“SALARY HEAD”

“Income under head Salary”

[Sec 15, 16 & 17]

Sec Content

15 - charging section of salary head

16 - deductions from salary

17 - meaning / inclusion in salary income

Sec 15 : Charging Section of Salary Head

 Income under head salary

 is chargeable to tax on

 Due Basis

Or Earlier

 Receipt Basis

Example: PY 2022-23

Due date of salary of March 2023 - 31.03.2023 [22-23]

Salary received - 05.04.2023 [23-24]

Now,

Salary will be taxable as income of P.Yr. 2022-23

Example:

What if salary for April 2023 is received in advance in March 2023 itself?

Now, it is taxable on due or Receipt – Earlier basis taxable as Income of P.Yr. 2022-23.

Note:- For Income to be taxable under head salary, there must be the relationship of

employer & employee between payer & payee.

Example:

1. Govt Remuneration MP / MLA

  

ER Taxable  Under head IFOS EE

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2. Firm Salary / Remuneration Partner
  

ER Under Head – PGBP EE

Principal  [Sec - 28] Agent 

Some Important points:-

# Advance Salary VS Advance Against Salary

 

It is taxable on receipt basis It is in the nature of loan

 

Not be taxed again will not be taxable

on due basis 

Salary will be taxable before

deduction of EMI.

# Foregoing of Salary VS Surrender of Salary

 

Forgoing of Salary to any surrender of salary to

employer after becoming Due the account of CG under

 “Voluntary surrender of

will be taxable on due basis Salary Act, 1961”.



Exempt

# Graded Pay / Salary

Example:- Mr. A joined job with XYZ Ltd. on 1.07.2020 at Basic Pay of ₹ 30,000 –

2000, 34000 – 3000 – 40,000. Calculate the basic salary for P.Yr. 2022-23 & 23-24.

Solution:

80
 1/07/ 1/07/ 1/07/ 1/07/

2020 2021 2022 2023

20 21 22 23 24

BS 30K 30000 pm 32000 pm 34000 pm 37000 pm

Total Basic Salary For 22-23 For 23-24

(32,000 × 3m) (34,000 × 3M)

+ +

(34,000 × 9M) (37,000 × 9M)

4,02,000 4,35,000

Coverage of Salary Head [Incomes U/h Salary]

Basic Salary Allowances Perquisites Retirement Deductions

Bonus [Monetary [Monetary / Benefits 

Incentives Benefits] Non-  16(ia) : Std

Commission Example monetary  Gratuity Deduction

others  Dearness Facilities]  Pension ₹ 50K

Allowance   VRS 16(ii) :

[egaxkbZ HkRrk] Example:  Leave Entertainment

 Telephone  Car for use  Retrench- Allowance

Allowance  Telephone -ment [Only Govt.

 House Rent facility Compensation Employee]

Allowance [HRA]  Rent Free  PF 16(iii) :

 Transport Accommodation Professional

Allowance etc.  Transport Tax

[?kj office] ation facility

Gross Salary (-) Deduction U/s 16 = Income Under head salary

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“Computation of Income under head salary”

Basic Salary xx

Bonus xx

Commission [Fixed or as % of turnover achieved by EE] xx

Incentive xx

Advance Salary / Arrears of Salary xx

+ Allowances [Taxable Part] xx

+ Perquisites [Taxable Value] xx

+ Retirement benefits [Taxable Part] xx

Gross Salary xx

(-) Deduction U/s 16

(ia) Standard Deduction (50K)

(ii) Entertainment Allowance [other to Govt. Employee] (xx)

(iii) Professional Tax paid by Employee & Employer (xx)

Income U/h Salary xx

Allowances

Fully Exempt Partly Taxable Fully Taxable

 Sec 10(14)(i) Sec 10(14)(ii) All other allowances

> Allowances to   fully taxable

SC / HC judges Allowances for Allowances for 

> Allowances by office purpose personal purpose Example:

GOI to Indian   > Dearness allowance

embassy “6 allowance” Exempt upto > City Compensatory

[Sec 10(7)]  a specified allowances

Exempt to the limit > Tiffin allowance

extent used [Irrespective > Medical allowance

82
 for office of Actual > Telephone All

purpose Exp.] > Entertainment

Allowances

> Other

# Partly Taxable Allowances U/s 10(14)(i) : For office use

Actual Allowance xx

(-) Amount spent [Exempt] (xx)

Balance [Saving] – Taxable xx

[Exp for Employer U/h - PGBP]

1. Research Allowance

Eq. Actual Research Allowance = ₹ 50,000

(-) Expense on Research [Exempt] = (₹ 40,000)

Taxable U/h Salary [Saving] = ₹ 10,000

2. Helper Allowance – For help in office work

Eq. Actual helper allowance = ₹ 60,000

(-) Expense for helper = (₹ 20,000)

Taxable U/h Salary [Saving] = ₹ 40,000

3. Uniform Allowance:- For purchase & maintenance of uniform

4. Convergence Allowance:- Office Client Place

5. Travelling Allowance:- For expense on tour [Business trip] or transfer

6. Daily Allowance:- For food & stay [at the time of tour or transfer]

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# Partly Taxable Allowance U/s 10(14)(ii) : For personal purpose

> There are exempt upto a specified limit, irrespective of actual expense.

Example:

1) Education Allowance:- Exempt upto ₹ 100 p.m. per child

[Max-2 children]

Example:

Mr. A received following education allowances from his employer

For Chintu - ₹ 170 P.M.

For Chinki - ₹ 60 P.M.

Calculate taxable & exempt allowance

Solution:

Total Education Allowance = ₹ 230 P.M.

Exempt

For Chintu = 100 P.M.

For Chinki = 60 P.M.

Taxable = 70 PM

Allowances Ex. Empty Limit

1) Education Allowance:- ₹ 100 PM, per child max 2 children

2. Hostel Allowance ₹ 300 PM per child max 2 children

3. Tribal Area Allowance ₹ 200 P.M.

4. Underground allowance ₹ 800 P.M.

[For work in mines]

5. Transport Allowance

[?kj office]

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 a) For Blind / Deaf / Dumb or upto ₹ 3200 P.M.

orthopedically handicapped person

b) Others Fully taxable

6. Allowance to person working in  Daily allowance will be exempt to

transport system. the extent utilized / spent

[Eq – Driver / Cleaner / Conductor i) 70% of Actual allowance xx

– Bus, Truck, Train, Aircraft etc.] or

a) He/She also receives daily ii) Max 10,000 P.M.

allowance - exempt [Lower] = xx

b) He/She does not receive any

daily allowance –

7. Compensatory Field Area Allowance ₹ 2600 PM

8. Compensatory modified field area allowance ₹ 1000 PM

9. Counter Insurgency Allowance ₹ 3900 P.M.

10. High Altitude area allowance

a) 9000 Ft to 15000 Ft ₹ 1060 PM

b) > 15000 Feet ₹ 1600 PM

11. Highly active field area allowance ₹ 4200 P.M.

12. Island Duty allowance ₹ 3250 P.M.

[- Andaman & Nicobar or Lakshyadweep Group]

