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INCOME UNDER THE HEAD SALARIES -2
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Red face INCOME UNDER THE HEAD SALARIES -2 - January 4th, 2008

INCOME UNDER THE HEAD
SALARIES - II

STRUCTURE
5.0 Introduction
5.1 Objectives
5.2 Incomes forming part of Salary - II
5.2.1. Taxable value of perquisites
5.2.2. Retirement Benefits
5.3 Deductions from Gross Salary
5.4 Computation of income from Salary
5.5 Let us Sum up
5.6 Glossary
5.7 Self assessment questions
5.8 Sources and further readings
5.0 INTRODUCTION
We have learnt till now that all incomes of an assessee are classified into 5
categories namely salaries, house property, capital gains, business or profession
and other sources. An income covered under a particular category will be taxed
under separate head of income pertaining to that category. Hence, it is very
important to know which incomes are covered in each head and the detailed
income tax provisions to calculate taxable income.
In the previous lesson, we have learnt about the concept of salary income, its
characteristics and three incomes forming part of salary, namely, basic salary,
fees, commission, bonus and allowances. The present lesson describes in detail
the other two components of salary income, namely, perquisites and retirement
benefits along with the procedure of computation of income under this head.
5.1 OBJECTIVES
After reading this lesson, you should be able to understand:
• Concept of perquisites
• Classification of perquisites for their tax treatment
• Valuation of perquisites
• Various kinds of retirement benefits along with their tax provisions
45
• Procedure for computation of net income under the head “Salaries”
5.2 INCOMES FORMING PART OF SALARY - II
As already stated earlier, Section 17 broadly includes:
1. Basic salary
2. Fees, commission and bonus
3. Taxable value of cash allowances
4. Taxable value of perquisites
5. Retirement benefits
First three incomes are already explained in detail in the previous lesson. The
other two incomes are explained here.
5.2.1 TAXABLE VALUE OF PERQUISITES
Perquisites are defined as any casual emolument or benefit attached to an office or
position in addition to salary or wages. It denotes some thing that benefits a man
by going into his pocket; it does not cover mere reimbursement of necessary
disbursements. Such benefits are normally given in kind but should be capable of
being measurable in money terms. Perquisites are taxable and included in gross
salary only if they are (i) allowed by an employer to an employee, (ii) Allowed
during the continuation of employment, (iii) directly dependent on service, (iv)
resulting in the nature of personal advantage to the employee and (v) derived by
virtue of employers authority.
As per Section 17 (2) of the Act, perquisites include:
1. Value of rent free accommodation provided to the employee by the
employer.
2. Value of concession in the matter of rent in respect of accommodation
provided to the employee by his employer.
3. Value of any benefit or amenity granted free of cost or at a concessional
rate in any of the following cases:
a) by a company to an employee who is a director thereof
b) 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 has
substantial interest in the company, but his monetary emoluments under
the head ‘Salaries’ exceeds Rs.50, 000.
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 of
assessee.
46
6. The value of any other fringe benefit given to the employee as may be
prescribed.
I. CLASSIFICATION OF PERQUISITES
For tax purposes, perquisites specified under Section 17 (2) of the Act may be
classified as follows:
(1) Perquisites that are taxable in case of every employee, whether specified
or not
(2) Perquisites that are taxable in case of specified employees only.
(3) Perquisites that are exempt from tax for all employees
(1) Perquisites Taxable in case of All Employees
The following perquisites are taxable in case of every employee, whether
specified or not:
1. Rent free house provided by employer
2. House provided at concessional rate
3. Any obligation of employee discharged by employer e.g. payment of club
or hotel bills of employee, salary to domestic servants engaged by
employee, payment of school fees of employees’ children etc.
4. Any sum paid by employer in respect of insurance premia on the life of
employee
5. Notified fringe benefits (on which fringe benefit tax is not applicable) – it
includes interest free or concessional loans to employees, use of movable
assets, transfer of moveable assets.
(2) Perquisites taxable in case of Specified Employees only
The following perquisites are taxable in case of such employees:
1. Free supply of gas, electricity or water supply for household consumption
2. Free or concessional educational facilities to the members of employees
household
3. Free or concessional transport facilities
4. Sweeper, watchman, gardener and personal attendant
5. Any other benefit or amenity
Specified employee is an employee who is either a director or has substantial
interest in the company where he is employed or is drawing monetary salary of
more than Rs.50, 000 during the previous year.
(3) Perquisites which are tax free for all the employees
47
This category includes perquisites which are tax free for the employees and also
other perquisites on which employer has to pay a tax (called Fringe Benefit Tax)
if they are given to the employees and so are not taxable for them.
1. Medical benefits (provided within or out of India) subject to limits.
2. Value of Leave Travel Concession in India.
3. Free meals provided to the employees during working hours.
4. Amount spent by the employer as its contribution to staff welfare schemes.
5. Laptops and computers provided for personal use.
6. Rent free official accommodation provided to a Judge of High Court or
Supreme Court or an official of Parliament including Minister and Leader
of Opposition in Parliament.
7. Health Insurance Premium of employee or member of household paid by
the employer.
8. All such facilities (like motor car, lunch refreshments, travelling, touring,
gift, credit cards, club etc.) provided by employer on which employer has
to pay Fringe Benefit Tax.
With effect from Assessment Year 2006-07, a Fringe Benefit Tax has been
introduced, where companies giving certain fringe benefits to its employees are
required to pay Fringe Benefit Tax on the expenditure incurred for the same.
Hence, these benefits are tax free for the employees.
II. VALUATION OF PERQUISITES
The perquisites which are taxable in the hands of employees are valued in
accordance with the provisions laid down under the Income Tax Rule 3. These
benefits can be provided to the employee or member of his household.
Member of household shall include:
(1) Spouse (2) Children and their spouses (3) Parents (4) Servants and
dependents
(i) Valuation of rent free accommodation
For the purpose of valuation of house, employees are divided into 2 categories:
a) Central and State Government employees: If accommodation is provided
by the State or Central Government to their employees, the value of such
accommodation is simply the amount fixed by the government (called the licence
fees) in this regard.
Illustration 5.1:
Mr X, a Senior Officer in Delhi administration draws Rs.20, 000 per month as
basic salary. The government has provided him with a rent free unfurnished flat
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whose market rent is Rs.3000 per month, though as per government rules, its
licence fees is fixed at Rs.700 per month. Determine the value of perquisite in
respect of rent free accommodation.
Solution:
In a case of government employee, the value of rent free accommodation is Rs.8,
400 (Rs.700 x 12) i.e. the licence fees fixed by the government.
b) Other Employees
The valuation of accommodation for this category of non government employees
depends upon whether the accommodation given to the employee is owned by the
employer or taken on lease.
1. Accommodation owned by employer
The value of accommodation is:
(i) 20% of salary in cities having population exceeding four lakhs as per 1991
census.
(ii) 15% of salary in other cities in respect of the period for which the
accommodation was occupied by the employee during the previous year.
