSURANCE PREMIUM
b. 5% OF TAXABLE INCOME
c. Rs.150,000.
5. INTEREST OR MARK UP ON LOAN FOR THE CONSTRUCTION/PURCHASE OF HOUSE
a. ACTUAL AMOUNT OF INTEREST
b. 50% OF TAXABLE INCOME
c. Rs.2,000,000.