13. Hilly area Allowance for Siachen in J & K ₹ 7000 PM

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# All other Allowances  Fully Taxable

“House Rent Allowance : HRA U/s 10 (13A) : Partly Taxable

Actual HRA received = xx

(-) Exempt U/s 10 (13A) = (xx)

Taxable HRA = xx

Exemption:

Metro city [D, M, K & C] Other Cities

1) Actual HRA xx 1) Actual HRA xx

2) Rent paid by EE xx 2) Rent paid by EE xx

(-) 10% of Salary (xx) xx (-) 10% of Salary (xx) xx

3) 50% of Salary xx 3) 40% of Salary xx

Lower xx Lower xx

Salary = Basic Salary + DA (If forms part of Retirement Benefits) + Commission as

% of TO achieved by employee

Illustration 1:

WN 1 : Calculation of Salary for the purpose of HRA

Salary = Basic Salary + DA (if forms past of RB) + Commission as

% of to achieved by Employee

= 40,000 PM + ₹ 6000 PM + -

= ₹ 46,000 pm

HRA exemption U/s 10(13A) : Non Metro City

1. Actual HRA = ₹ 15,000 PM

2. Rent paid = 16,000 PM

(-) 10% of salary = (4600) PM = ₹ 11,400 PM

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3. 40% of Salary [46000 × 40%] = ₹ 18,400 PM

Exempt Amount = ₹ 11,400 PM

× 12 months

Total exemption = 1,36,800

Taxable HRA

Actual HRA [` 15,000 pm × 12m] = 1,80,000

(-) Exempt U/s 10(13A) = (1,36,800)

Taxable HRA = 43,200

Note: Exemption of HRA depends on following factors

i) Actual HRA

ii) Rent paid

iii) Salary [BS + DA(If) + % Comm]

iv) Place of Employment

Now, if there is any change in any of the above elements, HRA exemption will be

calculated on monthly basis.

Example:

Following is the detail of an employee Mr. X, calculate HRA exemption & taxable

HRA from following data

1st 1st 1st

July Sept Dec

A M J J A S O N D J F M

Salary ₹ 40,000 pm ₹ 50,000 pm

HRA ₹ 15000 pm ₹ 18000 pm

Rent ₹ 20,000 pm ₹ 24,000 pm

Posting INDORE Mumbai

87
Solution:

AMJ JA SON DJFM

1) Actual HRA 15000 pm 18000 PM 18000 PM 18000 PM

2) Rent paid 20 K 20 K 24 K 24 K

(-) 10% of (4K) 16000 (4K) 16000 (4K) 20000 (5K) 19000

Salary

3) 40% / 50% 16000 16000 20000 25000

of Salary (40K × 40%) (40K × 40%) (40K × 50%) (50K × 50%)

Exemption (L) 15000 PM 16000 PM 18000 PM 18000 PM

Total HRA received [(15K × 3M) + (18K × 9M)] = 2,07,000

(-) Exemption U/s 10(13A) = (2,03,000)

[(15,000 × 3M) + (16K × 2M) + (18K × 3M) + (18K × 4M)]

Taxable HRA = 4,000

HW – Q26 [HRA]

“Taxability & Exemption of Retirement benefits”

I) Pension [Sec 10(10A)]

Monthly pension Commuted Pension

[Lump-Sum Pension]

Govt EE Non-Govt EE

Govt EE Non-Govt EE

Fully Taxable Fully Exempt

EE also receives gratuity EE does not receive gratuity

 

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Exemption

1. Actual Commuted Pension xx 1. Actual Commuted Pension xx

2. 1 X commuted Pension X 100 = xx 2. 1 X commuted Pension X 100 = xx

3 commutation % 2 commutation %

Lower xx Lower xx

Example:

 Mr. A retired on 1st Nov 2022 when his salary was ₹ 60,000 p.m.

 his pension income is ₹ 20,000 p.m.

 He commuted 60% of his pension on 1st Feb & received ₹ 12L in Lump-Sum.

Analyse

Solution:

Pension
1/04 1St 31/03

2022 Nov 2023

D M J J A S O N D J F M

20K 20K 20K 20K 8K

Retired Commuted ×40%

Salary = ₹ 60,000 pm 60%= ₹ 12L 8K

Case I : Govt Employee

Salary [60K × 7M] = 4,20,000

Pension monthly [Fully Taxable] [(20K × 3M) + (8K × 2M)] = 76,000

Commuted Pension [Fully exempt] = -

Gross Salary = 4,96,000

Case II : Non Govt Employee + Receives Gratuity

Salary = 4,20,000

Monthly Pension = 76,000

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Commuted Pension [12,00,000 – 666,667] = 5,33,333

1. Actual 12,00,000

2. rd × 6,66,667

Exempt 6,66,667

Gross Salary = 10,29,333

Case III: Non-Govt Employee + Not in receipt of Gratuity

Salary = 4,20,000

Monthly pension = 76,000

Commuted pension [12,00,000 – 10,00,000] = 2,00,000

Exempt

1. Actual 12,00,000

2. of 10,00,000

L = 10,00,000

Gross Salary = 6,96,000

II) Gratuity [Sec 10(10)]

During Service Period After retirement / Death

Govt EE Non Govt EE Govt EE Non Govt EE



Fully Taxable Fully Exempt

Employee covered under EE not covered under

POGA, 1972 POGA, 1972

 

Exemption:

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1. Gratuity received xx 1. Gratuity received xx

2. Statutory limit 20L 2. Statutory limit 20L

3. Last Drawn salary 3. Average salary

× Completed or part (> 6M) [10M average]

Year of Service xx × Completed year of service xx

[Part - Ignore]

Lower xx Lower xx

Salary = BS = DA (any) Salary = BS + DA(if) + % Comm.

[HRA wali Salary]

ILLUSTRATION

Mr. Ravi retired on 15.6.2022 after completion of 26 years 8 months

of service and received gratuity of ₹ 15,00,000. At the time of retirement,

his salary was:

Basic Salary : ₹ 50,000 p.m.

Dearness Allowance : ₹ 10,000 p.m. (60% of which is for retirement benefits)

Commission : 1% of turnover (turnover in the last 12

months was ₹ 1,20,00,000)

Bonus : ₹ 25,000 p.a.

Compute his taxable gratuity assuming:

(a) He is private sector employee and covered by the Payment of Gratuity Act, 1972.

(b) He is private sector employee and not covered by Payment of Gratuity Act, 1972.