2. Accommodation is taken on lease / rent by the employer
The value of such accommodation is actual amount of lease rental paid or payable
by the employer or 20% of salary, whichever is lower.
Definition of salary for rent free accommodation: Basic Salary + Taxable cash
allowances + Bonus or Commission + any other monetary payment.
(It does not include dearness allowance if it is not forming part of basic salary for
retirement benefit, allowances which are exempt from tax, value of perquisites
specified under Section 17(2), employer’s contribution to provident fund account
of employees).
(ii) Valuation of furnished accommodation where the accommodation is
furnished, 10% per annum of the original cost of furniture given to the employee
shall be added to the value of unfurnished accommodation. If the furniture is
taken on rent by employer, then actual hire charges are to be added to the value.
Rules for valuation of Rent free unfurnished Accommodation:
Nature of Accommodation Accommodation in a
city with population > 4
lakhs
Accommodation in
any other place
Where accommodation is
owned by employer
20% of salary 15% of salary
Accommodation taken on
lease / rent by employer
Amount of lease or 20%
of salary whichever is
less
Amount of lease or
20% of salary
whichever is less
49
Illustration 5.2
Mrs. X, a company employee gets Rs.1,20,000 as basic pay, Rs.24,000 as
Commission, Rs.10,000 as Bonus, Rs.6000 as uniform allowance (60% utilized
for uniform), Rs.3,600 as education allowance and Rs.12,000 as transport
allowance. Her employer has paid income tax of Rs.6000 and professional tax of
Rs.2000 on her behalf. A rent free unfurnished flat is provided in a place where
population is a) more than 4 lakhs or b) less than 4 lakhs. Determine the
taxable value of rent free flat.
Solution
Salary for this purpose:
Amount / Rs.
Basic Salary 1,20,000
Commission 24,000
Bonus 10,000
Uniform allowance (40% of Rs.6000) 2,400
Transport allowance (Rs.12000 – Amount
exempt Rs.800 x 12)
2,400
Education allowance (Rs.3600 – amount
exempt Rs.100 x 12 x 2)
1,200
Salary 1,60,000
a) Where population is more than 4 lakhs
Value of rent free house = 20% of salary
= 20% of Rs.1, 60,000
= Rs.32, 000
b) Where population is less than 4 lakhs
Value of rent free flat = 15% of salary
= 15% of Rs.1, 60,000
= Rs.24, 000
(iii) Sweeper, gardener or watchman provided by the employer
The value of benefit of provision of services of sweeper, watchman, gardener or
personal attendant to the employee or any member of his household shall be the
actual cost to the employer. The actual cost in such a case is the total amount of
salary paid or payable by the employer or any other person on his behalf for such
services as reduced by any amount paid by the employee for such services.
If the above servants are engaged by the employer and facility of such servants
are provided to the employees, it will be a perquisite for specified employees
only. On the other hand, if these servants are employed by the employee and
wages of such servants are paid / reimbursed by the employer, it will be taxable
perquisite for all classes of employees.
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(iv) Free Supply of Gas, Electricity or Water
The value of these benefits is taxable in the hands of specified employees, if the
connection is taken in the name of the employer, and is determined according to
the following rules:
a) If the employer provides the supply of gas, electricity, and water from its
own sources, the manufacturing cost per unit incurred by the employer
shall be the value of perquisite.
b) If the supply is from any other outside agency, the value of perquisite shall
be the amount paid by the employer to the agency supplying these
facilities.
c) Where the employee is paying any amount in respect of such services, the
amount so paid shall be deducted from the value of perquisite calculated
under (a) or (b).
d) Where the connection for gas, electricity, water supply is in the name of
employee and the bills are paid or reimbursed by the employer, it is an
obligation of the employee discharged by the employer. Such payment is
taxable in case of all employees under Section 17 (2) (iv).
(v) Free Education
a) Cost of free education to any member of employees’ family provided in an
educational institution owned and maintained by the employer shall be
determined with reference to reasonable cost of such education in a similar
institution in a near by locality. For education facilities provided to the
children of employee (excluding any other member of house hold), the
value shall be nil, if the cost of such education per child does not exceed
Rs.1, 000 per month.
b) Where free education facilities are allowed to any member of employees’
family in any other educational institution by reason of his being in
employment of that employer, the value of perquisite shall be determined
as in (a).
c) In any other case: The value of benefit of providing free or concessional
educational facilities for any member of the house hold (including
children) of the employee shall be the amount of expenditure incurred by
the employer.
d) While calculating the amount of perquisite in all in above cases, any
amount paid or recovered from the employee in this connection, shall be
deducted.
(vi) Free Transport
The value of any benefit provided by any undertaking engaged in the carriage of
passengers or goods to any employee or to any member of his household for
private journey free of cost or at concessional rate in any conveyance owned or
leased by it shall be taken to be the value at which such benefit is offered by such
undertaking to the public as reduced by the amount, if any, paid by or recovered
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from the employee for such benefit. In case of employees of the Railways and
airlines, the value of transport facility shall be exempt.
(vii) Valuation of Medical Facilities
Medical facilities provided to employee are exempt from tax.
A. Medical benefits within India which are exempt from tax include the
following:
a) Medical treatment provided to an employee or any member of his family
in hospital maintained by the employer.
b) Any sum paid by the employer in respect of any expenditure incurred by
the employee on medical treatment of himself and members of his family :
(i) in a hospital maintained by government or local authority or approved by
the government for medical treatment of its employees.
(ii) In respect of the prescribed diseases or ailments in any hospital approved
by the Chief Commissioner.
(iii) Premium paid by the employer on health insurance of the employee under
an approved scheme.
c) Premium on insurance of health of an employee or his family members
paid by employer.
Limited Exemption: If the ordinary medical treatment of the employee or
any member of his family is done at any private hospital, nursing home or
clinic, the exemption is restricted to Rs.15, 000.
B. Medical Treatment outside India which is exempt from tax includes the
following:
a) Any expenditure incurred by employer on the medical treatment of the
employee or any member of his family outside India.
b) Any expenditure incurred by employer on travel and stay abroad of the
patient (employee or member of his family) and one attendant who
accompanies the patient in connection with such treatment, shall be
exempt to the following extent :
(i) The expenditure on medical treatment and stay abroad shall be exempt to
the extent permitted by the Reserve Bank of India.
(ii) The expenditure on travel shall be exempt in full provided the gross total
income of the employee (including this expenditure) does not exceed Rs.2,
00,000.
Illustration 5.3 (based on perquisites received by employee)
Mr. X is a Purchase Officer in a Company in Kota. He has furnished the
following particulars of his incomes to you for the previous year 2005-06. You
are required to compute his gross salary.
Rupees
52
Salary @ Rs.12500 per month 1,50,000
Leave Travel Concession for proceeding on leave (total
expenditure on rail fare Rs.4100)
3,800
Tiffen Allowance (actual expenditure Rs.2700) 4,000
Reimbursement of medical expenses for treatment of X
and his family in private clinic
31,300
Besides, he enjoys the following perks:
• Free unfurnished flat at Delhi (rent paid by
employer : Rs.80,000)
• The employer provided two watchmen (salary
Rs.700 per month each).
