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Salary Salary TaxationTaxation

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• The relevant Acts, Rules, The relevant Acts, Rules, Forms and Notifications are Forms and Notifications are available at the website of available at the website of the Income-tax Department -the Income-tax Department -www.incometaxindia.gov.inwww.incometaxindia.gov.in

TDS rates for Financial Year 2013-14TDS rates for Financial Year 2013-14

Senior Citizen Senior Citizen above 60 Years above 60 Years WomanWoman OthersOthers Tax (%)Tax (%)

  For Income For Income Between 0 to Between 0 to 2,50,0002,50,000

  For Income For Income Between 0 to Between 0 to 2,00,0002,00,000

  For Income Between 0 For Income Between 0 to to 2,00,0002,00,000 00

  For Income For Income Between 2,50,001 Between 2,50,001 to to 5,00,0005,00,000

  For Income For Income Between 2,00,001 Between 2,00,001 toto 5,00,000 5,00,000

  For Income Between For Income Between 2,00,0012,00,001 to  to 5,00,0005,00,000 1010

  For Income For Income Between 5,00,001 Between 5,00,001 toto 10,00,000 10,00,000

  For Income For Income Between 5,00,001 Between 5,00,001 toto 10,00,000 10,00,000

  For Income Between For Income Between 5,00,0015,00,001 to  to 10,00,00010,00,000 2020

  For For Income Income above above 10,00,00110,00,001

  For For Income Income above above 10,00,00110,00,001

  For Income For Income above above 10,00,00110,00,001 3030

SurchargeSurcharge >1,00,00,000>1,00,00,000 >1,00,00,000>1,00,00,000 1010Education CessEducation Cess 33

SECTION 87ASECTION 87A

Individual whose net income does not exceed Rs. 5,00,000/-is entitled for rebate u/s 87A for Rs. 2,000/-.

This is in addition to benefits of slab rates given by Govt.

AY 2014-15

TopicsTopics• WHAT IS WHAT IS SALARYSALARY• ALLOWANCES ALLOWANCES • INCOMES WHICH DO NOT FORM PART INCOMES WHICH DO NOT FORM PART OF TOTAL INCOMEOF TOTAL INCOME..• DEDUCTION UNDER SECTION 16DEDUCTION UNDER SECTION 16• DEDUCTIONS UNDER CHAPTER VI ADEDUCTIONS UNDER CHAPTER VI A

What is salaryWhat is salary ? ?(Sec.15,16&17)(Sec.15,16&17)

• Employer and Employee relationship

• An income can be taxed under the head salaries only if there is a relationship of an employer and employee between the payer and payee.

What is salaryWhat is salary ? ?• Salary includesSalary includes• Wages, Wages, • BonusBonus• Annuity Annuity • Pension, Pension, • Gratuity, Gratuity, • Fees, Fees, • Commission, Commission, • Perquisites, Perquisites, • Leave encashment, Leave encashment, • Arrears of salary Arrears of salary • others.others.

What is salaryWhat is salary ? ?• Any salary, bonus, commission

or remuneration, by whatever name called, due to, or received by, a partner of a firm from the firm shall not be regarded as “Salary”.

Allowances which are Fully Allowances which are Fully exempted in case of Certain exempted in case of Certain

PersonPersonIndian Citizen – Govt. Servant Indian Citizen – Govt. Servant

Working Outside IndiaWorking Outside IndiaSC and HC JudgeSC and HC JudgeUNO EmployeesUNO EmployeesChairman, Member or Retired Chairman, Member or Retired

Member of UPSC [10(45)]Member of UPSC [10(45)]

HOUSE RENT HOUSE RENT ALLOWANCE ALLOWANCE u/s.10(13A)u/s.10(13A)

• The least of the following exemptedThe least of the following exempted• Actual HRA receivedActual HRA received• Rent paid in excess of 10% of salaryRent paid in excess of 10% of salary• 50% of salary in 50% of salary in metro citiesmetro cities• 40% in other places.40% in other places.

• For this purpose “Salary” includes For this purpose “Salary” includes dearness allowance if terms of dearness allowance if terms of employment so provideemployment so provide

House Rent House Rent AllowanceAllowance

• The disbursing authorities should satisfy themselves in this regard by insisting on production of evidence of actual payment of rent.