Solution:

I) Non-Govt Employee + Covered by POGA

a) Here, salary means = BS + DA (any)

= ₹ 50,000 + ₹ 10,000 = ₹ 60,000

b) Exempt Gratuity [Sec 10(10)]

91
 i) Actual Gratuity received = ₹ 15,00,000

ii) Statutory Limit = ₹ 20,00,000

iii) Last drawn salary × completed &

part (> 6M) year of service

= ₹ 60,000 × 27 years = ₹ 9,34,615

[26 Yr. & 8M (>6M)]

Exempt (Lower) = ₹ 9,34,615

Taxable Gratuity = 15,00,000 – 9,34,615 = 5,65,385

II) Non-Govt. Employee & Not Covered under POGA

a) Here, salary = BS + DA (if) + Comm. as % of TO

[Average of 10M] = ₹ 50,000 + ₹ 6000 + 1% of 1,20,00,000

12 M

= ₹ 66,000 [as there is no change in salary, so

it also Avg. of 10M]

b) Exempt Gratuity

i) Actual Gratuity received = ₹ 15,00,000

ii) Statutory Limit = ₹ 20,00,000

iii) Avg. Salary [10 month Avg.] ×

Completed Yr. of Service

₹ 66,000 × 26 Yr. = ₹ 8,58,000

[ignore – any months]

Lower = ₹ 8,58,000

c) Taxable = 15,00,000 – 8,58,000 = ₹ 6,42,000

III) He is a Govt Employee:-

Fully exempt – any gratuity received on retirement or death of govt. employee.

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 Retrenchment compensation : 10 (10B)

[gVk;k tkuk]

Exempt Amount

1. Actual retrenchment compensation = xx

2. Statutory Limit = ₹ 5,00,000

3. Amount calculated as per Sec 25 F of Industrial

Dispute Act 

i.e. Average Salary [3M Average] × = xx

Completed or Part (>6M) year of service

Lower = xx

Here, Salary Means

Basic Salary xx

DA (any) xx

Commission (any) xx

Bonus xx

Gratuity xx

Contribution to Any retirement Fund xx

All other Remuneration xx

[All allowances & Perquisites]

Example:

Mr. X retired after 25 years & 8 months of service. At the time of retirement.

BS - ₹ 10,000 PM

DA [40% forms part of retirement benefit] - ₹ 6,000 PM

Commission - ₹ 2000 PM

Bonus - ₹ 1500 PM

Retrenchment compensation received - ₹ 4,85,000

Calculate exemption u/s 10 (10B).

93
 Solution :

Exemption u/s 10 (10B)

(i) Actual Retrenchment Compensation = 4,85,000

(ii) Statutory Limit = 5,00,000

(iii) Amount calculated as per sec 25F of Industrial

dispute Act

= 15 × Avg. Salary × Completed or

26 [3m Avg] part (> 6 m) year

= 15 × ₹ 18,000 × 26 year = 2,70,000

26

Lower = 2,70,000

Here, Salary

BS = ₹ 10,000 pm

DA (any) = ₹ 6,000 pm

Commission (any) [fixed Hkh ] = ₹ 2,000 pm

Bonus = ₹15,00

All other Allowance & Perquisities = -

[except retirement benefits]

Salary = ₹ 18,000 pm

“Voluntory Retirement Scheme : VRS  Sec. 10 (10c)”

a) Exempt Amount

ICAI (i) Actual VRS Compenstion = xx

dk (ii) Statutory Limit = ₹ 5,00,000

Formula Lower = xx

However, VRS Compensation should not e more than Higher of the following

[otherwise No exemption at All]
Lower
(iii) Last Drawn Salary × balance month of service = xx

(iv) Last Drawn salary × 3m 5 completed year of service = xx
Exempt

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 Higher = xx

Here, 

Salary = BS + DA (if) + % Commission blls T;knk Actual VRS

[HRA okyh Salary] Compensation ugh

gksuk pkfg, otherwise

No exemption.

ILLUSTRATION

Mr. Dutta received voluntary retirement compensation of ₹7,00,000 after 30 year

4months of service. He still has 6 years of service left. At the time of voluntary

retirement, he was drawing basic salary ₹ 20,000 p.m.; Dearness allowance (which

forms part of pay) ₹ 5,000 p.m. Compute his taxable voluntary retirement compensation,

assuming that he does not claim any relief under section 89.

Solution:

Exemption of VRS  Sec 10 (10c)

(i) Actual VERS [VRS ≤ 22.50L] = ₹ 7,00,000

(ii) Statutory Limit = ₹ 5,00,000

(iii) Last Drawn salary × Balance month of service

= ₹25,000 × 72 months [6 yr. × 12m] = ₹ 18,00,000

(iv) Last Drawn Salary × 3m × Completed yr. of service

= ₹ 25,000 × 3m × 30 years = ₹ 22,50,000

Exempt (Lower) = ₹ 5,00,000

T&C for exemption of VRS Compensation —

1) Employee retired after 10 years of service or after attaining 40 years of age.

2) There is overall reduction in No. of Employee

3) Retiring positions are not filled up.

4) Retiring Employees are not appointed in any other organsation under same

management.

95
 “Exemption of Leave Encashment : Sec 10 (10AA)

During Service Period After Retirement / Super-Annuation

Govt EE Non-Govt EE Govt EE Non-Govt EE

 

Fully Taxable Fully exempt FkksM+k Taxable &

FkksM+k exempt

Exemption in case of Non-Govt. Employee 

(i) Actual Leave encashment Received = xx

(ii) Statutory Limit = ₹3,00,000

(iii) Unavailed Leave [Days] × Average Salary = xx

30 [10 months Avg]



Date to Date 10 months

(iv) Average Salary × 10 months = xx = xx

[10 month’s Average]

Exempt (Lower) = xx

Here, Salary = BS + DA (if) + % commission

[HRA okyh]

How to calculate unavailed Leave —

Leaves available × No. of completed yr. of service = xx

[taking max 30 Days Leave in a year]

(-) Leave availed by EE = (xx)

Unavailed Leave = xx

96
Example

Years of services = 20 yr. & 8 months

Leaves allowed each year = 45 Days

Leaves availed = 420 Days

Unavailed Leaves = ?

Solution:

Leaves available p.a. × Completed yr. of service = 600 Days

[45 30 Days Max × 20 yr.]

(-) Leaves availed = (420)

Unavailed Leave = 180 Days

ILLUSTRATION

Mr. Gupta retired on 1.12.2022 after 20 years of service and received leave salary

of ₹ 5,00,000. Other details of his salary income are:

Basic Salary : ₹ 5,000 p.m. (₹ 1,000 was increased

w.e.f. 1.4.2022)

Dearness Allowance : ₹ 3,000 p.m. (60% of which is for retirement

Commission : ₹500 p.m.

Bonus : ₹1,000 pm.

Leave availed during service : 480 days.

He was entitled to 30 days leave every year.

You are required to compute his taxable leave salary assuming.

(a) He is a government employee.

(b) He is a non government employee.