• Free use of Maruti car for official use, car can be
used for journey between office and residence and
other private purposes (log book of car is not
maintained).
• Free meal at place of works (Rs.70 per day for 210
days) Rs.14, 700.
Solution:
Computation of Income under the head salaries of Mr. X for AY 2006-07
Particulars Rupees
Basic Salary 1,50,000
Leave Travel Concession (exempted from tax) -
Tiffin Allowance (fully taxable) 4,000
Reimbursement of medical expenses (Rs.31,300 –
Rs.15,000)
16,300
Rent free unfurnished flat* 30,800
Two watchmen (Rs.700x2) 16,800
Free use of Maruti car Nil
Free meals Nil
Gross Salary 2,17,900
* Salary for rent free unfurnished flat is 1, 54,000 (1, 50,000+4,000)
Value of rent free house is 20% of salary or rent paid by employer, whichever is
lower (20% of 1, 54,000=30,800)
CHECK YOUR PROGRESS
53
Activity A:
Discuss the tax treatment of the following perquisites in case of specified and non
specified employees:
Nature of Perquisites Is perquisite taxable if
Specified
Employee
Non
specified
Employee
Rent free furnished or unfurnished
Services of sweeper, watchman, gardener,
personal attendant provided to employee
Domestic servants’ salary reimbursed to
employee
Leave Travel Salary reimbursed to employee
Education facility provided to employee’s
children
Gas, electricity, water supply bills of employee
reimbursed by employer
Use of laptop and computers to employees
Medical facilities provided to employee in
employer’s hospital
Health insurance premium of employee and
family paid by employer
Free refreshments to employee
Motor car facility provided to employee
Transport facility provided to employee
Club facility provided to employee
Interest free loan provided to employee for
purchasing car
Telephone bills reimbursed by employee
Activity B:
“It is generally said that non specified employees pay less tax as compared to
specified employees”. Do you agree?
__________________________________________________ ________________
__________________________________________________ ________________
__________________________________________________ ________________
__________________________________________________ ________________
__________________________________________________ ________________
54
5.2.2 RETIREMENT BENEFITS
These benefits are provided by the employer to the employee for his future, either
while in service or on his retirement. These have different tax treatment. They
include:
a) Pension
Pension is a payment made by the employer after the retirement or death of
employee as a reward for past service. It is normally paid as a periodical payment
on monthly basis but certain employers may allow an employee to forgo a portion
of pension in lieu of lumpsum amount. This is known as commutation of pension.
The treatment of these two kinds of pension is as under:
(i) Periodical pension (or uncommuted pension).
It is fully taxable in the hands of all employee, whereas government or nongovernment.
(ii) Commuted pension
For employees of government organisations, local authorities and statutory
corporations, it is fully exempted from tax, hence not included in gross salary.
For other employees, commuted value of half of the total value of pension is
exempted from tax. Any amount received over and above this amount is taxable,
so included in gross salary.
If, however, the employee is also receiving gratuity (another retirement benefit)
along with pension, then one third of the total value of pension is exempted from
tax. Amount received in excess of this is taxable, so included in gross salary.
Pension received by employee is taxable under the head “Salaries”. However,
family pension received by legal heirs after death of employee is taxable under
‘Income from other sources’.
b) Gratuity
Gratuity is the payment made by the employer to an employee in appreciation of
past services rendered by the employee. It is received by the employee on his
retirement. Gratuity is exempted upto certain limit depending upon the category
of employee. For the purpose of exemption, employees are divided into 3
categories:
(i) Government employees and employees of local authority:
In case of such employees, the entire amount of gratuity received by then is
exempted from tax. Nothing will be added to gross salary.
(ii) Employees covered under Payment of Gratuity Act, 1972.
55
In case of employees who are covered under Payment of Gratuity Act, the
minimum of the following amounts are exempted from tax:
• Amount of gratuity actually received
• 15 days of salary for every completed years of service or part thereof in
excess of six months.
(15 / 26 x [basic salary + Dearness Allowance] x No. of years of service+1
[if fraction > 6 months]).
• Rs.3, 50,000 (amount specified by government).
(iii) Other employees.
In case of employees not falling in the above two categories, gratuity received
from the employers is exempt to the extent of minimum of following amounts:
• Actual amount of gratuity received.
• Half month average salary for every completed year of service
(1/2 x average salary of last 10 months x completed years of service).
• Rs.3, 50,000 (amount specified by government).
c) Leave Salary
Employees are entitled to various types of leave. The leave generally can be taken
(casual leave/medical leave) or it lapses. Earned leave is a kind of leave which an
employee is said to have earned every year after working for some time. This
leave can either be availed every year, or get encashment for it. If leave is not
availed or encashed, it is allowed to be carried forward. This leave keeps getting
accumulated and is encashed by employee on his retirement. The tax treatment of
leave encashment is as under:
(i) Encashment of leave while in service. This is fully taxable and so is added
to gross salary.
(ii) Encashment of leave on retirement. For the purpose of exemption of
accumulated leave encashment, the employees are divided into two
categories:
• State or Central Government employees.
Leave encashment received by government employees is fully exempted
from tax. Nothing is to be included in gross salary.
• Other employees
Leave encashment of accumulated leave at the time of retirement received
by other employees is exempted to the extent of minimum of four
amounts.
- Amount specified by Central Government (3, 00,000).
- Leave encashment actually received.
- 10 months average salary (10 x average salary of 10 months preceeding
retirement).
56
Cash equivalent of unavailed leave.
 (Leave entitlement is calculated on the basis of maximum 30 days leave
every year, cash equivalent is based on average salary of last 10 months).
d) Provident Fund
Provident Fund Scheme is a welfare scheme for the benefit of employees. Under
this scheme, certain amount is deducted by the employer from the employee’s
salary as his contribution to Provident Fund every month. The employer also
contributes certain percentage of the salary of the employee to the Fund. The
contributions are invested outside in securities. The interest earned on it is also
credited to the Provident Fund Account. At the time of retirement, the
accumulated balance is given to the employee.
Tax treatment of provident fund depends upon the type of provident fund being
maintained by the employer. Employee’s provident fund may be of the following
3 types:
(i) Statutory Provident Fund
This is set up under the provisions of Provident Fund Act, 1925 and is maintained
by Government and Semi-Government organisations, local authorities, railways,
universities and recognised educational institutions.
(ii) Recognised Provident Fund
This is set up under the Employee’s Provident Fund and Miscellaneous Provisions
Act, 1952 (PF Act, 1952) and is maintained by private sector employees. The
establishments covered under PF Act, 1952 have two options; either to follow the
same scheme at by the Government under the PF Act or draft their own scheme of
PF but get recognition from Commissioner of Income Tax.
(iii) Unrecognized Provident Fund
If a provident fund is not recognized by the Commissioner of Income Tax, it is
known as unrecognized PF.
Besides these 3 funds, a person can also become a member of Public Provident
Fund.
