Salary Head

8/6/2019 Salary Head

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INCOME UNDERINCOME UNDERTHE HEAD SALARYTHE HEAD SALARY


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DEFINITIONDEFINITION1. Basic salary1. Basic salary

2. Fees, Commission, perquisites and Bonus2. Fees, Commission, perquisites and Bonus

3. Any annuity, pension or gratuity3. Any annuity, pension or gratuity

3. Taxable value of cash allowances3. Taxable value of cash allowances4. Any advance of Salary4. Any advance of Salary

5. Any payment received by an employee in respect5. Any payment received by an employee in respectof any period of leave not availed by himof any period of leave not availed by him

6. Transferred balance in a recognized provident6. Transferred balance in a recognized providentfund to the extent it is taxablefund to the extent it is taxable

The aggregate of the above incomes, after theThe aggregate of the above incomes, after theexemptions available, if any, is known as Grossexemptions available, if any, is known as Gross

Salary.Salary.


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From the Gross Salary, the following deductions

are allowed underSection 16 of the Act to arrive

at the figure of Net Salary:

1. Deduction forentertainment allowance Section

16 (ii)

2. Deductionon account of anysum paid towards

tax on employment Section 16(iii).

Contd.


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SALARYSALARY

RemunerationRemuneration ofof aa person,person, whichwhich hehe hashasreceivedreceived fromfrom hishis employeremployer forfor renderingrendering

servicesservices toto himhim.. TheThe relationshiprelationship ofof payerpayerandand payeepayee mustmust bebe of of employeremployer andandemployeeemployee forfor anan incomeincome toto bebecategorizedcategorized asas salarysalary incomeincome..

TheThe ActAct makesmakes nono distinctiondistinction betweenbetweensalarysalary andand wages,wages, thoughthough generallygenerallysalarysalary isis paidpaid forfor nonnon--manualmanual workwork andand

wageswages areare paidpaid forfor manualmanual workwork


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SALARYSALARY

Salary received from more than oneemployer during the same previous year,

salary from each source is taxable underthe head salaries.

Salary is taxable either on due basis orreceipt basis which ever matures earlier

Salary, perquisite or allowance may begiven as a gift to an employee, yet itwould be taxable.


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SALARYSALARYCompulsory deduction from salary such asemployees contribution to provident fund,deduction on account of medical scheme orstaff welfare scheme etc. are examples of

instances of application of income. In thesecases, for computing total income, thesedeductions have to be added back.


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SALARYSALARY Surrender of salary Tax free salary

Foregoing of salary

Salary paid by foreign government orenterprises


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Basisof chargeBasisof charge

As per section 15, salary consists of:As per section 15, salary consists of:

a)a) Any salary due from an employer (or a formerAny salary due from an employer (or a formeremployer) to an assessee in the Prev. year,employer) to an assessee in the Prev. year,

whether actually paid or not;whether actually paid or not;b)b) Any salaryAny salary paidpaidoror allowedallowed to him in the Prev.to him in the Prev.

year by or on behalf of an employer, though notyear by or on behalf of an employer, though notdue or before it became due;due or before it became due;

c)c) Any arrears of salary paid or allowed to him in theAny arrears of salary paid or allowed to him in thePrev. year or on behalf of an employer, if notPrev. year or on behalf of an employer, if notcharged to incomecharged to income--tax for any earlier previoustax for any earlier previousyear.year.


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Place of accrual of salaryPlace of accrual of salary

1.1. Salary in respect of service rendered inSalary in respect of service rendered inIndia is deemed to accrue or arise inIndia is deemed to accrue or arise inIndia even if it is paid outside India or itIndia even if it is paid outside India or it

is paid or payable after the contract inis paid or payable after the contract inIndia comes to an end.India comes to an end.

2.2. Pension paid abroad is deemed to accruePension paid abroad is deemed to accrueor arise in India, if it is paid in respect ofor arise in India, if it is paid in respect ofservices rendered in Indiaservices rendered in India

3.3. Leave salary paid abroad in respect ofLeave salary paid abroad in respect ofleave earned in India is deemed toleave earned in India is deemed to

accrue or arise in Indiaaccrue or arise in India


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Different formsofsalaryDifferent formsofsalary

Advance Salary[sec17(1)(v)]Advance Salary[sec17(1)(v)]-- Advance Salary isAdvance Salary istaxable ontaxable on receiptreceiptbasis in the assessment year.basis in the assessment year.However, a loan taken from employer is not taxableHowever, a loan taken from employer is not taxableas advance salary.as advance salary.

Arrear SalaryArrear Salary-- It is taxable on receipt basis, if theIt is taxable on receipt basis, if thesame has not been subjected to tax earlier onsame has not been subjected to tax earlier on dueduebasis.basis.

Leave SalaryLeave Salary-- Encashment of leave by surrenderingEncashment of leave by surrenderingleave standing to ones credit is known as Leaveleave standing to ones credit is known as LeaveSalarySalary


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Contd.Contd.

Fees, commission and Bonus:Any fees orcommission paid or payable to an employee is fully

taxable and is included in salary.

Bonus:Bonus is taxable ion the year ofReceiptif it has not

been taxed earlier on due basis.