Solution:

I) In case of Govt EE : -

Leave encashment received by Govt. - fully exempt

EE at the time retirement / super annuation

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II) Non-Govt. Employee :

(i) Actual Amount received = ₹ 5,00,000

(ii) Statutory Limit = ₹ 3,00,000

(iii) unavailed Leave (Days) × Avg. salary

30 [Last 10m]

= 120 Days × ₹ 6,600 = ₹ 26,400

30

(iv) Avg salary × 10 months = ₹ 66,000

= ₹6,600 × 10 months

Exempt u/s 10 (10AA) [Lower] = ₹ 26,400

Taxable Amount = ₹ 5,00,000 - ₹ 26,400 = ₹ 4,73,600

WN: Average Salary of Last 10 months

Basic salary [ ₹ 4000 pm × 2 months (Feb & March)] = 48,000

[₹5,000 pm × 8 months]

DA [ 3000 × 60% ie ₹ 1800 pm × 10 months = 18,000

Commission as % of To Achieved by EE = -

Total of Last 10 months = 66,000

÷ months = ÷10

Avg salary = 6,600 pm

How to calculate Avg. Salary

For Gratuity [Non – POGA]  Avg of 10 months

[Last 10 month upto Last Calender month]

1/04 18th 31/03

2022 feb 2023

A M J J A S O N D J

Gratuity

Leave encashment

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 For Gratuity 1.04.2022 to 31.01.2023 [Last 10 months]

For leave encashment 19th April 2022 to 18th Feb 2023 [Date to Date 10m]

# Contribution to Provident Fund [Sec 10(11)/(12)]

Particulars SPF RPF URPF PPF

1. ER’s contribution Exempt Exempt upto Not taxable -NA-

to PF 12% of salary at this time

excess: Taxable

2. EE’s Contribution Deduction Deduction “No Deduction

to PF u/s 80c u/s 80c Deduction” u/s 80c

[Self Employed] [No Limit of 12%]

3. Int Accrued on Exempt Exempt upto Not taxable -

ER’s contribution 9.5% of contri

excess – Taxable

4. Int Accrued on Exempt Exempt upto Not taxable Exempt

¤ EE’S Contribution 9.5% of contri

[Self employed] excess = Taxable

Int. exempt on Contri upto 2.50L ₹ 5L

(on or After 1.04.2021)

5. withdrawal Exempt u/s Exempt u/s i) ER’s contri

10(11) 10(12) Taxable u/h

[ T&C**] salary

If taxable ii) EE’s contri

- TDS u/s 192A – No Tax

- @ 10% [Deduction

- Limit > ugh feyh Fkh]

49,999 iii) Int on

- At Payment ER’s Contri

-Taxable

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 u/h Salary

iv) Int on

EE’s Contri

- Taxable

u/h IFOS

Note:

1. Salary = BS + DA (if) + % Commission

[ HRA – okyh ]

2. Taxability of Interest on EE’s / Self Employed persons Contribution

to SPF / RPF / PPF.

Contribution before 1.04.2021 Contribution on or after 1.04.2021

 

Interest on whole  Interest on Contribution upto 2.50L

amount of contribution / 5L (Self Emp.) is exempt

  Interest on excess Contribution

Exempt beyond 2.50L / 5L  Taxable

Example:

Case EE’s Contribution to RPF Int. Exempt Taxable

[made after 1.04.2021] Rate [upto 9.5%]

1. ₹ 4,00,000 9% 2.50 L × 9% = 1.50 L × 9%

= ₹ 13,000

2. ₹ 4,50,000 11% 2.50 L × 9.50% 2.50L × 1.5%

= 23,750 = ₹ 3,750

2L × 11%

= ₹ 22,000

25,750

100
 Exemption of Accumulated balance of RPF, payable to an employee

Has the employee rendered continuous service of at least

5 years with the employer?

Yes No

Exempt Are his service terminate due to (i) his ill-health

(ii) contraction or discontinuance of employer’s business or

(iii) any other cause beyond the control of the employee?

Yes No

Exempt

Is the entire balance Is the entire balance

standing to the credit of standing to the credit of

the employee transferred No Taxable No the employee transferred

to his individual account to his NPS account

in any RPF maintained referred to in section

with his new employer? 80CCD and notified by

Yes the Central Government?

Yes

Exempt Exempt

*Where the accumulated balance in Recognised Provident Fund becomes taxable, the

tax payable in each of the years would be computed as if the fund has been an

Unrecognised Provident Fund and the difference in tax would be payable by the

employee.

101
Example : Contribution to RPF

ER
ER’s Contribution Salary = ₹ 10L EE

₹ 1.20 L

EE’s PF Account

“Expense Allowed to ER u/h PGBP

Salary = 10,00,000

ER’s Contribution to RPF [upto 12% of salary] = 1,20,000

= 11,20,000

“Computation of Salary Income of EE”

Salary = 10,00,000

+ER’s Contribution to PF [exempt u/s 10(11)/(12)] = 1,20,000

(-)ER’s Contribution to PF = (1,20,000)

(-)ER’s Contribution to PF [Deduction u/s 80C] =(1,20,000)

Taxable = 8,80,000

[Subject to Deduction u/s 16 of Salary head]

ER Salary = ₹ 10L EE

Contri to

to NPS

₹ 1.20 L

EE’s PF Account

102
“Computation of Income u/h Salary”

Salary = 10,00,000

+ER’s Contribution to NPS = 1,20,000

Subject to other Deduction u/s 16 = 11,20,000

Deduction—

(-) EE’s Contribution to NPS u/s 80CCD(1B) = (50,000)

(-) EE’s Contribution to NPS u/s 80CCD(1)

Balance Contri = 70,000

10% of Salary [BS+DA (if)] =

[10L × 10%] =100000 = (70,000)

(-) ER’s Contribution to NPS u/s 80CCD (2) =

(i) Actual Contri = 1,20,000

Lower (ii) 10% of salary [BS+DA (if)]

[₹10 L × 10%) =1,00,000 =(1,00,000)

Refer – Illustration 6, 7, 8 (5M)

“Taxability of Perquisites”

Allowances Vs Perquisities
 

 Monetory benefits  Generally Non-Monetory

benefits / facilities

 Example  Example

- Education Allowance - Education Facility

- House Rent Allowance [ER’s School]

- Tiffin Allowance - Rent Free Accomodation

- Medical Allowance - Mess facility

- - Medical facility

 We calculate Exempt part Example – Monetory Perquisites

in Allowance  Interest Free / Concessional Loan

103
 Eg – HRA  We calculate Taxable part of

Perquisite

# Medical Facilities :

Exempt Perquisite :

1) Exp on treatment of EE / FM  in ER’s hospital

2) Exp by ER / Reimbursement by ER  Exp on treatment of EE / FM  in Govt hospital

3) Exp on treatment of prescribed disease in any Approved hospital

[by chief commissioner of IT or Principal Chief CIT]

4) Premium paid by ER on health Insurance of EE & Family members

Example

XYZ Ltd. Health Insurance EE ] Exempt

ER FM ] Taxable in

hands of EE

Premium

Paid

Insurance

Company

5) Reimbursement by ER of premium paid by EE for Insurance of his health or for

his/her FM.

Example

Reimbursement Insurance EE E
ER
2 FM E

Premium for
1 EE / FM

Insurance Co.

104
Treatment Abroad : - EE or Family member (FM)

Exempt

1) Expense on Treatment [EE/ FM]  Upto RBI Limit

2) Stay Expense 

[Patient + 1 Attendent]

3) Travelling Exp. [Patient + 1 Attendent]

a) If EE’s GTI ≤ 2 L [P.Yr.]  Fully Exempt

b) If EE’s GTI > 2 L  Fully Taxable

Here,

Family Members (FM) means  i) S/C Dependent / Not

ii) P/B/S  Wholly or mainly dependent

[nknkth @ nknhth cqvk etc.  Not FM.