• It has been decided as an administrative measure that salaried employees drawing house rent allowance up to Rs. 3,000 per month will be exempted from production of rent receipt. [Cir. 9/2003, dt. 18/11/03]

Allowances exempt, amount Allowances exempt, amount received or limit specified, received or limit specified,

which ever is lesswhich ever is less1.1. Children Education Allowance : Exempt up to Children Education Allowance : Exempt up to

actual amount received per child or Rs.100 p.m. actual amount received per child or Rs.100 p.m. per child up to maximum of two children, which per child up to maximum of two children, which ever is less.ever is less.

2.2. Transport Allowance : Exempt to the extent of Transport Allowance : Exempt to the extent of Rs.800 p.m.Rs.800 p.m.

3.3. Washing Allowance : Exempt to the extent of Washing Allowance : Exempt to the extent of actual expenditure.actual expenditure.

S.10 – Incomes which do not S.10 – Incomes which do not form part of total income.form part of total income.

These payments will not be part of salary subject These payments will not be part of salary subject to limits prescribedto limits prescribed

• LTC (Sec. 10(5))LTC (Sec. 10(5))• The exemption is allowed only in respect of fare The exemption is allowed only in respect of fare

only.only.• Gratuity (Sec. 10(10))Gratuity (Sec. 10(10))• Commuted value of pension (Sec. 10(10A))Commuted value of pension (Sec. 10(10A))• Leave encashment at the time of retirement (Sec. Leave encashment at the time of retirement (Sec.

10(10AA))10(10AA))• Provident fund receipts and RPF receipts (Sec. Provident fund receipts and RPF receipts (Sec.

10(11) & 10(12))10(11) & 10(12))

LTCLTCLTA tax exemption can be claimed twice in block of

4 years01-Jan-2006 – 31-Dec-200901-Jan-2010 – 31-Dec-2013 01-Jan-2014 – 31-Dec-2017

Amt spent on self, spouse, children (maximum of two children), parent, brother, sister, and dependent.

Travel within India via rail, air, road through shortest route

lodging, boarding, food, cab fare, auto fare, driver tip/allowance.

GratuityGratuity• Death Cum Retirement Gratuity Death Cum Retirement Gratuity

received by the Central Govt./State received by the Central Govt./State Govt. /Local Authorities - EXEMPTGovt. /Local Authorities - EXEMPT

• Covered by gratuity Act, 1972 least of Covered by gratuity Act, 1972 least of the following is exempted.the following is exempted.1.1. Actual amount received.Actual amount received.2.2. 15 days salary (based on last drawn 15 days salary (based on last drawn

salary) for each year of completed salary) for each year of completed service - (i.e. 15 days Salary x Length of service - (i.e. 15 days Salary x Length of Service)Service)

3.3. Rs.10,00,000/-.Rs.10,00,000/-.

• Central Govt / State Govt EmployeesCentral Govt / State Govt Employees – – ExemptExempt

• Other EmployeesOther Employees – – • Earned Leave received During the Tenure of

Service -Fully Taxable• Earned Leave received on Retirement

or Superannuation • Least of the Following will be Deducted

• Amount Actually Received• Rs. 3,00,000/-• Average Salary x 10• (Maximum 30 Days for each

completed year of Service minus Leave Available ) x Average Salary

EL Encashment

• Tax on employment (professional tax) Tax on employment (professional tax) paid is allowable as deduction from paid is allowable as deduction from salary. (max:- 2,500/- P.A)salary. (max:- 2,500/- P.A)

• Entertainment Allowance : This Entertainment Allowance : This deduction is allowed only to a deduction is allowed only to a Government employee to the least of Government employee to the least of following.following.•Actual amount received.Actual amount received.•20% of salary exclusive of any allowance.20% of salary exclusive of any allowance.•Rs.5000.Rs.5000.