Gratuity: Gratuity is a retirement benefit. It is generally

payable at the time of cessation of employment of

employment and on the basis of duration of service.


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ALLOWANCESALLOWANCES

Allowance is a fixed monetary amount paid

by the employer to the employee (over and

above basic salary) for meeting certain

expenses, whether personal or for the

performance of his duties. These allowances

are generally taxable and are to be included

in gross salary unless specific exemption isprovided in respect of such allowance.


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Fully taxable allowancesFully taxable allowances

(i)(i) Dearness Allowance and Dearness PayDearness Allowance and Dearness Pay

This allowance is paid to compensate theThis allowance is paid to compensate the

employee against the rise in price level in theemployee against the rise in price level in the

economy. Although it is a compensatoryeconomy. Although it is a compensatoryallowance against high prices, the whole of it isallowance against high prices, the whole of it is

taxable. When a part of Dearness Allowance istaxable. When a part of Dearness Allowance is

converted into Dearness Pay, it becomes part ofconverted into Dearness Pay, it becomes part of

basic salary for the grant of retirement benefitsbasic salary for the grant of retirement benefits

and is assumed to be given under the terms ofand is assumed to be given under the terms of

employment.employment.


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Contd.Contd.

(ii)(ii) City Compensatory Allowance:City Compensatory Allowance: ThisThis

allowance is paid to employees who are postedallowance is paid to employees who are posted

in big cities. The purpose is to compensate thein big cities. The purpose is to compensate the

high cost of living in cities like Delhi, Mumbai etc.high cost of living in cities like Delhi, Mumbai etc.However, it is fully taxable.However, it is fully taxable.

(iii)(iii) Tiffin / Lunch Allowance:Tiffin / Lunch Allowance: It is fully taxable. ItIt is fully taxable. It

is given for lunch to the employees.is given for lunch to the employees.


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Contd.Contd.

(iv)(iv) Non practicing AllowanceNon practicing Allowance: This is normally given: This is normally givento those professionals (like medical doctors, charteredto those professionals (like medical doctors, chartered

accountants etc.) who are in government service andaccountants etc.) who are in government service and

are banned from doing private practice. It is toare banned from doing private practice. It is to

compensate them for this ban. It is fully taxable.compensate them for this ban. It is fully taxable.(v)(v) WardenorProctorAllowanceWardenorProctorAllowance: These allowances: These allowances

are given in educational institutions for working as aare given in educational institutions for working as a

Warden of the hostel or as a Proctor in the institution.Warden of the hostel or as a Proctor in the institution.

They are fully taxable.They are fully taxable.

(vi)(vi) Deputation AllowanceDeputation Allowance: When an employee is sent: When an employee is sent

from his permanent place of service to some place orfrom his permanent place of service to some place or

institute on deputation for a temporary period, he isinstitute on deputation for a temporary period, he is

iven this allowance. It is full taxable.iven this allowance. It is full taxable.


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Contd.Contd.

(vii)(vii) Overtime AllowanceOvertime Allowance: When an employee works for: When an employee works forextra hours over and above his normal hours of duty,extra hours over and above his normal hours of duty,he is given overtime allowance as extra wages. It ishe is given overtime allowance as extra wages. It isfully taxable.fully taxable.

(viii)(viii) Fixed Medical AllowanceFixed Medical Allowance: Medical allowance is: Medical allowance isfully taxable even if some expenditure has actuallyfully taxable even if some expenditure has actuallybeen incurred for medical treatment of employee orbeen incurred for medical treatment of employee orfamily.family.

(ix)(ix) Servant Allowance:Servant Allowance: It is fully taxable whether or notIt is fully taxable whether or not

servants have been employed by the employee.servants have been employed by the employee.(x)(x) OtherallowancesOtherallowances: There may be several other: There may be several otherallowances like family allowance, project allowance,allowances like family allowance, project allowance,marriage allowance, education allowance, and holidaymarriage allowance, education allowance, and holidayallowance etc. which are not covered underallowance etc. which are not covered under

specifically exempt category, so are fully taxable.specifically exempt category, so are fully taxable.


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PARTIALLY EXEMPTPARTIALLY EXEMPT

ALLOWANCESALLOWANCES This category includes allowances which are

exempt up to certain limit. For certain allowances,

exemption is dependent on amount of allowance

spent for the purpose for which it was received andfor other allowances, there is a fixed limit of

exemption.


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House Rent Allowance (H.R.A.)House Rent Allowance (H.R.A.)

An allowance granted to a person by his employer toAn allowance granted to a person by his employer tomeet expenditure incurred on payment of rent inmeet expenditure incurred on payment of rent inrespect of residential accommodation occupied by himrespect of residential accommodation occupied by himis exempt from tax to the extent of least of theis exempt from tax to the extent of least of the

following three amounts:following three amounts:a) House Rent Allowance actually received by thea) House Rent Allowance actually received by the

assesseeassessee

b) Excess of rent paid by the assessee over 10% ofb) Excess of rent paid by the assessee over 10% of

salary due to himsalary due to himc) An amount equal to 50% of salary due to assessee (Ifc) An amount equal to 50% of salary due to assessee (If

accommodation is situated in Mumbai, Kolkata, Delhi,accommodation is situated in Mumbai, Kolkata, Delhi,Chennai) Or an amount equal to 40% of salary (ifChennai) Or an amount equal to 40% of salary (if

accommodation is situated in any other place).accommodation is situated in any other place).