Other Exemption :

 Amount paid by ER  for personal Accident policy

E
Staff’s Group Insurance Policy

 Premium on Life Insurance Policy of EE/FMFully Taxable

Quesiton—

Ms. Rakhi is an employee in a private company. She receives the following medical

benefits from the company during the previous year 2022-23:

Particulars ₹

1 Reimbursement of following medical expenses incurred by

Ms. Rakhi FM

(A) On treatment of her self employed daughter in a 4,000  T

private clinic

(B) On treatment of herself by family doctor 8,000  T

105
 (C) On treatment of her mother-in-law 4,000  T

dependent on her, in a nursing home FM x

2 Payment of premium on Mediclaim Policy taken on her health 7,500 E

3 Medical Allowance [Always Fully Taxable] 2,000 p.m.  T

4 Medical expenses reimbursed on her son’s treatment in a 5,000  E

government hospital

5 Expenses incurred by company on the treatment of 1,05,000  E

her minor son abroad including stay expense

6 Expenses in relation to foreign travel of Rakhi and her 1,20,000

son for medical treatment 

Note – Limit prescribed by RBI for expenditure on medical Depends on

treatment and stay abroad is USD 2,50,000 per GTI.

financial year under liberalized remittance scheme.

Examine the taxability of the above benefits and allowance in the hands of Rakhi.

# Interest free on Concessional Loan Facility :

 Taxable Perquisite :

Loan Amount × [Int. Rate by SBI (-) Int Rate charged by ER]

[monthly closing for similar purpose

o/s balance] [as on 1st April]

Example:

 ER Loan to EE - ₹ 1,00,000 @ 9% p.a.

 Int. Rate of SBI on 1st April 2022= @ 12% p.a.

For same purpose

 Date of Loan 1st Oct 2022 for 5 months.

Calculate perquisite value of Loan

Solution—

106
Perquisite value

= ₹100000 × (12% - 9%) × 5m = ₹1250

12m

Note:

1) Interest Rate of SBI as on 1st April of P.Yr. will be considered.

2) Interest will be calculate on monthly closing outstanding balance

No perquisite value in following cases 

(i) Aggregate Loan amount does not exceeds ₹20,000 during P.Yr. [NksVk Loan]

or

(ii) Loan is taken for medical treatment of prescribed diseases.

# Perquisite value of Assets given for “USE” [EREE]

FM

i) Compute or Laptop Nil

[official / personal use]

ii) Any other thing 10% p.a. of cost (owned by ER)

[eg- car, bike TV, sofa, AC, Or

chair etc.] Rental charge paid by ER.

# Perquisite value of “Transfer of ownership to EE”.

Asset T/F Perquisite value

1. Computer, Laptop etc. - COST (-) Depreciation @ 50% For

on WDV Completed

2. Car - COST (-) 20% Depre on WDV year of

3. Any other asset - COST (-) 10% Depre on SLM Acquisition

[eg – Bike, Cycle, Chair, Table, bed etc. ] 

Part

Ignore

107
Example:

 Mr. X joined to Job with ABC Ltd. on 1.07.2019 when he was provided a car for

personal use form same day.

Cost of car (Acquired on 1.05.2018) - ₹ 6,00,000

 This car is ultimately T/F (Sold) to Mr. X on 1st Oct 2022 for ₹ 60000. Required

(i) Calculate perquisite value of use of car for PY 19-20, 20-21, 21-22 & 2022-23.

(ii)Calculate perquisite value of transfer of car for P.Yr. 2022-23.

Solution:

I) Perquisite value for use of car

= 10% p.a. of COST

Yr.

19-20 = 600000× 10% × 9/12 =45,000

20-21 = 600000 × 10% =60,000

21-22 = 6L × 10% =60,000

22-23 = 600000 × 10% × 6/12 =30,000

[upto Oct.]

II) Perquisite value of Transfer of car

= Cost (-) 20% on WDV basis for completed & Past Yr. of Acquisition.

Cost = 6,00,000

(-) 20% [1.05.2018 – 30.04.2019] = (1,20,000)

4,80,000

(-) 20% [1.02.2019 – 30.04.2020] = (96,000)

3,84,000

(-) 20% [1.05.2020 – 30.04.2021] = (77,000)

(-) 20% [1.05.2021 -30.04.2022] (61,440)

(-) 20% [1.05.2022  30.09.2022] X = -

Part X

WDV = 2,45,760

108
(-) Amount Recovered from EE = (60,000)

Perquisite value = 1,85,760

“Perquisite value of Transfer of car”

Car Expense Purpose Perquisite value

Owner [fuel. R&M]

1. ER ER Office No perquisite at All

2. ER EE Personal 10% of COST xx

3. ER ER ER For car – 10% p.a. of Cost xx

+ Expenses met by ER xx

+ Driver’s salary paid by ER xx

4. EE ER Personal Expense met by ER xx

+ Driver’s salary paid by ER xx

5. ER ER office NksVh car (≤ 1.6L / 1600 cc) – 1800 pm

+ cM+h car (> 1.6L) -2400 pm

Personal +

Driver’s by ER - 900 p.m.

6. EE ER O+P Expense by ER [[kpZ] xx

[[kpZ] (-)NksVh car (≤ 1.6 L) (1800 pm)

(-)cM+h car (> 1.6 L) (2400 pm)

Perquisite value of car xx

+ Driver +900 pm

109
7. ER EE O+P NksVh car (≤ 1.6 L) - ₹ 600 pm

(-)cM+h car (> 1.6 L) - ₹900 pm

Perquisite value of car = xx

Driver = ₹ 900 pm

8. EE EE O+P No perquisite

Note : What if ≥ 2 cars given for office + personal use



Only 1 car  treated as used for office + personal

All other cars  treated as for personal use.

Mr. X retired from the services of M/s Y Ltd. on 31.01.2023, and received the

following on his retirement:

As per the scheme of the company, he was offered a car which was purchased on

30.01.2020 by the company for ₹ 5,00,000. Company has recovered ₹ 2,00,000

from him for the car. Company depreciates the vehicles at the rate of 15% on

Straight Line Method.

Ans: ₹ 56,000

His son is allowed to use a motor cycle belonging to the company. The company had

purchased this motor cycle for ₹ 60,000 on 1.5.2019. The motor cycle was finally sold

to him on 1.8.2022 for ₹ 30,000.

Solution:

I) Perquisite value for use  10% p.a. of COST

= ₹ 60,000 × 10% × 4m / 12m [April to Aug 2022]

= ₹ 2,000

110
II) Perquisite value of T/F 

= Cost (-) 10% on SLM basis for COMPLETED Year of Acquisition Less Amt Recovered

= ₹ 60,000 (-) 10% of 3 completed yr. (-) 30,000

[1.05.2019 to 30.04.2022]

= ₹42,000 (-) 30,000 Recovered

= ₹ 12,000

A Car of 1,200 cc which is owned by X Ltd. and given to Mr. Y to be used both for

official and personal purposes. All running and maintenance expenses are fully met

by the employer. He is also provided with a chauffeur.