(iv) Public Provident Fund
The Central Government has established the Public Provident Fund for the
benefits of general public to mobilize personal savings. Any member of general
public (whether salaried or self employed) can participate in this fund by opening
a Provident Fund Account at the State Bank of India or its subsidiaries or other
nationalised banks. A salaried employee can simultaneously become member of
employees provident fund (whether statutory, recognized or unreconised) and
public provident fund. Any amount may be deposited (subject to minimum of
57
Rs.500 and maximum of Rs.70, 000 per annum) under this account. The
accumulated sum is repayable after 15 years. At present, it carries an interest rate
of 8% per annum which is credited every year but payable only the time of
maturity.
Tax treatment of these provident funds (i.e. the exemption and deduction
available in respect of contributions to and payment from these funds) is
summarised as follows:
S.
No.
Particulars Statutory PF Recognised
PF
Unrecognised PF Public
PF
1. Employees
Contribution
to PF
Exempted
from tax
Exempted
upto 12% of
salary
excess of
employer’s
contribution
in included
in gross
salary
Exempted from tax Employer
does not
contribute
2. Deduction
under Section
80C on
employee’s
contribution
Available Available Not available Available
3. Interest
credited to PF
Exempted
from tax
Exemption
upto notified
rate (9.50%)
per annum)
Excess of
interest
included in
gross salary
Exempted from tax
Exempted
from tax
4. Lump sum
payment given
to employee
on retirement
Exempted
from tax
Exempted
from tax (if
rendered
continuous
service of
more than 5
years
Lumpsum includes :
a) Own
Contribution- Exempt
b) Interest on own
contribution - taxable as
income from other
sources
c)Employer’s contribution
and interest thereontaxable
so included in
gross salary
Exempted
from Tax
• Salary here means basic salary + dearness allowance / dearness pay (if
terms of employment provide) + commission (if fixed as percentage of
turnover achieved by employee).
CHECK YOUR PROGRESS
58
Activity C:
What are different kinds of Provident Funds of which a salaried person can be a
member? Can he be a member of two Provident Funds simultaneously?
__________________________________________________ ________________
__________________________________________________ ________________
__________________________________________________ ________________
__________________________________________________ ________________
__________________________________________________ ________________
Activity D:
Classify these key words into the following three categories of salary.
Dearness allowance, medical facility, uniform allowance, gratuity, leave travel
concession, overtime allowance, pension, free transport, servant allowance, gas,
electricity, water supply facility, provident fund, education facility, hostel
allowance, rent free house, telephone reimbursement.
1. Cash allowances ______________________________________________
__________________________________________________ __________
__________________________________________________ __________
2. Perquisites __________________________________________________
__________________________________________________ __________
__________________________________________________ __________
3. Retirement benefits__________________________________________ __
__________________________________________________ __________
__________________________________________________ __________
5.3 DEDUCTIONS FROM GROSS INCOME
The income chargeable under the head salaries is computed after making the
following deductions under Section 16:
1. Standard deduction [section 16(i)] of the Act: From assessment year 2006-
07, standard deduction has been withdrawn.
2. Entertainment Allowance [section 16(ii)] of the Act as given earlier,
entertainment allowance received from employer is first included in gross
salary and thereafter, a deduction is allowed to government employees
(State or Central Government) to the extent of least of following 3
amounts:
(i) Rs.5000
59
(ii) 20% of basic salary
(iii) Amount of Entertainment Allowance actually received during the
year.
3. Professional Tax [Section 16(iii)] of the Act.
Professional tax or tax on employment levied by a State under Article 276
of the Constitution is allowed as a deduction only in the year when it is
actually paid. If the professional tax is paid by the employer on behalf of
the employee, it is first included in gross salary as a perquisite (since it is
an obligation of employee fulfilled by employer) and then the same
amount is allowed as deduction on account of professional tax from gross
salary.
Illustration 5.4 (based on retirement benefits)
Mr. X is working in a factory in Delhi since August 1970. He gets Rs.4000 per
month as basic salary, Rs.400 per month as dearness allowance and Rs.500 per
month as house rent allowance. He resides in his own house.
On 1st January, 2005 he retires and gets Rs.40, 000 as gratuity and Rs.50, 000 as
accumulated balance from unrecognized provident fund. His own contribution
and that of factory to the fund was equal. From January 2005 onwards, he starts
getting pension of Rs.1000 per month.
Compute Net Income of Mr X for the Assessment Year 2006-07.
Solution
Computation of Net Salary of Mr. X
for the Assessment Year 2006-07
Rupees
Basic Salary (Rs.4000 x 9) 36,000
Dearness Allowance (Rs.400 x 9) 3,600
House Rent Allowance (Rs.500 x 9)
(No exemption since X resides in own house)
4,500
½ Lumsum received from unrecognized provident fund 25,000
Pension Rs.1000 x 3 3,000
Gratuity (Rs.40,000 – amount exempt Rs.68,000 NIL
Gross Salary 72,100
60
Less deductions -
Net Salary 72,100
Amount of gratuity exempt is least of following 3 amounts for other employees:
1. ½ months salary for completed years of service
(½ x 4000 x 34) = Rs.68, 000
2. Actual gratuity received (Rs.40, 000)
3. Limit by Central Government – Rs.3, 50,000
Amount exempt is Rs.68, 000; amount received is Rs.40, 000.
So, entire amount of gratuity is exempt.
CHECK YOUR PROGRESS
Activity E:
What are the differences between Public Provident Fund and Recognized
Provident Fund?
__________________________________________________ ________________
__________________________________________________ ________________
__________________________________________________ ________________
__________________________________________________ ________________
__________________________________________________ ________________
5.4 COMPUTATION OF INCOME FROM
SALARIES
61
Computation of Net Salary of Mr. X
for the Assessment Year 2006 -2007
Rupees
Particulars Amount
Basic Salary
Fees, Commission and Bonus
Taxable value of cash allowances
Taxable value of perquisites
Retirement Benefits
GROSS SALARY
Less: Deductions from Gross Salary
1. Standard Deduction
2. Entertainment allowance deduction
3. Professional tax deduction
NET SALARY
Illustration 5.5
Mr. X is a lecturer in a private college in Chennai. During the previous year
2005-06, he gets the following emoluments: Basic salary Rs.10, 000 per month,
dearness allowance: 10% of basic salary, city compensatory allowance: Rs.300
per month, children education allowance: Rs.500 per month (for 3 children),
house rent allowance: 20% of salary (rent paid Rs.2000 per month). He gets
Rs.18, 000.
a) Reimbursement from his employer in respect of medical expenditure incurred
on treatment of his wife in a private clinic. Besides, he gets Rs.11, 400 as
reimbursement from the employer in respect of books and journals purchased
by him in discharging his official work.
He contributes 11% of his salary to statutory provident fund to which a
matching contribution is made by the employer. During the year, he spends
Rs.15, 000 for maintaining a car for going to the college. Determine his net
income under the head salaries.