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Contd.Contd.

Salary for this purpose includes Basic Salary,

Dearness Allowance (if it forms part of salary for

the purpose of retirement benefits), Commission

based on fixed percentage of turnover achievedby the employee. But it does not include any

other allowance and perquisite.


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Illustration:Illustration:

Mr. X is employed in A Ltd. getting basic pay of Rs.20,

000 per month and dearness allowance of Rs.7, 000

per month (halfof the dearness allowance forms part

ofsalary for the purpose ofretirement benefits). The

employer has paid bonus @Rs.500 per month,

Commission @1% on the sales turnover of Rs.20

lakhs, and house rent allowance of Rs.6, 000 per

month. X has paid rent of Rs.7, 000 per month and

was posted at Agra.Compute his gross salary for the assessment year

2006-07


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SolutionSolution

Computationof Gross Salary Amount / Rs.

Basic Salary (Rs.20,000 x 12) 2,40,000

Dearness Allowance (Rs.7,000 x 12) 84,000

Bonus (Rs.500 x 12) 6,000

Commission (1% of Rs.20,00,000) 20,000

House Rent Allowance

(Rs.6,000 x 12 Amount exempt Rs.53,800) 18,200

Gross Salary: 3,68,200


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Contd.Contd.

Amount of HRA exempt is least of 3 amounts:Amount of HRA exempt is least of 3 amounts:

1. 40% of Salary (Rs.2,40,000 + Rs.42,000 + Rs.20,000) = Rs.3,02,0001. 40% of Salary (Rs.2,40,000 + Rs.42,000 + Rs.20,000) = Rs.3,02,000

2. Actual HRA received (Rs.6, 000 x 12) = Rs. 72,0002. Actual HRA received (Rs.6, 000 x 12) = Rs. 72,000

3. Rent paid (Rs.7, 000 x 123. Rent paid (Rs.7, 000 x 12 10% of salary Rs.30, 200) = Rs. 53,80010% of salary Rs.30, 200) = Rs. 53,800

Amount of HRA exempt is = Rs. 53,800Amount of HRA exempt is = Rs. 53,800


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WhenWhen exemptionexemption dependsdepends uponupon actualactualexpenditureexpenditure byby thethe employeeemployee-- TheThe follfoll..AllowancesAllowances areare exemptexempt underunder sectionsection 1010((1414)) totothethe extentextent thethe amountamount isis utilisedutilised forfor thethe specifiedspecifiedpurposepurpose forfor whichwhich thethe allowanceallowance isis receivedreceived.. TheTheamountamount ofof exemptionexemption underunder sectionsection 1010((1414)) isis--

a)a) TheThe amountamount ofof thethe allowanceallowance;; oror

b)b) TheThe amountamount utilisedutilised forfor thethe specificspecific purposepurpose forforwhichwhich allowanceallowance isis given,given,

WhicheverWhichever isis lowerlower isis consideredconsidered


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Name ofName ofallowanceallowance

Nature of allowanceNature of allowance

Traveling

allowance/transferallowance

Any allowance (by whatever name called)

granted to meet the cost of travel on touror on transfer

Conveyanceallowance

Conveyance allowance granted to meetthe expenditure on conveyance in

performance of duties of an office ( exp.For covering the journey between officeand residence is not treated asexpenditure and is not exempt from tax.)

Daily

allowance

Any allowance whether granted on tour

or for period of journey in connectionwith transfer, to meet the ordinary dailycharges incurred by an employee onaccount of absence from his normal placeof duty


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Name ofallowance

Nature of allowance

Helperallowance

Any allowance (by whatever name called) tomeet the expenditure on a helper wheresuchhelper is engaged for the performanceof official duties.

Researchallowance

Any allowance (by whatever name called)granted for encouraging the academicresearch and other professional pursuits.

Uniformallowance

Any allowance (by whatever name called) tomeet the expenditure on the purchase ormaintenance of uniform for wear during theperformance of duties of an office.


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When exemption does not depend upon expenditureWhen exemption does not depend upon expenditure-- In theIn thecases given, the amount of exemption does not depend uponcases given, the amount of exemption does not depend uponexpenditure incurred by the employee. Regardless of the amountexpenditure incurred by the employee. Regardless of the amountof expenditure, the allowances given below are exempt to theof expenditure, the allowances given below are exempt to the

extent ofextent of--

a)a) The amount of allowance; orThe amount of allowance; or

b)b) The amount specified in rule 2BBThe amount specified in rule 2BB

Whichever is lowerWhichever is lower


Nature of allowanceNature of allowance Exemption as specified in ruleExemption as specified in rule2BB2BB

SpecialSpecialcompensatorycompensatory(Hill Area)(Hill Area)AllowanceAllowance

It includes anyIt includes anyspecial compensatoryspecial compensatoryallowance in theallowance in thenature of specialnature of specialcompensatory (hillcompensatory (hillarea) allowance orarea) allowance orhigh altitudehigh altitudeallowance or snowallowance or snowbound area allowancebound area allowance

Amt. exempt from tax variesAmt. exempt from tax variesfrom Rs. 300 per month tofrom Rs. 300 per month toRs. 7,000 per monthRs. 7,000 per month


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Nature of allowanceNature of allowance Exemption asExemption asspecified in rulespecified in rule2BB2BB

Border areaBorder areaallowanceallowance

Tribal areasTribal areas/scheduled area/scheduled areaallowanceallowance

ChildrenChildrenEducationEducationallowanceallowance

It includes any specialIt includes any specialcompensatory allowance in thecompensatory allowance in thenature of border area allowancenature of border area allowanceor remote locality allowance oror remote locality allowance ordifficult area allowance ordifficult area allowance ordisturbed area allowance.disturbed area allowance.