Ans: ₹ 1800 + ₹ 900 pm = ₹ 2700 pm

“Perquisite value of Rent free / concessional Accomodation”

[eg – Flat for Residence]

Particulars Perquisite value of Perquisite value of

UNFURNISHED ACCO. Furniture (TV, AC, Sofa etc.)

1. Govt. ER Perquisite value as per a) Furniture owned by ER

Govt Records – Also 

called Licence fees 10% of COST

Or

2. Non-Govt ER City Perquisite

2001
(i) Accomodation is (Population)

owned by ER ≤ 10 L -7.5% of salary

> 10 L ≤ -10% of salary b) Furniture on Rent by ER

> 25 L -15% of salary 

(ii) Rental / Leased Rent paid by ER xx Rent / hire charges

by ER or paid by ER

15% of salary xx

Lower xx

111
3. Stay in Hotal NA Rent paid by ER xx

or

24% of salary xx

Lower xx

Note:

1. No perquisite value for stay in Hotel for upto 15 Days.

2. In case of transfer

Indore Transfer Mumbai



EE

Holding Both Houses

For First 90 Days Perquisite value of only one house (Lower value) will be taxable.

After 90 Days Perquisite value of both the houses will be taxable.

3. Meaning of salary

BS xx

DA (if) xx

Commission (any) xx

Bonus xx

All Allowances [Taxable part only] xx

Perquisite xx

HW  Illustration 14 to 18

112
# Perquisites taxable in the hands of specified Employee only —

(i) Facility of Sweeper, Gardener, Servant or Watchman

(ii) Facility of Gas, water or electricity

(iii) Motor car facility

(iv) Free or Concessional tickets [by ER in transport Business]

(v) Education Facility

Meaning of specified Employee —

(i) EE + Director or

(ii) EE + has substantial Interest in entity or [≥ 20% voting power / share in profit]

(iii) EE’s Income u/h salary > 50,000 in P.Yr.

[BS +DA+Bonus+Commission

+ All Taxable Allowance

+ Perquisites

Less: Deduction u/s 16(ia)/(ii) & (iii)

Note: Any obligation of Employee met by Employer will always be taxable in hands

of All Employee, whether specified Employee or not.

Example Specified EE Non-specified

(i) Servant provided by ER as Taxable Not taxable

remuneration Package

(ii) Servant engaged by EE & salary paid Taxable Taxable

/Reimbursed by ER

# Perquisites exempt in case of All Employee

(i) Telephone facility at Residence of EE [+ Bill paid by Er] Exempt

Telephone Allowance Fully Taxable

113
(ii) Transport facility Fully Exempt

[pick up & Drop  ?kj office

Transport Allowance Fully Taxable

[exempt for fnO;kax – 3200 pm]

(iii) Perquisites paid by Govt to Indian citizen for services Fully exempt

rendered outside India [ie Indian Embassy etc.] u/s 10(7)

(iv) Amount spent on training of EE Fully exempt

(v) Medical facility Exempt

[Already

discussed]

Medical Allowance Fully Taxable

Deductions u/s 16 :

(i) Deduction u/s 16(ia) : Standard Deduction  upto ₹ 50,000

Or

 Gross salary

Lower xx

(ii) Deduction u/s 16(ii): Entertainment Allowance

[To entertain the clients]

Step 1: Add to salary when Received [Free Amt] xx

Step 2: Deduction Allowed only to Govt EE

i) Actual Entertainment Allowance xx

ii) Max Limit 5,000 p.a.

iii) 20% or 1/5th of Basic salary xx

Lower xx

114
(iii) Deduction u/s 16(iii): Professional Tax

 It is the obligation of EE to pay PT to SG - ₹ 25,00 p.a.

Deduction

Paid by EE Paid by ER
 

Fully Amt Paid Step 1 : Add this to salary Income of EE

[No max limit of ₹ 25,00] Step 2: Deduction Allowed

# Relief u/s 89 [Govt / Non-Govt / EE]

Example: 12-13 13-14 14-15 22-23

Salary 7,00,000 8,00,000 9,00,000 20,00,000

(computed) Tax Paid

Disputed 1,00,000 1,50,000 1,00,000 + Arrears of

Tax X 12-13, 13-14, & 14-15

= ₹ 4,50,000

7L 7L+1L 8L 8+ 1.50L 9L 11 L

Tax Tax Tax 9.50L Tax + cess Tax + cess Tax + cess

+ cess + cess + cess Tax + cess nsuk on 20 L 20 L + 40 L

paid payable paid + cess fn;k Fkk  

nsuk gS xx xx
pkfg, FkkA

xx  Extra Tax
de pqdk;k xx xx xx  (xx) ek¡x jgs gS

bruk Relief ns[kks xx

u/s 89

Point s to Remember —

115
1) Use slab rates Applicable in that particular p.yr. for which arrears of salary is

received.

2) Education cess was only 3% before 1.04.2020. There was

3) Must consider age of assessee while Applying slab rates.

Refer- Illustration 25.

EE’s Contribution ER’s Contribution

Deduction Introduced SPF = No limit of 12%

u/s 80C w.e.f. 1.04.2020  Exempt RPF = upto 12% of salary

[max 1.50 L] upto 7.50 L [HRA okyh ]

EE’s PF A/c Super annuation Fund = x

 max

Interest on ER’s Contri Upper Limit = ₹ 7.50 L

upto 7.50 L Exempt



Exempt Excess Contri = Taxable

[RPF – max 9.5%]

Interest Accrued on Interest on excess Contri

EE’s Contribution (> 7,50,000) by ER

Contribution Contribution 

before 1.04.21 On or After 1.04.2022 Taxable to EE =

 

Int on whole Int on EE’s Contri

contribution upto 2.50 L

  exempt

Exempt [RPF  max 9.5%]

[RPF  max 9.5% exempt] Int on excess Contribution



Taxable

116
 1.04 Interest? 22

19 20 21
   

ER’s ₹ 8,00,000 ₹ 8,50,000 Op. fund ₹ 9,00,000 Clo. Fund

Contri + EE’s Contri

to RPF + ER’s Contri + Int

[upto 12%]

Int xx xx xx

Taxable Contri = NiL 8.50 L – 7.50 L = 1 L 9 L – 7.50 L = 1.50 L

[u/s 17(2)(vii) Taxable Taxable

Taxable Int = NiL a) Int on old Fund of a) on old fund

[u/s 17(2)(viia)] 8 L [ upto 31.03.2020] - on 8 L + 7.50 L  Exempt

 Fully exempt - on Int on 8 L + 7.50 L  E

- on 1 L  Taxable

b) Int on C.yr. Contri - on Interest  Taxable

on 7.50 L  Exempt on 1 L

on 1 L  Taxable

Int on Int

8 L  Exempt

How to calculate Interest Income =

 op fund + ER’s Contri + EE’s Contri + Int. = clo. Fund

Int = clo. Fund (-) op. fund (-) ER’s Contri (-) EE’s Contri = xx

How to calculate Rate of Interest (I)

= Interest earned on Fund during yr.

Average Fund

117
Average Fund

= opening fund + closing fund

Calculation of taxable Interest Income during P.Yr. [TP]

TP = (PC/2)* R+ (PC1 + TP)* R

Where,

TP Taxable perquisite under section 17(2) (viia) for the current previous year.

