Dr.

Shannu NARAYAN
FinTax
PGP FIN – 2 Batch
Session 5
Profits in Lieu of salary
 Any compensation due to or received from the employer or former
employer at or in connection with the termination of his employment.

 For example, from present employer in connection with the

modification of the terms and conditions relating to employment. (like
lumpsum paid to employee for his salary being cut down)

 Any amount due to or received, (A) before his joining any employment
with that person; or (B) after cessation of his employment with that
person.

 PF, Gratuity pending from previous employer

 Any sum received under Keyman Insurance Policy (Insurance policy

amount)
Perquisites
Means any facility / benefit that is granted by the employer,
enjoyed by employee or any member of the employee’s household

Taxable Perquisites
 Rent Free Residential Accommodation
 Interest Free / Concessional Loan
 Use of movable assets by employee / any member of his
household
 Transfer of movable assets
 Provision of gas / electricity / water
 Provision of free / concessional educational facilities
 Credit Card Expenses
 Club expenditure
 Health Club, Sports, Similar facilities
 Sweat Equity
Tax-free perquisites
 Medical Facilities
 Refreshment
 Subsidized lunch or dinner
 Recreational facilities
 Telephone facility
 Transport
 Personal accident insurance
 Refresher Course
 Free rations
 Computer/laptops
 Rent free houses / conveyance
 Employers’ Contribution
 Annual Premium
Provident Fund
 Standard Provident Fund

 PFs set up under the Provident Funds Act, 1925 are called
Statutory Provident Funds.

 PFs of institutions such an Universities, Colleges or other

Educational Institutions, RBI, SBI, Central Government and
State Government

 Whole amount of employer’s contribution without any limit or

restriction whatsoever and the interest thereon received by the
employee shall not be included in the total income of the
employee
Standard Deductions
 In the Union Budget 2020-21, standard deduction
amounting to Rs. 50,000 for salaried employees was
implemented for those who opted to be taxed under
old regime. However, for anyone claiming under new
tax regime will not get this benefit.

 This was in the place of the transport allowance (Rs.

19,200) and medical reimbursement (Rs. 15,000). As a
result, salaried people could avail an additional
income tax exemption of Rs. 5,800 in FY 2018-19.
Standard Deductions
 1. INR 50,000 from taxable income from salary
 2. Entertainment Allowance
 Fully taxable
First to be included in salary and then deduction to be
made.
In case of Government Employees, the deduction is
available, which would be lower of:
 l 1/5th of Basic Salary Or
l INR 5000/- Or
l Actual Entertainment Allowance received
 3. Profession Tax
Income from house property
 Section 22-27 of the Act.

 Section – 22: Income from house property

 Section – 23: Annual value how determined
 Section – 24: Deductions from income from house
property
Annual Value (AV)
 AV of the property of which the assessee is the owner is
chargeable to Income Tax, under the head “house property”

 Purpose of occupation is determinant factor

 Property occupied for the purpose of business / profession

carried on by self is not chargeable under “Income from
House Property”

 It deals with self-occupied or let out properties for

residential use.
Exceptions

 Income from letting out a vacant land is chargeable to

tax under the head “Income From Other Sources”

 Income earned by an assessee who is engaged in the

business of letting out properties on rent, would be
chargeable to tax under the head “Profits / Gains
from Business / Profession”
Determination Of Annual
Value

Step 2:
Step 1: Reduce from it the Step 3:
Ascertain the Gross Municipal Taxes Arrive at the Net
Annual Value (GAV) paid by the Owner Annual Value (NAV)
in the PY
Annual Value (S.23 (1))
 (a) the sum for which the property might reasonably be expected
to let from year to year; or

 (b) where the property or any part of the property is let and the
actual rent received or receivable by the owner in respect thereof
is in excess of the sum referred to in clause (a), the amount so
received or receivable; or

 (c) where the property or any part of the property is let and was
vacant during the whole or any part of the previous year and
owing to such vacancy the actual rent received or receivable by
the owner in respect thereof is less than the sum referred to in
clause (a), the amount so received or receivable.
Self-Occupied Houses
 Property when consists of a house or part of a house which
is in the occupation of the owner for the purposes of his
own residence; or cannot actually be occupied by the owner
due to various reasons and lives in house in some other
place, the annual value of such house or part of the house
shall be taken to be nil.

 Exceptions:
 (a) the house or part of the house is actually let during the
whole or any part of the previous year (restricted to only
one house); or
 (b) any other benefit therefrom is derived by the owner.