This allowance is given in a)This allowance is given in a)Madhya Pradesh ;b) Tamil NaduMadhya Pradesh ;b) Tamil Naduc) UP;(iii) Karnataka (iv) Tripurac) UP;(iii) Karnataka (iv) Tripura(v) Asam (iv) West Bengal (v)(v) Asam (iv) West Bengal (v)Bihar (iv) OrissaBihar (iv) Orissa

This allowance is given forThis allowance is given forchildrens educationchildrens education

Amt. ofAmt. ofexemptionexemptionvaries from Rs.varies from Rs.200 per month200 per monthto Rs. 1300 perto Rs. 1300 permonthmonth

Rs. 200 perRs. 200 permonthmonth

The amountThe amountexempt isexempt islimited to Rs.limited to Rs.100 per month100 per monthper child up to aper child up to a

max. of 2max. of 2childrenchildren


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Nature of allowanceNature of allowance Exemption as specifiedExemption as specifiedin rule 2BBin rule 2BB

HostelHostelexpenditureexpenditureallowanceallowance

CompensatoryCompensatoryfield areafield area

allowanceallowance

CompensatoryCompensatorymodified areamodified areaallowanceallowance

This allowance is granted toThis allowance is granted toan employee to meet thean employee to meet thehostel expenditure of hishostel expenditure of hischildchild

If this exemption is taken,If this exemption is taken,the same employee cannotthe same employee cannot

claim any exemption inclaim any exemption inrespect of border arearespect of border areaallowance mentioned aboveallowance mentioned above

If this exemption is taken,If this exemption is taken,the same employee cannotthe same employee cannot

claim any exemption inclaim any exemption inrespect of border arearespect of border areaallowance mentioned aboveallowance mentioned above

It is exempt from taxIt is exempt from taxto the extent of Rs.to the extent of Rs.300 pm per child up to300 pm per child up toa max. of 2 childrena max. of 2 children

Exemption is limited toExemption is limited to

Rs. 2600 pm in someRs. 2600 pm in somecasescases

Exemption is limited toExemption is limited toRs. 1,000 pm in someRs. 1,000 pm in somecasescases


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Nature of allowanceNature of allowance Exemption as specifiedExemption as specifiedin rule 2BBin rule 2BB

TransportTransport

AllowanceAllowance

UndergroundUndergroundallowanceallowance

High altitudeHigh altitudeallowanceallowance

It is granted to an employeeIt is granted to an employee

to meet his expenditure forto meet his expenditure forthe purpose of commutingthe purpose of commutingbetween the place of hisbetween the place of hisresidence and the place of hisresidence and the place of hisdutyduty

It is granted to an employeeIt is granted to an employeewho is working inwho is working inuncongenial, unnaturaluncongenial, unnaturalclimate in underground minesclimate in underground mines

It is granted to the membersIt is granted to the membersof armed forces operating inof armed forces operating inhigh altitude areashigh altitude areas

It is exempt up to Rs.It is exempt up to Rs.

800 pm (Rs. 1600 pm800 pm (Rs. 1600 pmin the case of anin the case of anemployee who is blindemployee who is blindor orthopaedicallyor orthopaedicallyhandicapped)handicapped)

Exemption is limited toExemption is limited toRs. 800 per monthRs. 800 per month

It is exempt from taxIt is exempt from tax

up to Rs. 1,060 perup to Rs. 1,060 permonth (for altitude ofmonth (for altitude of9,000 to 15,000 feet)9,000 to 15,000 feet)or Rs. 1,600 peror Rs. 1,600 permonth ( for altitudemonth ( for altitudeabove 15,000 feetabove 15,000 feet


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Entertainment Allowance [Sec. 16(ii)]:Entertainment Allowance [Sec. 16(ii)]:Entertainment allowance is first included inEntertainment allowance is first included insalary income under the head salariessalary income under the head salaries

and thereafter a deduction is givenand thereafter a deduction is given Govt. employee least of the following. isGovt. employee least of the following. is

deductible:deductible:

a)a) Rs. 5,000;Rs. 5,000;b)b) 20% ofSalary exclusive of any allowance,20% ofSalary exclusive of any allowance,

benefit or other perquisites.benefit or other perquisites.c)c) Amount of entertainment allowance grantedAmount of entertainment allowance granted

during the Prev. yearduring the Prev. year NonNon--Govt. employee (including employeesGovt. employee (including employees

of statutory corporation and local authority)of statutory corporation and local authority)entertainment allowance is not deductible.entertainment allowance is not deductible.