PC Amount or aggregate of amounts of employer’s contribution in excess of ₹7.5

lakh to recognized provident fund, national pension scheme u/s 80CCD and

approved superannuation fund during the previous year

PC1 Amount or aggregate of amounts of employer’s contribution in excess of ₹

7.50 lakh to recognized provident fund, national pension scheme u/s

80CCD and approved superannuation fund for the previous year or years

commencing on or after 1st April, 2020 other than the current previous year.

TP1 Aggregate of taxable perquisite under section 17(2)(viia) for the previous

year or years commencing on or after 1st April, 2020 other than the

current previous year.

R I/ Favg

I Amount or aggregate of amounts of income accrued during the current

previous year in recognized provident fund, national pension scheme u/s

80CCD and approved superannuation fund

118
Favg (Amount or aggregate of amounts of balance to the credit of recognized

provident fund, national pension scheme u/s 80CCD and approved

superannuation fund on first day of the current previous year + Amount or

aggregate of amounts of balance to the credit of recognized provident fund,

the credit of recognized provident fund, national pension scheme u/s

80CCD and approved superannuation fund on last day of the current

previous year)/2

For Average

TP = (PC /2 *R + (PC1 + TP1) *R

   

C.Yr.’s excess Op. excess Int. on Rate of Int.

contribution contribution op.excess

> 7.50 L > 7.50 L Contribution Accrued upto Last year.

Illustration 10  H.W.

“Contribution to RPF / Super Annuation Fund”

EE’s Contribution ER’s Contribution

Deduction Exempt u/s Upto 12%

u/s 80C 10(12) of salary

[max – 1.50 L] EE’s RPF A/C [contri after

1.04.2020


Max exempt = 7.50 L

Excess part = Taxable

u/s 17(2)(vii)

Int on EE’s Contribution Int on ER’s Contribution

119
 Before On or after Contribution Contribution

1.04.2021 1.04.2021  

  Made before Made on or

Int on whole Int on EE’s Contri 1.04.2020 After 1.04.2020

contribution upto 2.50 L  

[max Rate 9.5%] Int Int on whole Int on ER’s Contri

 [max 9.5%] contribution upto 7,50,000

Exempt   

Exempt Exempt Exempt

Interest on excess [max 9.5%] Interest on excess

partTaxable Part  Taxable

Rate of Income Rate of Income

TP = (PC/2 *R + (PC1 + TP1) *R

 Avg  

Taxable C.Yr.’s ER’s ER’s excess Interst on

Perquisite contribution contribution ER’s excess

[Interest] to RPF in to RPF upto Contribution

 excess of ₹ Last year upto

u/s 7,50,000 [Included in Last year

17(2)(viia) op. fund] [Included in

opening

fund]

120
How to calculate Income on RPF A/C 

= Op. fund + ER’s + EE’s + Income = Clo. Fund

Balance Contribution Contribution Balance

= Income = Clo. Fund (-) Op fund (-) ER’s (-) EE’s

[Int/Div] contri. contri.

How to calculate Rate of Income

= Income Accrued During the P.Yr.

Average Fund

Average Fund

= Opening fund + Closing Fund

TP = (PC/2)*R + (PC1 + TP1)*R

Where,

TP Taxable perquisite under section 17(2)(viia) for the current previous year

PC Amount or aggregate of amounts of employer’s contribution in excess of ₹

7.5 lakh to recognized provident fund, national pension scheme u/s 80CCD

and approved superannuation fund during the previous year

PC1 Amount or aggregate of amounts of employer’s contribution in excess of ₹

7.5 lakh to recognized provident fund, national pension scheme u/s 80CCD

and approved superannuation fund for the previous year or years commencing

on or after 1st April, 2020 other than the current previous year.

[Amendmend – 1.04.2020]

121
 Interest

TP1 Aggregate of taxable perquisite under section 17(2)(viia) for the previous

year or years commencing on or after 1st April, 2020 other than the

current previous year

R I/ Favg

I Amount or aggregate of amounts of income accrued during the current

Income previous year in recognized provident fund, national pension scheme u/s

80CCD and approved superannuation fund.

Favg (Amount or aggregate of amounts of balance to the credit of recognized

 provident fund, national pension scheme u/s 80CCD and approved

Average superannuation fund on first day of the current previous year + Amount

fund or aggregate of amounts of balance to the credit of recognized provident

fund, national pension scheme u/s 80CCD and approved superannuation

fund on last day of the current previous year)/2 op + clo = Avg. fund
2

122
 Proforma for computation of income under the head “Salaries”

Particulars Amt

(₹)

(i) Basic Salary xxx

(ii) Fees / Commission xxx

(iii) Bonus xxx

(iv) Allowances:

(a) Dearness Allowance xxx

(b) House Rent Allowance (HRA) xxx

Less: Least of the following is exempt xxx xxx

[Section 10(13A)]

HRA actually received xxx

Rent paid (-) 10% of salary xxx

for the relevant period xxx

(c) Children Education Allowance xxx

Less : ₹ 100 per month per child upto

maximum of two children xxx xxx

(d) Children Hostel Allowance xxx

Less : ₹ 300 per month per child upto

maximum of two children xxx xxx

(e) Transport Allowance xxx

Less : ₹ 3,200 per month in case of blind / deaf and

dumb / orthopedically

handicapped employee only xxx xxx

(f) Entertainment Allowance xxx

(g) Other Allowances including overtime xxx

allowance, city compensatory allowance etc.

(v) Taxable Perquisites

(a) Valuation of rent free accommodation xxx

123
 I) Where the accommodation is provided

by the Govt. to its employees

License fee determined by the Govt. xxx

Less: Rent actually paid by the employer xxx

II) Where the accommodation is provided

by any other employer

If accommodation is owned by the employer

(i) Cities having population > 25 lakh as per

2001 census

15% of salary in respect of the period of

occupation (-) rent recovered from

employee xxx

(ii) Cities having population > 10 lakh

≤ 25 lakh as per 2001 census

10% of salary in respect of the period

of occupation (-) rent recovered from

employee xxx

(iii) In other cities

7.5% of salary in respect of the

period of occupation (-) rent

recovered from employee xxx

If accommodation is taken on lease / rent by the employer

Lower of lease rental paid or payable

by the employer (or) 15% of salary xxx

Less: Rent recovered from the employee xxx

(b) Obligation of employee discharged by employer: xxx

For e.g. Professional tax paid by the employer

(c) Any sum payable by the employer to effect an xxx

124
 assurance on the life of the employee or to

effect a contract for annuity:

Actual expenditure incurred by the employer

* In case of furnished accommodation, the value will be increased by 10% p.a. of the

cost of furniture or hire charges, as the case may be, less amount recovered from the

employees.

