| This Section
deals with the provisions in the Income Tax for the salaried
customer. |
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| It
is by no means a substitute for the Income Tax Act. |
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| 1. |
Salary
received in lieu of notice period is taxable. Similarly,
any amount deducted from the salary for inadequate notice
period is allowed as a deduction.
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| 2. |
Salary
or any other allowance received, as a partner is not
taxable under "Salary" Head, but will be taxable
as Income from Business or Profession.
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| 3. |
The
Income Tax Return for a salaried person has to be filed
by 31st July for the previous financial year ending
31st March. For Example a Salaried individual has to
file his return by 31st July 2006 for the financial
Year ending on 31st March 2006.
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| 4. |
One can
file a belated return up to two years from the end of
the relevant financial year. This may attract certain
Interest and Penalty for non-submission of return in
time.
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| 5. |
A copy
of the acknowledgment received from the Income Tax department
serves as a proof of filing your Return. It also serves
as an Assessment Order where, in cases where there is
no notice received by the assessee (the person filing
the Return).
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| 6. |
Remuneration
received by foreign nationals as diplomatic personnel,
consular personnel, trade commissioners or staff of
a foreign mission is exempt from tax.
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| 7. |
Tax
Deduction at Source (T.D.S) certificates in Form No.16
can be obtained from the Employer after one month from
the end of the financial year in which the deduction
is made.
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| 8. |
Allowances
to a High Court judge or amount received from UNO is fully
exempt. |
| 9. |
Salary of
Foreign technicians and foreign citizens are exempt subject
to certain conditions. |
| 10. |
In the
case of specified employees, most of the items are taxable.
Specified employees denote a director employee, an employee
who owns more than 20% of the interest in the company
and whose income exceeds Rs.50,000.
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Heads,
Highlights and Tips under "SALARY INCOME"
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Heads
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Explanation/
Highlights
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Tips
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1.Basic
Salary
2.Dearness Allowance
3.Dearness Pay
4.Notice Salary
5.Fees & Commission
6.Bonus
7.Annuity from Employer
8.Any Remuneration for extra work or Overtime
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These
are fully taxable.
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It
is advantageous to include Dearness Allowance or Dearness
Pay in Basic Salary since it will minimize tax incidence
on HRA, gratuity and commuted pension. This also helps
to avail a greater benefit in contributions to Recognized
Provident Fund. |
|
Salary Arrears
|
This
is taxable in the year in which it is received subject
to certain conditions.
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Relief
is available in Rates of Tax for the salary received
in arrears under section 89(1). For this purpose
Form 10E can be filed along with the Income Tax
Return.
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Advance Salary
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Any
advance received in the current year as advance
for the future years is taxable in the year in which
it is received subject to certain conditions.
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Relief
is available in Rates of Tax for the salary received
in arrears under section 89(1). For this purpose
Form 10E can be filed along with the Income Tax
Return.
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House Rent Allowance
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Exemption
Available:
Minimum
of:
1.
An amount of 50% of Salary in all four Metros and
40% in all other areas OR 2. Actual HRA received
OR 3. Excess of Rent paid over 10 % of Salary.
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Those
who are staying in rented accommodation (house not
in their name) can avail of this exemption subject
to the conditions mentioned. For this, they are
advised to preserve the rent receipts and preferably
a Rent Agreement and hand over these to the employer.
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Gratuity
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Fully Exempt for Central or State Government or
local authority employees For other persons Exemption
available subject to minimum of:
1.
15 days Salary (Monthly salary divided by 26 multiplied
by 15) for the number of years in service.
2. Rs.3, 50,000/-
3.
Actual Gratuity received.
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Gratuity received during employment is not exempt
from tax but relief is available in rates of tax
under Section 89(1). For this purpose Form 10E can
be filed along with the Income Tax Return.
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Leave Travel Concession or Assistance. (LTC or LTA)
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Exempt from income tax once in two years in a block
of four years. Current Block of four years: 1/1/2006
to 31/12/2009. The maximum permissible exemption
includes travel by air (economy fare) for self and
family.
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1. Try to avail LTA/LTC once in two years (twice
in 4 years) to maximize the benefit from this clause.
Most organisations allow accumulation of LTA/LTC
for 2 years.
2. Exemption is available for journey on leave only
to any place in India, not necessarily to the home
town.
3.
Exemption is available to the extent of actual fare
by the shortest route.
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Medical Facilities
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Actual Medical expenses for self and dependants
exempt subject to a maximum of Rs.15,000/-p.a. for
normal medical facilities other than hospitalization.
(For Hospitalisation separate rules apply)
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1. To avail of this exemption you are required to
submit the medical bills to your organization for
reimbursement.
2.
Medical reimbursements are exempt, while Fixed Medical
Allowance (without submission of bills) is taxable.
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Leave Salary
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Salary
earned for encashment of Leave. Exempt up to 300
days of leave (Maximum of 30 days per year) but
subject to certain conditions.
|
Relief is available in Rates of Tax for the salary
received in arrears under section 89(1). For this
purpose Form 10E can be filed along with the Income
Tax Return.
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| Valuation
of Perquisites |
| Rent-free
accommodation: |
|
Licence
fee as determined by the Union or State Government would
be taken as the value of rent - free accommodation in
the case of government employees. Private Sector employees
The former will be valued at 10 per cent of the salary
in ities with population above four lakh, and 7.5 per
cent in other cities. Rent paid shall be deducted from
the perquisite value. In the latter, the value will
be the actual rent paid by the employer or 10 per cent
of salary, whichever is lower. For furnished accommodation,
10 per cent of the cost of furniture will be added to
the value.
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For hotel
accommodation, 24 per cent of the salary or the actual
charges, whichever is lower, is added to the salary.
Accommodation up to 15 days, in case of a transfer,
will not be treated as perquisite. Accommodation in
remote areas, mining and offshore exploration and project
sites has been exempted.For the employer-owned accommodation,
no provision is made to reduce the value when the rent
is less than 10 per cent of salary.
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| Motor
cars |
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Cars
are defined in two categories-engine capacity below
1.6 litres and above 1.6 litres. The perquisite valuation
for employer- provided cars has been doubled to Rs 1,200
and 1,600 per month respectively. Another Rs 600 will
be added per month if a chauffeur is provided. Expenses
above Rs 1,800 and Rs 2,200 per month will be taxed
for the employee's car maintained by the employer.
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Other taxable perks
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- Payments for education
of employees children will be added to the salary.
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Other benefits
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- Amounts reimbursed
on expenses for holiday by the employee will be added
to the salary.
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- Free meals shall be
considered expenditure incurred by the employer.
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- Membership and fees
reimbursements on credit card provided by the employer
will be taxed.
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-
The
use of movable asset shall be determined at 10 per
cent of the actual cost of the asset per annum.
Any recovery is deducted. If the movable asset is
transferred to the employee, its net cost will be
added to the income. For computers and electronic
items, wear and tear will be 50 per cent and for
cars at 20 per cent.
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- Expenses on telephones
and mobile phone actually incurred on behalf of the
employer shall be excluded.
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