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PERQUISITESPERQUISITES Perquisites are defined as any casual emolument or benefitPerquisites are defined as any casual emolument or benefit

attached to an office or position in addition to salary orattached to an office or position in addition to salary orwages. It denotes some thing that benefits a man by goingwages. It denotes some thing that benefits a man by goinginto his pocket; it does not cover mere reimbursement ofinto his pocket; it does not cover mere reimbursement ofnecessary disbursements. Such benefits are normally givennecessary disbursements. Such benefits are normally given

in kind but should be capable of being measurable in moneyin kind but should be capable of being measurable in moneyterms. Perquisites are taxable and included in gross salaryterms. Perquisites are taxable and included in gross salaryonly if they areonly if they are

(i)(i) Allowed by an employer to an employee,Allowed by an employer to an employee,

(ii) Allowed during the continuation of employment,(ii) Allowed during the continuation of employment,

(iii) directly dependent on service,(iii) directly dependent on service,

(iv) resulting in the nature of personal advantage to the employee(iv) resulting in the nature of personal advantage to the employeeandand

(v) derived by virtue of employers authority.(v) derived by virtue of employers authority.


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DEFINITIONDEFINITION

1. Value of rent free accommodation provided to the employee by the1. Value of rent free accommodation provided to the employee by theemployer.employer.

2. Value of concession in the matter of rent in respect of accommodation2. Value of concession in the matter of rent in respect of accommodation

provided to the employee by his employer.provided to the employee by his employer.

3. Value of any benefit or amenity granted free of cost or at a concessional3. Value of any benefit or amenity granted free of cost or at a concessional

rate in any of the following cases:rate in any of the following cases:a) by a company to an employee who is a director thereofa) by a company to an employee who is a director thereof

b) by a company to an employee who has substantial interest in the companyb) by a company to an employee who has substantial interest in the company

c) by any employer to an employee who is neither a director, nor hasc) by any employer to an employee who is neither a director, nor has

substantial interest in the company, but his monetary emoluments undersubstantial interest in the company, but his monetary emoluments under

the head Salaries exceeds Rs.50, 000.the head Salaries exceeds Rs.50, 000.4. Any sum paid by the employer towards any obligation of the employee.4. Any sum paid by the employer towards any obligation of the employee.

5. Any sum payable by employer to effect an assurance on the life of5. Any sum payable by employer to effect an assurance on the life of

assessee.assessee.

6. The value of any other fringe benefit given to the employee as may be6. The value of any other fringe benefit given to the employee as may be

prescribed.prescribed.


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Perquisites Taxable in case of AllPerquisites Taxable in case of All

EmployeesEmployees1. Rent free house provided by employer1. Rent free house provided by employer

2. House provided at concessional rate2. House provided at concessional rate

3. Anyobligationof employee discharged by3. Anyobligationof employee discharged by

employere.g. payment of club orhotel billsofemployere.g. payment of club orhotel billsofemployee,salary to domestic servants engagedemployee,salary to domestic servants engagedby employee, payment ofschool feesofby employee, payment ofschool feesofemployees children etc.employees children etc.

4. Anysum paid by employerwhetherdirectlyor4. Anysum paid by employerwhetherdirectlyor

through a fund to effect an assurance on the lifethrough a fund to effect an assurance on the lifeof the assessee orto effect a contract foranof the assessee orto effect a contract foranannuity.annuity.

5. The value of anyotherfringe benefit oramenity5. The value of anyotherfringe benefit oramenityasmay be prescribed.asmay be prescribed.


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Valuationofrent free accommodation forValuationofrent free accommodation for

Government employeesGovernment employees

a)a) UnfurnishedUnfurnished If accommodation is provided byIf accommodation is provided by

the State or Central Government to theirthe State or Central Government to their

employees, the value of such accommodationemployees, the value of such accommodation

is simply the amount fixed by the governmentis simply the amount fixed by the government(called the license fees) in this regard.(called the license fees) in this regard.

b)b) FurnishedFurnished Value will be calculated asValue will be calculated as

unfurnished. Such value shall be increased byunfurnished. Such value shall be increased by10% p.a. of the cost of furniture or if such10% p.a. of the cost of furniture or if such

furniture is hired than by actual hire chargesfurniture is hired than by actual hire charges


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OtheremployeesOtheremployees-- UnfurnishedUnfurnishedPopulation of city asPopulation of city asper 2001 censusper 2001 censuswhere accommodationwhere accommodationis providedis provided

Where theWhere theaccommodation is ownedaccommodation is ownedby the employerby the employer

Where theWhere theaccommodationaccommodationis taken on leaseis taken on leaseor rent by theor rent by theemployeremployer

Exceeding 25 lakhExceeding 25 lakh 15% of salary in respect of 15% of salary in respect of

the period during which thethe period during which theaccommodation is occupiedaccommodation is occupiedby the employeeby the employee

Amount of leaseAmount of lease

rent paid orrent paid orpayable or 15% ofpayable or 15% ofsalary, whicheversalary, whicheveris loweris lower

Exceeding 10 lakh butExceeding 10 lakh butnot exceeding 25 lakhnot exceeding 25 lakh

10% of salary in respect of10% of salary in respect ofperiod during which theperiod during which the

accommodation is occupiedaccommodation is occupiedby the employeeby the employee

Same as aboveSame as above

Any otherAny other 7.5% of salary in respect of 7.5% of salary in respect ofperiod during which theperiod during which theaccommodation is occupiedaccommodation is occupiedby the employeeby the employee

Same as aboveSame as above


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OtheremployeesOtheremployees-- FurnishedFurnished

Value will be calculated as unfurnished.Value will be calculated as unfurnished.