62
Computation of Net Salary of Mr. X
for the Assessment Year 2006 -2007
Rupees
Particulars Amount
Basic Salary (Rs.10, 000 x 12) 1, 20,000
Dearness allowance (10% of 1, 20,000) 12,000
City compensatory allowance (Rs.300 x 12) 3,600
Children education allowance (Rs.500 x 12 less
amount exempt Rs.100 x 12 x 2)
3,600
House Rent Allowance (20% of 1, 20,000 less amount
exempt Rs.12, 000)
12,000
Reimbursement of medical expenses (Rs.18, 000 -
Rs.15, 000)
3,000
Reimbursement of expenses on books (not chargeable
to tax)
-
GROSS SALARY 1, 54,200
Less Standard deduction NIL
NET SALARY 1, 54,200
Working Notes:
1. Amount of HRA exempt is least of 3 figures:
a) 50% of Salary (1, 20,000) 60,000
b) Actual HRA received (20% of 1, 20,000) 24,000
c) Rent paid in excess of 10% of Salary
2000 x 12 - 10 / 100 x 1, 20,000 12,000
Amount of HRA exempt is 12,000
2. Expenditure on maintenance of car is an application of income, not
deductible.
3. Contribution of employer towards employee’s statutory provident fund is
exempt upto 12%.
4. Reimbursement of medical expenditure by employer in private clinic is
exempt upto Rs.15, 000.
5. Children education allowance is exempt to the extent of Rs.100 per month
per child for maximum 2 children.
Illustration 5.6
Mr. X, a production manager of A Ltd. receives the following emoluments during
the previous year 2005-06.
63
Basic salary Rs.12,000 per month, bonus : Rs.12,000 per annum, commission :
Rs.6,000 per annum, entertainment allowance : Rs.4,000 per annum, A rent free
house has been provided in Bombay, Lease rent of the house : Rs.1,50,000 per
annum.
Employer has provided him free use of an optra car for official as well as personal
use. Employer spent Rs.50, 000 on car, 30% of which is attributable to personal
use. The employer pays a sum of Rs.400 on account of professional tax on behalf
of X. A Ltd. gifts a computer to X on its founder’s day (cost of computer Rs.24,
560). Employer’s contribution towards recognized provident fund Rs.18, 000 per
annum. Determine net salary of X for the Assessment year 2006-07.
Computation of Net Salary of Mr. X
for the Assessment Year 2006 -2007
Rupees
Particulars Amount
Basic Salary (Rs.12, 000 x 12) 1, 44,000
Bonus 12,000
Commission 6,000
Entertainment Allowance 4,000
Rent free house (See note 1) 33,200
Motor Car NIL
Computer gifted by employer NIL
Employer’s contribution towards recognized PF
(Rs.18, 000 - 12 / 100 x 1, 44,000)
720
Professional tax paid by employer 400
GROSS SALARY 2, 00,320
Less: Standard deduction NIL
Less: Professional tax 400
NET SALARY 1, 99,920
Working Notes:
1. Computation of value of rent free house
Rent free salary
Basic salary (1, 44,000) + bonus (12,000) + commission (6,000) +
entertainment allowance (4,000) = Rs.1, 66,000
Value of house in Bombay
20% of Rent free salary (1, 66,000) = Rs.33, 200
2. Perquisite in respect of car and gift of computer to employees are
chargeable to tax in the hands of employer under fringe benefit tax.
64
5.5 LET US SUM UP
1. Heads of Income: There are 5 heads of income into which income of
persons can be divided namely Income from salary, house property,
business or profession, capital gains and other sources.
2. Meaning of Salary: Any remuneration paid by an employer to an
employee in consideration of his services is called salaries. It includes
monetary value of those benefits and facilities which are provided by the
employer and are taxable.
3. Income forming part of salary: They include basic salary, advance salary,
fees, commission, and bonus, taxable value of cash allowances, perquisites
and retirement benefits.
4. Allowances: These are of three types
(a) Taxable Allowances: Dearness allowance, Medical allowance, Servant
allowance, Warden Allowance, Family allowance, City Compensatory
allowance etc.
(b) Allowances exempt upto specified limit: House rent allowances,
Entertainment allowance, Certain Special allowances, etc.
(c) Fully exempted allowances: Foreign allowance, sumptuary allowance to
High Court / Supreme Court Judges, Allowances from U.NO.
5. Perquisites: These are of three types:
(a) Taxable perquisites for all employees: Facility of rent-free house or house
at concessional rent, payment of employee’s obligations, payment of life
insurance premium of the employee, etc.
(b) Perquisites taxable in specified cases only: Facility of servant, gardener,
gas, electricity, water, education, etc.
(c) Tax-free perquisites: Free Medical facility or reimbursement of medical
expenses, free facility of refreshments, entertainment, telephone, family
planning, scholarship, leave travel concession, free motor car, club
facility, gifts etc.
6. Valuation of perquisites: See Rule 3 of Income Tax Rules.
7. Deductions: Following three deductions are admissible:
(a) Standard Deduction: This has been withdrawn from Assessment Year
2006-07.
65
(b) Entertainment Allowance:
(i) Government employees – 1/5th of salary or Rs.5, 000, whichever is
less.
(ii) Others - Nil
(c) Employment Tax – Full Amount
8. Provident Funds: These are of four types:
(a) Statutory provident fund
(b) Recognized provident fund
(c) Unrecognized provident fund and
(d) Public provident fund
5.6 GLOSSARY
Terms used in the lesson are as explained herein:
1. Fringe Benefits - Means any privilege, service, facility, or amenity,
directly or indirectly provided by an employer to his employee, also
includes expense made by employer in the course of business on
entertainment , hospitality, conferences, sales promotion, etc.
2. Encashment of Leave – Getting cash equivalent of leave which is not availed
by an employee based on his salary.
3. Carried Forward – In context of earned leave, this means it can be taken
over to next year if not availed during the year.
4. Substantial interest – a person who holds 20% or more of shares / voting
power in a company is considered as having substantial interest in that
Company.
5.7 SELF ASSESSMENT QUESTIONS
1. Mrs. X (Age: 29 years) is a part time lecturer in Delhi University. The
details of her salary income are as follows:
Rupees
Basic Salary 60,000
Dearness Allowance 2,400
Education Allowance for 2 children 3,600
Hostel expenditure allowance for one child 6,080
House Rent Allowance
(Rent paid by Mrs. X is Rs.900 per month)
8,000
66
She is a member of statutory Provident Fund to which she contributes 12%
of her salary and similar amount is contributed by the College. Besides,
College reimburses Rs.21, 600 being expenditure incurred by Mrs. X on
medical treatment of her daughter in a private clinic. She spent Rs.700 on
purchase of books for teaching purpose. She has maintained a scooter for
commuting to College and spends Rs.500 per month on it. Compute net
salary of Mrs. X for assessment year 2006-07.
