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SALARY
INCOME FROM SALARY
Chargeability (u/s 15)
Under section 15, the following incomes are taxable under the head
‘salaries’:
(a) The salary due from as employer or former employer to an Assessee
in the previous year, whether paid or not.
(b) The salary paid or allowed to him in the previous year by or on behalf
of an employer or a former employer though not due or before it
becomes due to him.
(c) Any arrear of salary paid or allowed to him in the previous year by or
on behalf of an employer or a former employer, if not charged to
income tax any earlier previous year.
Salary becomes due on the first date of every month. In almost all the
offices of state govt. this rule is in force. In central govt. offices the salary is
paid on the last date of the month but salary for the month of March is paid
only on 1st April. In cases, in a particular assessment year, the salary drawn
by the employee for the month of March paid in April to February paid in
March shall be included.
In banks & certain other bodies, the salary is credited on the last date
of the month. Hence, the salary from April to March next shall be taxable.
DEFINITIONS
Under section 17 of the act the following have been defined:
(1) salary
(2) Perquisites
(3) Profits in lieu of salary.
SALARY
Salary includes:
1. Wages
2. Any Annuity or Pension
3. Any gratuity
4. Any fees, commission, perquisites, or profit in lieu of or in addition to
any salary or wages.
5. Any advance of salary but not loan for purchasing a car, cycle,
Scooter or a house etc.
6. the annual accretion to the balance at the credit of any employee
participating in a recognized provident fund i.e. employer’s
contribution in excess of 12% of the employee’s salary & interest on
provident fund in excess of 9.5%
7. The aggregate of all sums comprised in the transferred balance to the
extent to which it is chargeable to tax.
8. The contribution made by the central government or any other
employer in the previous year, to the account of an employee under a
pension scheme.
SALARY
Less
Entertainment Employment
Allowance Allowance
= Taxable Salary
Treatment of Various incomes to be included in ‘Salary’
ALLOWANCES
FULLY TAXABLE
PARTLY TAXABLE FULLY EXEMPT
ALLOWANCE
ALLOWANCE ALLOWANCE
1. HRA is fully taxable if Assesses stays in own house or no rent is paid by him.
2. Salary is to be taken on ‘due’ basis in respect of the period during which the
Rented Accommodation is occupied by the Employee in the previous year.
The salary of any other period is not to be included even though it may be
received and taxed during the previous year.
3. The period for which the following 4 factors are same, calculation for such
period can be made jointly:
(a) HRA
(b) Rent Paid
(c) Salary
(d) Location of house taken on place
4. The Assessee shall be required to produce the rent receipts in proof of actual
source, employees drawing HRA up to rs. 3000 p.m. are exempted from
production of rent receipts. For the purpose of regular Assessment, the
employee shall be required to produce the rent receipts in all cases.
PERQUISITES
Taxable value = 15% salary for the accommodation period (If city
Population is over 25lacs) & 10% of salary (if population is
Between 10 to 25lacs) & 7.5% of salary (if city population
Is less than 10 lacs)
II. If Accommodation is taken on lease or rent by
employer
Taxable value
- Use of Laptop & Computer NIL
- Use of assets other than Laptop & computer 10% p.a. of Actual cost
& other Specified assets in rules OR
Hire Charges paid by employer
H. Transfer/Sale of any Movable Asset to employee or any
member of his household at nominal rate/without cost
Taxable value
- Computer & Actual Cost – 50% P.a. of cost for each completed
Electronics item year. (On WDV method on purchase of asset)
- Motor Car Actual Cost of use – 20% P.a. of cost for each
completed year of use. (On WDV method)
- Any other Asset Actual Cost – 10% P.a. of cost for each completed
year of use. (On straight line method
Taxable value
- Where such facility is maintained Value at which such facility are offered
by employer & is not available by other Agencies to the public
uniformly to all employees.
-Where employee is on official tour Amount incurred for other member by
& expenses are For the any member employer.
of his household accompanying him
- Where official tour extended as Amount incurred for extended period
vacation of vacation.
- Any other case Amount incurred
The above rules are not applicable to LTC to which rule 2B is
applicable.
