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. Under section 17 of the Income Tax Act, 1961 the following incomes comes under the head of salary:

Basic Salary € Dearness Allowance € Advance Salary € Arrears of Salary € Leave Encashment € Salary to Partner € Fees and Commissions € Bonus € Gratuity € Pensions

Retrenchment Compensation € Remuneration for Extra Work € Voluntary Payment € Salary from a United Nations Organization € Salary to a Foreign Citizen € Payment Received at the Time of Voluntary Retirement

House Rent Allowance [Sec. 10(13A)
It is an allowance given to an assessee by his employer to meet the expenditure on payment of rent in respect of residential accommodation occupied by him. € Calculation of HRA

Actual HRA Received Less : Exempted Taxable



Least of the Following Exempted

Actual HRA Received Rent Paid ± 10% of Salary 40% or 50% of Salary Whichever is less is exempted

Salary = Basic + DA + Commission € 50% Sal= Delhi, Mumbai, Kolkatta and Chennai and 40% other places

Entertainment Allowance [Sec. 10(ii)]

Entertainment Allowance is first included in Salary Income and there after a deduction is given. In case of a Government Employee, the least of the following is deducted..
Actual EA Received Maximum Limit 20% of Basic Salary XXX XXX XXX

Salary = Basic pay only ‡ In case of a Non-Government Employee, no deduction is available.

‡ ‡ ‡ ‡

1. 2. 3.

Education Allowance Hostel Allowance Gratuity Provident Fund Deduction U/S 16 Standard Deduction 16(i) EA 16(ii) PT 16(iii)

Income From House Property
Under the Income Tax Act the owner of a House property is taxed on the income in the form of its annual value under the head ³Income from House Property´. € Owner € It is the Legal Owner of the house property who is chargeable to tax in respect of property income.

Basis of computing Income from a let out house property
Income from a let out house property is determined as
Gross Annual Value Less: Municipal Taxes Net Annual Value Less: Standard Deductions Sec 24 (30%) Interest on Borrowed Capital Income from House Property XXX

XXX XXX xxx xxx Xxx

Calculation of GAV
a) Municipal Valuation b) Fair Rent c) Whichever is High d) Standard rent e) c and d whichever is least f) Rent Actually Received e and f whichever is high 20,000 15,000 20,000 25,000 20,000 30,000 30,000

Capital Gains
Capital Asset is defined to include property of any kind held by assessee whether fixed or circulating, movable or immovable, tangible or intangible. € Types of Capital Assets A) Other Types of Assets
€ € € € €

Equity or Preference share of a Company, Securities listed in a Recognised Stock Exchange in India, Units of UTI, Units of Mutual Funds specified under Sec. 10(23D) Zero Coupons Bonds

Cost of Acquisition € Cost of Acquisition of an asset is the value for which it was acquired by the assessee. Expenses of the Capital nature for completing or acquiring the title to the property are includible in the Cost of Acquisition.


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