Ans. Net income from salary = Rs.77, 080
Hints: (1) Medical expenditure incurred in private hospital is exempt upto Rs.15,
000
(2) HRA taxable is Rs.4, 400
(3) No deduction is given for expenses incurred in earning salary
income
2. Mr. X receives the following incomes during the year ending on 31st
March, 2006
Rupees
Salary @ Rs.12,500 per month 1,50,000
Leave Travel Concession for proceeding on Leave
(actual expenditure Rs.4,100)
3,800
Tiffin allowance (actual expenditure Rs.2,700) 4,000
Reimbursement of medical expenses of X and his family
in private clinic
31,300
Besides, X enjoys the following perks:
Free unfurnished flat in Delhi (rent paid by the employer Rs.80, 000)
The employer provides a watchman and a gardener / salary paid to both
@Rs.7, 000 per month)
Free use of Maruti Car for private and official purposes. Expenditure
incurred by employer Rs.30, 000
Free meal at place of work: Rs.14, 700 paid directly to the canteen by
employer.
Determine the income under the head salaries.
Ans. Net income from salaries: Rs.2, 17,900.
Hints: 1. Leave Travel Concession is fully exempt from tax.
2. Tiffin allowance is fully taxable
3. Value of rent free flat is calculated as 20% of salary or lease rent
paid by employer, whichever is less. [Value of flat: Rs.30, 800].
4. Free Car and free meals are taxable in the hands of employer as
fringe benefits under fringe benefit tax and so are not taxable for
employees who receive them.
67
3. Mr. X, an employee of A Ltd. receives the following salary and
perquisites from his employer during the previous year 2005-06.
Basic salary Rs.96,000, Bonus Rs.4,500, Commission on Sales @ 2
percent of turnover (turnover of the year 2005-06 achieved by X
Rs.4,50,000), advance salary of April, May and June 2006 received in
March 2006 Rs.24,000, employer’s contribution to recognized provident
fund Rs.13,220, interest credited to the provident fund account @ 14.5 per
cent Rs.8,700, rent free furnished house in Calcutta (lease rent of
Rs.78,550 paid by employer, rent of furniture Rs.23,500). Free services of
gardener (salary paid Rs.6, 000); watchman (salary Rs.7, 200) and cook
(salary Rs.7000) were provided by the employer.
Determine taxable income of X for the Assessment year 2006-07.
Ans. Net income from salaries – Rs.1, 92,720.
Hints: 1. Advance salary is taxable on receipt basis, so is included in salary.
2. Employers’ contribution to recognized provident fund is exempt to
the extent of 12% of basic salary + commission – Rs.620.
3. Interest credited to the extent of 9.5 per cent is exempt, balance is
taxable – Rs.3000.
4. Salary of watchman, gardener and cook is fully taxable.
5. Value of rent free house – Rs.21900.
5.8 SOURCES AND FURTHER READINGS
1. Singhania V.K. and Monica Singhania (2006), Students Guide to Income
Tax, Taxmann Publications, and New Delhi.
2. Chandra Mahesh and D.C. Shukla (2006), Income Tax Law and Practice,
Pragati Publication, New Delhi.
3. Mehrotra H.C. (2006), Income Tax Law and Accounts, Sahitya Bhawan,
Agra.
4. Ahuja Girish and Ravi Gupta (2006), Systematic Approach to Income Tax
and Sales Tax, Bharat Publication, Sahitya Bhawan, Agra.
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Re: INCOME UNDER THE HEAD SALARIES -2 - February 25th, 2016

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INCOME UNDER THE HEAD
SALARIES - II

STRUCTURE
5.0 Introduction
5.1 Objectives
5.2 Incomes forming part of Salary - II
5.2.1. Taxable value of perquisites
5.2.2. Retirement Benefits
5.3 Deductions from Gross Salary
5.4 Computation of income from Salary
5.5 Let us Sum up
5.6 Glossary
5.7 Self assessment questions
5.8 Sources and further readings
5.0 INTRODUCTION
We have learnt till now that all incomes of an assessee are classified into 5
categories namely salaries, house property, capital gains, business or profession
and other sources. An income covered under a particular category will be taxed
under separate head of income pertaining to that category. Hence, it is very
important to know which incomes are covered in each head and the detailed
income tax provisions to calculate taxable income.
In the previous lesson, we have learnt about the concept of salary income, its
characteristics and three incomes forming part of salary, namely, basic salary,
fees, commission, bonus and allowances. The present lesson describes in detail
the other two components of salary income, namely, perquisites and retirement
benefits along with the procedure of computation of income under this head.
5.1 OBJECTIVES
After reading this lesson, you should be able to understand:
• Concept of perquisites
• Classification of perquisites for their tax treatment
• Valuation of perquisites
• Various kinds of retirement benefits along with their tax provisions
45
• Procedure for computation of net income under the head “Salaries”
5.2 INCOMES FORMING PART OF SALARY - II
As already stated earlier, Section 17 broadly includes:
1. Basic salary
2. Fees, commission and bonus
3. Taxable value of cash allowances
4. Taxable value of perquisites
5. Retirement benefits
First three incomes are already explained in detail in the previous lesson. The
other two incomes are explained here.
5.2.1 TAXABLE VALUE OF PERQUISITES
Perquisites are defined as any casual emolument or benefit attached to an office or
position in addition to salary or wages. It denotes some thing that benefits a man
by going into his pocket; it does not cover mere reimbursement of necessary
disbursements. Such benefits are normally given in kind but should be capable of
being measurable in money terms. Perquisites are taxable and included in gross
salary only if they are (i) allowed by an employer to an employee, (ii) Allowed
during the continuation of employment, (iii) directly dependent on service, (iv)
resulting in the nature of personal advantage to the employee and (v) derived by
virtue of employers authority.
As per Section 17 (2) of the Act, perquisites include:
1. Value of rent free accommodation provided to the employee by the
employer.
2. Value of concession in the matter of rent in respect of accommodation
provided to the employee by his employer.
3. Value of any benefit or amenity granted free of cost or at a concessional
rate in any of the following cases:
a) by a company to an employee who is a director thereof
b) 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 has
substantial interest in the company, but his monetary emoluments under
the head ‘Salaries’ exceeds Rs.50, 000.
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 of
assessee.
46
6. The value of any other fringe benefit given to the employee as may be
prescribed.
I. CLASSIFICATION OF PERQUISITES
For tax purposes, perquisites specified under Section 17 (2) of the Act may be
classified as follows:
(1) Perquisites that are taxable in case of every employee, whether specified
or not
(2) Perquisites that are taxable in case of specified employees only.
(3) Perquisites that are exempt from tax for all employees
(1) Perquisites Taxable in case of All Employees
The following perquisites are taxable in case of every employee, whether
specified or not:
1. Rent free house provided by employer
2. House provided at concessional rate
3. Any obligation of employee discharged by employer e.g. payment of club
or hotel bills of employee, salary to domestic servants engaged by
employee, payment of school fees of employees’ children etc.
4. Any sum paid by employer in respect of insurance premia on the life of
employee
5. Notified fringe benefits (on which fringe benefit tax is not applicable) – it
includes interest free or concessional loans to employees, use of movable
assets, transfer of moveable assets.