Such value shall be increased by 10% p.a.Such value shall be increased by 10% p.a.

of the cost of furniture or if such furniture isof the cost of furniture or if such furniture is

hired than by actual hire chargeshired than by actual hire charges


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Furnished accommodation in a HotelFurnished accommodation in a Hotel

The value of the perquisite is determined on the basisThe value of the perquisite is determined on the basisof lower of the following twoof lower of the following two--

1.1. 24% salary paid or payable for the period during24% salary paid or payable for the period duringwhich such accommodation is provided in the P.Y.which such accommodation is provided in the P.Y.

2.2. Actual charges paid or payable by the employer toActual charges paid or payable by the employer tosuch hotelsuch hotel

ExceptionException: If an accommodation is provided in a hotel: If an accommodation is provided in a hoteland following conditions are satisfied, nothing isand following conditions are satisfied, nothing is

chargeable to taxchargeable to tax-- The hotel accommodation is provided for a totalThe hotel accommodation is provided for a total

period not exceeding in aggregate 15 days in a P.Y.period not exceeding in aggregate 15 days in a P.Y.

Such accommodation is provided on an employeesSuch accommodation is provided on an employeestransfer from one place to another placetransfer from one place to another place


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Valuation of monetaryValuation of monetary obligation of the

employee discharged by employerby employer

Gas, electricity bill paid or reimbursedGas, electricity bill paid or reimbursed

Children education expenses paid orChildren education expenses paid orreimbursedreimbursed

Medical expenses reimbursedMedical expenses reimbursed

Income tax or professional tax paid byIncome tax or professional tax paid byemployeremployer

Value of such monetary obligation shall beValue of such monetary obligation shall bethe actual amount spent by the employerthe actual amount spent by the employerand is taxable whether the employee isand is taxable whether the employee is

specified or notspecified or not


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VALUATION OF LIFE INSURANCEVALUATION OF LIFE INSURANCE

PREMIUMPREMIUM

Amount. payable by an employer, directly orAmount. payable by an employer, directly orindirectly, to effect an assurance on the life ofindirectly, to effect an assurance on the life ofthe employee is taxable in the hands of allthe employee is taxable in the hands of all

employees. The rule is however, not applicableemployees. The rule is however, not applicableif the employer makes contribution/paymentif the employer makes contribution/paymenttowards the following:towards the following:--

a)a) Recognized Provident Fund ( up to 12% of theRecognized Provident Fund ( up to 12% of thesalary of the employee)salary of the employee)

b)b) Approved Superannuation FundApproved Superannuation Fund

c)c) Group Insurance schemesGroup Insurance schemes

d)d) Employees State Insurance schemes, andEmployees State Insurance schemes, and

e)e) Fidelity guarantee schemeFidelity guarantee scheme


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ValuationofinterestValuationofinterest--free loanorfree loanor

loan at concessional rate ofinterestloan at concessional rate ofinterest--Step 1 Find out the max. outstanding monthly balance (i.e.

the aggregate outstanding balance for each loan as onthe last day of each month)

Step 2 Find out rate of interest charged by SBI as on the 1st

day of relevant P.Y. in respect of loan for the samepurpose advanced by it

Step 3 Calculate interest for each month of the Prev. year onthe outstanding amount mentioned in step 1 at the ratof interest given in step 2

Step 4 From the total interest calculated for the entire P.Y.under step 3, deduct interest actually recovered, if anyfrom the employee during the P.Y.

Step 5 The balancing amount [step3 minus Step 4] is taxablevalue of the perquisite


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EXCEPTIONSEXCEPTIONS

--

ExemptionExemption11

If a loan is made available for medicalIf a loan is made available for medicaltreatment in respect of diseases specifiedtreatment in respect of diseases specifiedin Rule 3A (the exemption is however, notin Rule 3A (the exemption is however, notapplicable to so much of the loan a hasapplicable to so much of the loan a hasbeen reimbursed to the employee underbeen reimbursed to the employee underany medical insurance scheme)any medical insurance scheme)

ExemptionExemption22

Where the amount of original loan ( orWhere the amount of original loan ( orloans) does not exceed in the aggregateloans) does not exceed in the aggregateRs. 20,000Rs. 20,000


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TheThe valuevalue of of traveling,traveling, touring,touring,

accommodationaccommodation andand anyany otherotherexpenditureexpenditure paidpaid forfor oror borneborne ororreimbursedreimbursed byby thethe employeremployer forfor anyanyholidayholiday availedavailed ofof byby thethe employeeemployee oror

anyany membermember ofof hishis householdhousehold isis thetheactualactual costcost ofof thethe facilityfacility..