(d) Amount or aggregate of amounts of any contribution xxx

made -

- in a recognised provident fund,

- in NPS referred to in section 80CCD(1)

-in an approved superannuation fund

By the employer to the account of the assessee, to

the extent it exceeds ₹ 7,50,000

(e) Annual accretion by way of interest, dividend or any xxx

other amount of similar nature during the P.Y. to

the balance at the credit of the recognized provident

fund or NPS or approved superannuation fund to

the extent it relates to the employer’s contribution

which is included in total income in any P.Y. under

section 17(2)(vii)

(d) Value of use of motor car [Refer Table below] xxx

(e) Any other perquisite: For example, xxx

(1) Provision of services of a sweeper, gardener, watchman

or personal attendant: Actual cost to employer

by way of salary paid or payable for such

services (-) amount paid by the employee

(2) Gas, electricity, or water supplied by employer

for household consumption of the employee:

Amount paid on that account by the employer

125
 to the agency supplying gas etc. (-) amount

paid by the employee.

(3) Provision of free or concessional education

facilities for any member of employee’s

household : Sum equal to the expenditure

incurred by the employer (-) amount paid or

recovered from the v

Where education institution is maintained and owned

by employer: Cost of such education in similar

institution in or near the locality (-) amount

paid or recovered from employee [However,

there would be no perquisite if the value of

benefit per child does not exceed ₹ 1,000 p.m.]

Note: Above perquisites are taxable only in case of

specified employees.

(4) Interest-free or concessional loan exceeding ₹

20,000 : Interest computed at the rate

charged by SBI as on 1st day of relevant P.Y. in

respect of loans for similar purposes on the

maximum outstanding monthly balance (-)

interest actually paid by employee

(5) Value of gift, voucher: Sum equal to the

amount of such gift [if value of gift, voucher is

below ₹ 5,000, there would be no perquisite]

(6) Use of moveable assets [Refer table at page 4.84]

(7) Transfer of moveable assets: Actual cost of asset

to employer – cost of normal wear and tear –

Amount paid or recovered from employee

[Refer table at page 4.85]

126
(vi) Leave travel concession xxx

Less: Exempt u/s 10(5) [Refer table at Page 4.58] xxx xxx

(vii) Gratuity

(a) Received during the tenure of employment (fully taxable) xxx

(b) Received at the time of retirement or otherwise xxx

Less: exempt u/s 10(10) [Refer fig at Page 4.28] xxx xxx

(viii) Uncommuted pension (fully taxable) xxx

(ix) Commuted pension xxx

Less: Exempt u/s 10(10A) [Refer fig at Page 4.24] xxx xxx

(x) Leave encashment

(a) Received during the employment (fully taxable) xxx

(b) Received at the time of retirement or otherwise xxx

Less: Exempt u/s 10(10AA) [Refer fig at Page 4.32] xxx xxx

(xi) Voluntary retirement compensation xxx

Less: Exempt u/s 10(10C) – Least of the following xxx xxx

(a) Compensation received / receivable xxx

on voluntary retirement

(b) ₹ 5,00,000 xxx

(c) 3 months’ salary × completed years xxx

of service

(d) Last drawn salary × remaining months

of service left xxx

(xii) Retrenchment compensation etc. xxx

Less: Exempt u/s 10(10B)] – Least of the following: xxx xxx

(a) Compensation actually received xxx

(b) ₹ 5,00,000 xxx

(c) 15 days average pay × completed

years of service and part thereof in

excess of 6 months xxx

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Gross Salary xxx

Less: Deduction under section 16

Standard deduction u/s 16(ia) – amount of salary or

₹ 50,000, whichever is less xxx

Entertainment allowance u/s 16(ii) (only for Govt. xxx

employees)

Least of the following is allowable as deduction: xxx xxx

(a) ₹ 5,000 xxx

(b) 1/5th of basic salary xxx

(c) Actual entertainment allowance received xxx

Professional Tax/ Tax on employment (paid by xxx

employer / employee) u/s 16(iii)

Income under the head “Salaries” xxx

Exemption benefits :

Particulars Exempt Amount

1. Journey Performed by Air Economy class fare with shortest Route.

2. Journey performed by any mode

other than by Air.

[eg. Train, Bus, Ship, Car, Bike, other]

(i) Rail Service Available - 1st Class AC fare  Shortest Route

[Mode of Transport  Irre.]

(ii) No Railway Connectivity

(a) Recognised System of - Delux Class / 1st Class fare

transportation exists

[eg. Buses, Ship]

(b) Recognised System of - 1st Class AC fare by train

Transportation does not exist. [vxj ogk¡ rd train tkrh rks fdruk fare yxrk]

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# ESOP : Employee Stock Option Plan

Taxable Amount = FMV of Shares (-) Issue Price



[on the date of exercise of option]

Note : Such FMV will be considered as COA of ESOP for the purpose of Calculation of CG.

How to Determine FMV

1. If Share is Listed & Traded on date of option

a) Share is Listed on one stock exchange

= On the date of exercising the option

b) Share is Listed on more than one stock exchange

= On the date of exercising the option

[* On the RSE which recorded highest trading]

2. Share is Listed but not traded on the date of option



Closing Price  on the closest date of exercising the option.



On the RSE  which recorded highest volume of trading

3. Unlisted share

 FMV  as determined by merchant banker on the specified date.

# Education Facility

(i) For Employee  No Taxable perquisite

(ii) For Children 

a) in ER’s School / Tie-ups  Cost upto 1000 pm / child – Fully exempt

Cost > 1000 pm  Fully Taxable

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 b) other  Fully Taxable

[Cost of Education paid by ER]

(iii) For spouse / other family member  Fully Taxable

[Reasonable fees in other Institutions]

# Free or Concessional Tickets

> For Airlines & Railway EE  Fully exempt

> Others  [Equal to Price charged from Public]

# Gas, Electricity & water supply  Fully Taxable

> If manufactured produced by ER  Actual Manufacturing Cost

> Otherwise  Amount expensed by ER

# Personal Accident Policy / Staff Group Insurance Policy / Medical Insurance  paid by ER


Exempt in hands of EE

# Gift to EE

a) In cash/ convertible in cash – 100% Taxable

b) In kind / vouchers

i) upto 5000  Exempt

ii) > 5000 [Alternate view] Fully taxable

only excess part taxable

# Free Food

Tea, Snacks & Refreshments Meals & Non-Alcoholic Remote Area

beverages during working [Meals & Non Alcoholic

hours beverage during working Hours]

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   

Fully exempt > exempt upto ₹ 50 / meal exempt

> execss  taxable

# Credit Card Facility

> Office purpose  Fully exempt

> Personal  Exp. paid by ER = Fully Taxable

# Club Facility

(i) Health / Sports club facility to all EE  Exempt

(ii) Initial Corporate Membership Fees  Exempt

(iii) Other Club  Taxable

# Gardner / Sweeper / Servant  Fully Taxable

“Supper Annuation Fund”

Approved Super Annuation Fund Unapproved Super Annuation Fund

 

1) ER’s Contri – exempt upto ₹1,50,000 Same treatment as “ Unrecognised PF

2) EE’s Contri – Deduction u/s 80C “ URPF”.

3) Interest on ER’s Contri. – exempt

4) Interest on EE’s Contri – exempt

5) Withdrawal on retirement – exempt

u/s 10(13)

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SPACE FOR NOTES

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