(2) Perquisites taxable in case of Specified Employees only
The following perquisites are taxable in case of such employees:
1. Free supply of gas, electricity or water supply for household consumption
2. Free or concessional educational facilities to the members of employees
household
3. Free or concessional transport facilities
4. Sweeper, watchman, gardener and personal attendant
5. Any other benefit or amenity
Specified employee is an employee who is either a director or has substantial
interest in the company where he is employed or is drawing monetary salary of
more than Rs.50, 000 during the previous year.
(3) Perquisites which are tax free for all the employees
47
This category includes perquisites which are tax free for the employees and also
other perquisites on which employer has to pay a tax (called Fringe Benefit Tax)
if they are given to the employees and so are not taxable for them.
1. Medical benefits (provided within or out of India) subject to limits.
2. Value of Leave Travel Concession in India.
3. Free meals provided to the employees during working hours.
4. Amount spent by the employer as its contribution to staff welfare schemes.
5. Laptops and computers provided for personal use.
6. Rent free official accommodation provided to a Judge of High Court or
Supreme Court or an official of Parliament including Minister and Leader
of Opposition in Parliament.
7. Health Insurance Premium of employee or member of household paid by
the employer.
8. All such facilities (like motor car, lunch refreshments, travelling, touring,
gift, credit cards, club etc.) provided by employer on which employer has
to pay Fringe Benefit Tax.
With effect from Assessment Year 2006-07, a Fringe Benefit Tax has been
introduced, where companies giving certain fringe benefits to its employees are
required to pay Fringe Benefit Tax on the expenditure incurred for the same.
Hence, these benefits are tax free for the employees.
II. VALUATION OF PERQUISITES
The perquisites which are taxable in the hands of employees are valued in
accordance with the provisions laid down under the Income Tax Rule 3. These
benefits can be provided to the employee or member of his household.
Member of household shall include:
(1) Spouse (2) Children and their spouses (3) Parents (4) Servants and
dependents
(i) Valuation of rent free accommodation
For the purpose of valuation of house, employees are divided into 2 categories:
a) Central and State Government employees: If accommodation is provided
by the State or Central Government to their employees, the value of such
accommodation is simply the amount fixed by the government (called the licence
fees) in this regard.
Illustration 5.1:
Mr X, a Senior Officer in Delhi administration draws Rs.20, 000 per month as
basic salary. The government has provided him with a rent free unfurnished flat
48
whose market rent is Rs.3000 per month, though as per government rules, its
licence fees is fixed at Rs.700 per month. Determine the value of perquisite in
respect of rent free accommodation.
Solution:
In a case of government employee, the value of rent free accommodation is Rs.8,
400 (Rs.700 x 12) i.e. the licence fees fixed by the government.
b) Other Employees
The valuation of accommodation for this category of non government employees
depends upon whether the accommodation given to the employee is owned by the
employer or taken on lease.
1. Accommodation owned by employer
The value of accommodation is:
(i) 20% of salary in cities having population exceeding four lakhs as per 1991
census.
(ii) 15% of salary in other cities in respect of the period for which the
accommodation was occupied by the employee during the previous year.
2. Accommodation is taken on lease / rent by the employer
The value of such accommodation is actual amount of lease rental paid or payable
by the employer or 20% of salary, whichever is lower.
Definition of salary for rent free accommodation: Basic Salary + Taxable cash
allowances + Bonus or Commission + any other monetary payment.
(It does not include dearness allowance if it is not forming part of basic salary for
retirement benefit, allowances which are exempt from tax, value of perquisites
specified under Section 17(2), employer’s contribution to provident fund account
of employees).
(ii) Valuation of furnished accommodation where the accommodation is
furnished, 10% per annum of the original cost of furniture given to the employee
shall be added to the value of unfurnished accommodation. If the furniture is
taken on rent by employer, then actual hire charges are to be added to the value.
Rules for valuation of Rent free unfurnished Accommodation:
Nature of Accommodation Accommodation in a
city with population > 4
lakhs
Accommodation in
any other place
Where accommodation is
owned by employer
20% of salary 15% of salary
Accommodation taken on
lease / rent by employer
Amount of lease or 20%
of salary whichever is
less
Amount of lease or
20% of salary
whichever is less
49
Illustration 5.2
Mrs. X, a company employee gets Rs.1,20,000 as basic pay, Rs.24,000 as
Commission, Rs.10,000 as Bonus, Rs.6000 as uniform allowance (60% utilized
for uniform), Rs.3,600 as education allowance and Rs.12,000 as transport
allowance. Her employer has paid income tax of Rs.6000 and professional tax of
Rs.2000 on her behalf. A rent free unfurnished flat is provided in a place where
population is a) more than 4 lakhs or b) less than 4 lakhs. Determine the
taxable value of rent free flat.
Solution
Salary for this purpose:
Amount / Rs.
Basic Salary 1,20,000
Commission 24,000
Bonus 10,000
Uniform allowance (40% of Rs.6000) 2,400
Transport allowance (Rs.12000 – Amount
exempt Rs.800 x 12)
2,400
Education allowance (Rs.3600 – amount
exempt Rs.100 x 12 x 2)
1,200
Salary 1,60,000
a) Where population is more than 4 lakhs
Value of rent free house = 20% of salary
= 20% of Rs.1, 60,000
= Rs.32, 000
b) Where population is less than 4 lakhs
Value of rent free flat = 15% of salary
= 15% of Rs.1, 60,000
= Rs.24, 000
(iii) Sweeper, gardener or watchman provided by the employer
The value of benefit of provision of services of sweeper, watchman, gardener or
personal attendant to the employee or any member of his household shall be the
actual cost to the employer. The actual cost in such a case is the total amount of
salary paid or payable by the employer or any other person on his behalf for such
services as reduced by any amount paid by the employee for such services.
If the above servants are engaged by the employer and facility of such servants
are provided to the employees, it will be a perquisite for specified employees
only. On the other hand, if these servants are employed by the employee and
wages of such servants are paid / reimbursed by the employer, it will be taxable
perquisite for all classes of employees.
50
(iv) Free Supply of Gas, Electricity or Water
The value of these benefits is taxable in the hands of specified employees, if the
connection is taken in the name of the employer, and is determined according to
the following rules:
a) If the employer provides the supply of gas, electricity, and water from its
own sources, the manufacturing cost per unit incurred by the employer
shall be the value of perquisite.
b) If the supply is from any other outside agency, the value of perquisite shall
be the amount paid by the employer to the agency supplying these
facilities.
c) Where the employee is paying any amount in respect of such services, the
amount so paid shall be deducted from the value of perquisite calculated
under (a) or (b).
d) Where the connection for gas, electricity, water supply is in the name of
employee and the bills are paid or reimbursed by the employer, it is an
obligation of the employee discharged by the employer. Such payment is
taxable in case of all employees under Section 17 (2) (iv).