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VALUE OF FREE FOOD ETC.VALUE OF FREE FOOD ETC.

--

CIRCUM

STAN

CESCIRCUM

STAN

CESTAXABL

EVALU

ETAXABL

EVALU

E

Tea or snacks providedTea or snacks providedduring working hoursduring working hours

nilnil

Free food or nonFree food or non--alcoholicalcoholic

beverages during workingbeverages during workingin a remote area or anin a remote area or anoffshore installation.offshore installation.

nilnil

Free food or nonFree food or non--alcoholicalcoholicbeverages during workingbeverages during working

Amount in excessAmount in excessof Rs. 50 perof Rs. 50 permeal is taxablemeal is taxable

In any other caseIn any other case Actual costActual cost


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Value of any gift, voucher or tokenValue of any gift, voucher or token

Actual value of such gift if the valueActual value of such gift if the valueis more than Rs.5000is more than Rs.5000

It will be taken as nil if the value isIt will be taken as nil if the value isless than Rs. 5000less than Rs. 5000


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CREDIT CARD & CLUBCREDIT CARD & CLUB

MEMBERSHIPMEMBERSHIP

CIRCUMSTANCESCIRCUMSTANCES TAXABLE VALUETAXABLE VALUE

Where payment is made or

reimbursed by the employerfor the purpose other thanthe official..

The amount paidThe amount paid

for or reimbursedfor or reimbursedby the employerby the employer

Where payment is made or

reimbursed by the employerfor the official purpose

Nil , providedNil , provided

certain conditionscertain conditionsare fulfilled.are fulfilled.


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CONDITIONSCONDITIONS

CompleteComplete detailsdetails inin respectrespect of of suchsuchexpenditureexpenditure isis maintainedmaintained byby thetheemployeremployer whichwhich may,may, interinter alia,alia, includeinclude

thethe datedate ofof expenditureexpenditure andand thethe naturenature ofofexpenditureexpenditure..

TheThe employeremployer givesgives aa certificatecertificate forfor suchsuchexpenditureexpenditure toto thatthat effecteffect thethe samesame waswasincurredincurred whollywholly andand exclusivelyexclusively forfor thetheperformanceperformance ofof officialofficial dutyduty


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USE OF MOVABLE ASSETSUSE OF MOVABLE ASSETS

CIRCUMSTANCESCIRCUMSTANCES TAXABLETAXABLEVALUEVALUE

Use of laptop and computersUse of laptop and computers nilnil

Movable assets, other thanMovable assets, other than--

(i) Laptop and computers and(i) Laptop and computers and

(ii) Assets already specified(ii) Assets already specified

(i)(i) 10% p.a. of10% p.a. ofthe actualthe actualcost.cost.

(ii)(ii) The rent orThe rent orhire chargeshire charges

(As the case(As the case

may be)may be)

T f f bl tT f f bl t


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Transfer of any movable assets.Transfer of any movable assets.

Asset transferredAsset transferred Value of benefitValue of benefit

Computers andComputers andelectronic itemselectronic items

Actual cost of asset less 50%Actual cost of asset less 50%each completed year duringeach completed year duringwhich such asset was used bywhich such asset was used bythe employer on WDV methodthe employer on WDV method

Motor carsMotor cars Actual cost of asset less 20%Actual cost of asset less 20%each completed year duringeach completed year duringwhich such asset was used bywhich such asset was used bythe employer on WDV methodthe employer on WDV method

Any other assetsAny other assets Actual cost of asset less 10%Actual cost of asset less 10%each completed year duringeach completed year duringwhich such asset was used bywhich such asset was used by

the employer on SL methodthe employer on SL method


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Perquisites taxable in case ofPerquisites taxable in case of

Specified Employees onlySpecified Employees only1. Free supply of gas, electricity or water supply for1. Free supply of gas, electricity or water supply for

household consumptionhousehold consumption

2. Free or concessional educational facilities to the2. Free or concessional educational facilities to themembers of employees householdmembers of employees household

3. Free or concessional transport facilities3. Free or concessional transport facilities4. Sweeper, watchman, gardener and personal4. Sweeper, watchman, gardener and personal

attendantattendant

5. Any other benefit or amenity5. Any other benefit or amenity

Specified employeeSpecified employee-- Specified employee is anSpecified employee is anemployee who is either a director or has substantialemployee who is either a director or has substantialinterest in the company where he is employed or isinterest in the company where he is employed or isdrawing monetary salary of more than Rs.50, 000drawing monetary salary of more than Rs.50, 000during the previous year.during the previous year.