Deduction under section 16

Deduction on income fromDeduction on income fromHouse propertyHouse property

• interest up to a maximum limit of interest up to a maximum limit of Rs. Rs. 1,50,0001,50,000 is allowed is allowed o Loan taken on or after 1-4-1999 Loan taken on or after 1-4-1999 o for constructing/acquiring the residential. for constructing/acquiring the residential.

house and house and o completed within three years from the end completed within three years from the end

of the financial year in which capital was of the financial year in which capital was borrowed. borrowed.

o No limits for the let out propertyNo limits for the let out propertyo Only one property is eligible for deductionOnly one property is eligible for deduction

Section 80EE Section 80EE Deduction for interest on loan Deduction for interest on loan

on Residential Houseon Residential HouseInserted wide FY 2013-14Inserted wide FY 2013-14Deduction upto Rs.1,00,000Deduction upto Rs.1,00,000

Loan taken during FY 2013-14Loan taken during FY 2013-14Loan Amount does not Exceed 25 LacsLoan Amount does not Exceed 25 LacsValue or Residential Property does not Value or Residential Property does not

Exceed 40 LacsExceed 40 Lacs

Deductions under chapter VIADeductions under chapter VIA –u/s.80C,80CC &80CCD–u/s.80C,80CC &80CCD

• The following investments are eligible for The following investments are eligible for deduction:deduction:

• Life Insurance Premium, Statutory Life Insurance Premium, Statutory Provident Fund, RPF, PPF, NSC, ULIP, Provident Fund, RPF, PPF, NSC, ULIP, Notified Units of Mutual Fund, Re-payment Notified Units of Mutual Fund, Re-payment of housing loan, Tuition Fee paid, fixed of housing loan, Tuition Fee paid, fixed deposit for 5 years or more with a deposit for 5 years or more with a scheduled Bank, Senior Citizen Saving scheduled Bank, Senior Citizen Saving Scheme, five year time deposit scheme in Scheme, five year time deposit scheme in Post Office etc.Post Office etc.

Microsoft Word 97 - 2003 Document

Deductions Deductions u/s.80C,80CC&80CCDu/s.80C,80CC&80CCD

• Amount of deduction allowable; gross qualifying amount or Rs.1,00,000 which ever is lower.

Deduction u/s.80DDeduction u/s.80D

• Medical insurance premium (Med claim Policy) paid: On the health of taxpayer, spouse, parents and dependent children

• The premium can be paid by any mode other than cash.

Deduction u/s.80DDeduction u/s.80D

• Amount of deduction Rs.15,000 –

• additional deduction Rs.5,000 is allowed if the policy is taken on the health of senior citizen.

• Preventive Medical Check up Rs. 5,000 from 2012-13

• Deduction in respect of maintenance Deduction in respect of maintenance including medical treatment of a including medical treatment of a handicapped dependent :handicapped dependent :

• Furnish a certificate issued by the Furnish a certificate issued by the medical authority in form No.10-IA.medical authority in form No.10-IA.

• Amount of deduction Rs.50,000 is Amount of deduction Rs.50,000 is allowed.allowed.

• In case severe disability - Rs.1,00,000 In case severe disability - Rs.1,00,000 is allowed.is allowed.

• The person claiming deduction under The person claiming deduction under this section, he should not claim any this section, he should not claim any deduction under section 80U.deduction under section 80U.

Deduction u/s.80DD

Deduction Deduction u/s.80DDBu/s.80DDB

• Medical treatment of dependent or self Medical treatment of dependent or self for specified disease/ailment.for specified disease/ailment.

• Amount of deduction Rs.40,000: if the Amount of deduction Rs.40,000: if the person is a senior citizen Rs.60,000 is person is a senior citizen Rs.60,000 is allowed.allowed.

• This deduction is not This deduction is not allowable by the employer.allowable by the employer.

Deductions -u/s.80EDeductions -u/s.80E• Payment of Payment of interestinterest on loan taken for higher on loan taken for higher

education: spouse or childreneducation: spouse or children• The loan has to be taken from any financial The loan has to be taken from any financial

institution or approved charitable institution.institution or approved charitable institution.• The deduction is available for a maximum of The deduction is available for a maximum of

8 years8 years

Deductions -u/s.80GDeductions -u/s.80G• Deduction in respect of donations to certain Deduction in respect of donations to certain

funds, charitable institutions etc.funds, charitable institutions etc.• Deduction can be allowed by the employer Deduction can be allowed by the employer

only in respect of donations made to Prime only in respect of donations made to Prime Minister Relief Fund, Chief Ministers Relief Minister Relief Fund, Chief Ministers Relief Fund, Earthquake Fund, Fund, Earthquake Fund, National Childern National Childern FundFund, , etc.etc.