Taxable value
- Tea or Snacks provided during official NIL
hours (i.e. Refreshment or breakfast)
- Free meals during office hours in a Remote NIL
Area or an offshore installation
- Free meals provided by employer during Exempted up to Rs. 50 per meal.
office hours
At office or Business Premises;
or
Through paid vouchers which
are not transferable.
Remote Area: - remote area for purposes of proviso to this sub-rule means
an area that is located at least 40 kilometers away from a town having a
population not exceeding 20000, based on latest published all –India census.
The value of aforesaid gifts given on Social & Religious occasions like Diwali,
Christmas, New Year, the Anniversary of the organization etc. are deductible (for
employer) in computing the P/G/B/P. if gifts are of personal nature, e.g. Birthday
gift, Gift on Marriage Anniversary etc. the value of such gifts is neither Taxable in
the hands of an employee not deductible in computing the income of the employer.
C. Expenses on Credit Card of employee or his household
member:
Taxable value
- Where any expenses including membership fees & annual Amount paid or
fees incurred by the employee or his household member reimbursed by
credit Card, on are paid or reimbursed by the employer employer
-Where such expenses are incurred wholly for official NIL
purposes.
D. Expenses on Club membership & other expenses:
Taxable value
- Where any expenses (annual or periodical) incurred Amount paid or
by Employee in a club are paid or reimbursed by the reimbursed by the
employer employer.
- Where such expenses are incurred wholly for NIL
official purposes.
- Where facility of Corporate Membership taken by NIL
employer is enjoyed by employee or any member of
his household, the initial fee paid for such corporate
membership by employer.
Taxable value
Expenses are borne by EMPLOYER Expenses are borne by EMPLOYEE
Actual expenses + salary of driver + (no specified rule in act but assumed)
10% p.a. of cost of car estimated wear & tear expenses
(10% p.a. depreciation) + Salary of
driver
- If use of car is partly for office & partly for private purpose:
If a driver is also provided then add Rs. 900 per month in each of above
case.
II. In case of car is owned by the employee & expenses are met by
employer:
Taxable value
1. Car is used wholly for official NIL
purpose
2. Car is used wholly for private Actual Expenses paid by employer
purpose
3. Car is used partly official & partly Actual expenses of employer – 1800
private purpose and car is up to 1.60 p.m. or 2700 p.m. if driver is
ltr. provided
4. If car is more than 1.60 ltr. Actual expenses – 2400 p.m. or 3300
p.m. if driver is provided.
Taxable value
- Automotive is used wholly for NIL
official purpose
- Used partly for official & partly Actual expenses of employer –
private purpose. Rs 600 p.m.
In above all cases, month means complete month & a part of month
is left out of consideration.
Vehicle provided for commuting from residence to office or any place
of work & back to residence shall not be regarded as perquisites.
Taxable value
- Free Service of a Sweeper, Salary paid by employer To them
Gardner, Watchman or Personal
Attendant provided by employer.
- In case any domestic servant is Amount Reimbursed
engaged by the employee & their (Taxable is case of all employees as
salary is paid or reimbursed by the it is obligation of the employee met
employer. by the employer).
Taxable value
- If supplied from own sources. Manufacturing cost.
- If purchased by employer from any Actual amount paid to Agency by
outside agency. Employer
- Gas, Water, Electricity bill paid or Taxable in case of all employees as it
reimbursed by the employer on is the obligation met by the
behalf of employee. employer.
1. Taxable Value will be NIL, if such facility is provided to the children of the
(b)
employee & cost
Any of education
other per childexpenses
case if Education does notofexceed Rs. 1000
employee’s per month.
children or
2. No any
limitother
of number
member of are
children.
paid or reimbursed by employer.
The income Chargeable under the head ‘Salaries’ is computed after making
the following deductions:
1. ENTERTAINMENT ALLOWANCE U/S 16(II)
- Only for Govt. Employees.
Least of the following is deductible:
i. Amount of allowance actually received.
ii. 20% of salary.
iii. Rs. 5000
Salary means: - Basic Salary Only.