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Free supply of gas, electricity or waterFree supply of gas, electricity or water

CircumstancesCircumstances Value of benefitValue of benefit

Where such supply isWhere such supply ismade from resourcesmade from resourcesowned by the employerowned by the employer

It shall be the manuIt shall be the manu

--facturing cost perfacturing cost perunitunit

Any other caseAny other case Amount paid on thisAmount paid on thisaccount by employeraccount by employer


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Free or concessional educationalFree or concessional educational

facilitiesfacilities

CircumstancesCircumstances Value of benefitValue of benefit

Where institution isWhere institution ismaintained by themaintained by the

employeremployer

Actual Cost of education inActual Cost of education ina similar institution. Buta similar institution. But

nilnil if not more than Rs.if not more than Rs.1000 per child1000 per child

Where such facilitiesWhere such facilitiesis given in any otheris given in any otherinstitutioninstitution

Actual Cost of education inActual Cost of education ina similar institution. Buta similar institution. Butnilnil if not more than Rs.if not more than Rs.1000 per child1000 per child

Any other caseAny other case Actual costActual cost


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Free or concessional transportFree or concessional transport

facilitiesfacilitiesCircumstancesCircumstances Value of benefitValue of benefit

Provision of transport toProvision of transport toemployee or any otheremployee or any othermember of household whomember of household whohimself is in the businesshimself is in the businessof carriage and transportof carriage and transport

nilnil

Any other caseAny other case Actual costActual cost


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Value of any specified security orValue of any specified security or

sweat equitysweat equity

Fair market value of the specifiedFair market value of the specifiedsecurity on the date on which thesecurity on the date on which theoption is exercised by the assesseeoption is exercised by the assesseeas reduced by the amount actuallyas reduced by the amount actuallypaid by him.paid by him.

Valuation in respect of Motor carValuation in respect of Motor car


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Valuation in respect of Motor carValuation in respect of Motor car

Different situationsDifferent situations Value of the perquisiteValue of the perquisite

I. When Car is owned or hired byI. When Car is owned or hired by

employer & maintenance andemployer & maintenance andrunning expenses are met orrunning expenses are met orreimbursed by employerreimbursed by employer

a)a) If the car is wholly used forIf the car is wholly used forofficial purposesofficial purposes

b) If the car is wholly used forb) If the car is wholly used forprivate purposes of theprivate purposes of theemployee or any member of hisemployee or any member of hishouseholdhousehold

a)a) No value provided a fewNo value provided a fewconditions are satisfiedconditions are satisfied

b)b) Step1Step1: Find out actual: Find out actualexpenditure incurred by theexpenditure incurred by theemployer [ i.e. exp. On running &employer [ i.e. exp. On running &maintenance includingmaintenance includingremuneration of the chauffer plusremuneration of the chauffer plusnormal wear & tear of the car) @normal wear & tear of the car) @

10% pa of actual cost to the10% pa of actual cost to theemployer) or hire charges if car iemployer) or hire charges if car itaken on hire]taken on hire]

Step2Step2-- Less: Amt. recoveredLess: Amt. recoveredfrom employee Balancing amtisfrom employee Balancing amtistaxable value of the perquisitetaxable value of the perquisite


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c) If the car is used partly forc) If the car is used partly forofficial and partly for privateofficial and partly for privatepurposes of the employeepurposes of the employee

maintenance and runningmaintenance and runningexpenses are met byexpenses are met byemployer.employer.

A sum calculated at the rate of Rs.A sum calculated at the rate of Rs.1,800 pm where the cubic capacity1,800 pm where the cubic capacityof the engine does not exceed 1.6of the engine does not exceed 1.6liters or Rs. 2,400 pm if suchliters or Rs. 2,400 pm if suchcapacity exceeds 1.6 liters and Rs.capacity exceeds 1.6 liters and Rs.900 pm if chauffer is provided.900 pm if chauffer is provided.

d) If the car is used partly ford) If the car is used partly forofficial and partly for privateofficial and partly for privatepurposes of the employeepurposes of the employee

maintenance and runningmaintenance and runningexpenses are met byexpenses are met byemployee.employee.

A sum calculated at the rate of Rs.A sum calculated at the rate of Rs.600 pm where the cubic capacity600 pm where the cubic capacityof the engine does not exceed 1.6of the engine does not exceed 1.6

liters or Rs. 900 pm if suchliters or Rs. 900 pm if suchcapacity exceeds 1.6 liters and Rs.capacity exceeds 1.6 liters and Rs.900 pm if chauffer is provided.900 pm if chauffer is provided.



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When Car is ownedWhen Car is ownedor hired byor hired byemployee &employee &maintenance andmaintenance andrunning expensesrunning expensesare met orare met orreimbursed byreimbursed byemployeremployer

a) If the car isa) If the car iswholly used forwholly used for

official purposesofficial purposes

a)a) No value provided a few conditions areNo value provided a few conditions aresatisfiedsatisfied

b) If the car is usedb) If the car is usedpartly for official andpartly for official andpartly for privatepartly for private

purposes of thepurposes of theemployeeemployee

Actual cost as reduced by the Rs. 1,800 pmActual cost as reduced by the Rs. 1,800 pmwhere the cubic capacity of the engine doeswhere the cubic capacity of the engine doesnot exceed 1.6 liters or Rs. 2,400 pm if suchnot exceed 1.6 liters or Rs. 2,400 pm if such

capacity exceeds 1.6 liters and Rs. 900 pm ifcapacity exceeds 1.6 liters and Rs. 900 pm ifchauffer is provided.chauffer is provided.

However if actual expenses are more thanHowever if actual expenses are more than1800/2700/2400/3300 p.m. as the case may1800/2700/2400/3300 p.m. as the case maybe such amount may be claimed as deductionbe such amount may be claimed as deductionby maintaining specified recordsby maintaining specified records

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