• ·· In respect of donations to In respect of donations to charitable institutions, charitable institutions, deductions cannot be deductions cannot be allowed by the employerallowed by the employer. .

Deductions Deductions -u/s.80GG-u/s.80GG

• Deduction in respect of rent paid Deduction in respect of rent paid • The assessee should not be receipt of HRA The assessee should not be receipt of HRA

and he should not own any houseand he should not own any house• The least of the following amount is The least of the following amount is

exemptedexempted• Rent paid in excess of 10% of total income Rent paid in excess of 10% of total income

before allowing deduction under this section.before allowing deduction under this section.• Rs.2000 per month.Rs.2000 per month.• 25% of total income before allowing deduction 25% of total income before allowing deduction

under this sectionunder this section

Rajeev Gandhi Equity Saving Rajeev Gandhi Equity Saving Scheme – 80CCGScheme – 80CCG

Total Income does not Exceed 12 Total Income does not Exceed 12 LacsLacs

Investment – 50,000 (Max.)Investment – 50,000 (Max.)Deduction – 50% of Investment.Deduction – 50% of Investment.For 3 Consecutive Years.For 3 Consecutive Years.Lock-in Period – 3 Years.Lock-in Period – 3 Years.Over & above Deduction of Over & above Deduction of

1,00,000/- under 80C1,00,000/- under 80C

Deduction-u/Deduction-u/s.80GGCs.80GGC

• Any amount of contribution made Any amount of contribution made by a person to a political party or by a person to a political party or an electoral trust is deductible.an electoral trust is deductible.

• This deduction is not This deduction is not allowable by the employer.allowable by the employer.

Deductions under Deductions under Chapter VI A-u/s.80UChapter VI A-u/s.80U

• Deduction in case of a person with Deduction in case of a person with disability: blindness, low vision, leprosy, disability: blindness, low vision, leprosy, hearing impairment, mental retardation hearing impairment, mental retardation and mental illness. and mental illness.

• Conditions: Furnish a certificate issued Conditions: Furnish a certificate issued by the medical authority in form No.10-by the medical authority in form No.10-IA.IA.

• Amount of deduction (fixed)Rs.50,000 is Amount of deduction (fixed)Rs.50,000 is allowed. In case severe disability -allowed. In case severe disability -Rs.1,00,000 is allowed.Rs.1,00,000 is allowed.

• Relief is available when salary is Relief is available when salary is received in arrears or advance.received in arrears or advance.

• Application in Form-10E has to Application in Form-10E has to be obtained from the employee.be obtained from the employee.

• Form 10E is required to allow Form 10E is required to allow claim of relief u/s. 89(1)claim of relief u/s. 89(1)

Relief u/s.89(1)

Tax on Provident Funds & various exemptions

Particulars SPF/PPF RPF URPF

Employer's Contribution to the Fund

Not Taxable

Tax on Provident Funds is exempt to the extent of 12% of Salary (refer note 1 below)

Not Taxable in the year of Contribution

Employee's Contribution to the Fund

Deduction under section 80C available

Deduction under section 80C available No Benefit Available

Interest Credited to the Fund Exempt Exempt up to 9.5%

rate of Interest Not Taxable at the time of Credit

Lumpsum amount withdrawn from the Fund

Exempt under section 10(11)

Exempt under section 10(12) subject to :Completed 5 Years

Employer : TaxableEmployee: Exempt

• If the House Property is transferred If the House Property is transferred before expiry of five years no before expiry of five years no deduction in the year of transfer deduction in the year of transfer and earlier deductions allowed will and earlier deductions allowed will become income in the year of become income in the year of transfer .transfer .

• No deductions u/s. 80C for the No deductions u/s. 80C for the repayment of principal amount if repayment of principal amount if the loan is taken from the private the loan is taken from the private persons and also not for persons and also not for commercial properties.commercial properties.

Points to Ponder

?

Thank youThank you