(v) Free Education
a) Cost of free education to any member of employees’ family provided in an
educational institution owned and maintained by the employer shall be
determined with reference to reasonable cost of such education in a similar
institution in a near by locality. For education facilities provided to the
children of employee (excluding any other member of house hold), the
value shall be nil, if the cost of such education per child does not exceed
Rs.1, 000 per month.
b) Where free education facilities are allowed to any member of employees’
family in any other educational institution by reason of his being in
employment of that employer, the value of perquisite shall be determined
as in (a).
c) In any other case: The value of benefit of providing free or concessional
educational facilities for any member of the house hold (including
children) of the employee shall be the amount of expenditure incurred by
the employer.
d) While calculating the amount of perquisite in all in above cases, any
amount paid or recovered from the employee in this connection, shall be
deducted.
(vi) Free Transport
The value of any benefit provided by any undertaking engaged in the carriage of
passengers or goods to any employee or to any member of his household for
private journey free of cost or at concessional rate in any conveyance owned or
leased by it shall be taken to be the value at which such benefit is offered by such
undertaking to the public as reduced by the amount, if any, paid by or recovered
51
from the employee for such benefit. In case of employees of the Railways and
airlines, the value of transport facility shall be exempt.
(vii) Valuation of Medical Facilities
Medical facilities provided to employee are exempt from tax.
A. Medical benefits within India which are exempt from tax include the
following:
a) Medical treatment provided to an employee or any member of his family
in hospital maintained by the employer.
b) Any sum paid by the employer in respect of any expenditure incurred by
the employee on medical treatment of himself and members of his family :
(i) in a hospital maintained by government or local authority or approved by
the government for medical treatment of its employees.
(ii) In respect of the prescribed diseases or ailments in any hospital approved
by the Chief Commissioner.
(iii) Premium paid by the employer on health insurance of the employee under
an approved scheme.
c) Premium on insurance of health of an employee or his family members
paid by employer.
Limited Exemption: If the ordinary medical treatment of the employee or
any member of his family is done at any private hospital, nursing home or
clinic, the exemption is restricted to Rs.15, 000.
B. Medical Treatment outside India which is exempt from tax includes the
following:
a) Any expenditure incurred by employer on the medical treatment of the
employee or any member of his family outside India.
b) Any expenditure incurred by employer on travel and stay abroad of the
patient (employee or member of his family) and one attendant who
accompanies the patient in connection with such treatment, shall be
exempt to the following extent :
(i) The expenditure on medical treatment and stay abroad shall be exempt to
the extent permitted by the Reserve Bank of India.
(ii) The expenditure on travel shall be exempt in full provided the gross total
income of the employee (including this expenditure) does not exceed Rs.2,
00,000.
Illustration 5.3 (based on perquisites received by employee)
Mr. X is a Purchase Officer in a Company in Kota. He has furnished the
following particulars of his incomes to you for the previous year 2005-06. You
are required to compute his gross salary.
Rupees
52
Salary @ Rs.12500 per month 1,50,000
Leave Travel Concession for proceeding on leave (total
expenditure on rail fare Rs.4100)
3,800
Tiffen Allowance (actual expenditure Rs.2700) 4,000
Reimbursement of medical expenses for treatment of X
and his family in private clinic
31,300
Besides, he enjoys the following perks:
• Free unfurnished flat at Delhi (rent paid by
employer : Rs.80,000)
• The employer provided two watchmen (salary
Rs.700 per month each).
• Free use of Maruti car for official use, car can be
used for journey between office and residence and
other private purposes (log book of car is not
maintained).
• Free meal at place of works (Rs.70 per day for 210
days) Rs.14, 700.
Solution:
Computation of Income under the head salaries of Mr. X for AY 2006-07
Particulars Rupees
Basic Salary 1,50,000
Leave Travel Concession (exempted from tax) -
Tiffin Allowance (fully taxable) 4,000
Reimbursement of medical expenses (Rs.31,300 –
Rs.15,000)
16,300
Rent free unfurnished flat* 30,800
Two watchmen (Rs.700x2) 16,800
Free use of Maruti car Nil
Free meals Nil
Gross Salary 2,17,900
* Salary for rent free unfurnished flat is 1, 54,000 (1, 50,000+4,000)
Value of rent free house is 20% of salary or rent paid by employer, whichever is
lower (20% of 1, 54,000=30,800)
CHECK YOUR PROGRESS
53
Activity A:
Discuss the tax treatment of the following perquisites in case of specified and non
specified employees:
Nature of Perquisites Is perquisite taxable if
Specified
Employee
Non
specified
Employee
Rent free furnished or unfurnished
Services of sweeper, watchman, gardener,
personal attendant provided to employee
Domestic servants’ salary reimbursed to
employee
Leave Travel Salary reimbursed to employee
Education facility provided to employee’s
children
Gas, electricity, water supply bills of employee
reimbursed by employer
Use of laptop and computers to employees
Medical facilities provided to employee in
employer’s hospital
Health insurance premium of employee and
family paid by employer
Free refreshments to employee
Motor car facility provided to employee
Transport facility provided to employee
Club facility provided to employee
Interest free loan provided to employee for
purchasing car
Telephone bills reimbursed by employee
Activity B:
“It is generally said that non specified employees pay less tax as compared to
specified employees”. Do you agree?
__________________________________________________ ________________
__________________________________________________ ________________
__________________________________________________ ________________
__________________________________________________ ________________
__________________________________________________ ________________
54
5.2.2 RETIREMENT BENEFITS
These benefits are provided by the employer to the employee for his future, either
while in service or on his retirement. These have different tax treatment. They
include:
a) Pension
Pension is a payment made by the employer after the retirement or death of
employee as a reward for past service. It is normally paid as a periodical payment
on monthly basis but certain employers may allow an employee to forgo a portion
of pension in lieu of lumpsum amount. This is known as commutation of pension.
The treatment of these two kinds of pension is as under:
(i) Periodical pension (or uncommuted pension).
It is fully taxable in the hands of all employee, whereas government or nongovernment.
(ii) Commuted pension
For employees of government organisations, local authorities and statutory
corporations, it is fully exempted from tax, hence not included in gross salary.
For other employees, commuted value of half of the total value of pension is
exempted from tax. Any amount received over and above this amount is taxable,
so included in gross salary.
If, however, the employee is also receiving gratuity (another retirement benefit)
along with pension, then one third of the total value of pension is exempted from
tax. Amount received in excess of this is taxable, so included in gross salary.
Pension received by employee is taxable under the head “Salaries”. However,
family pension received by legal heirs after death of employee is taxable under
‘Income from other sources’.
b) Gratuity
Gratuity is the payment made by the employer to an employee in appreciation of
past services rendered by the employee. It is received by the employee on his
retirement. Gratuity is exempted upto certain limit depending upon the category
of employee. For the purpose of exemption, employees are divided into 3
categories:
(i) Government employees and employees of local authority:
In case of such employees, the entire amount of gratuity received by then is
exempted from tax. Nothing will be added to gross salary.
(ii) Employees covered under Payment of Gratuity Act, 1972.
55
In case of employees who are covered under Payment of Gratuity Act, the
minimum of the following amounts are exempted from tax:
• Amount of gratuity actually received
• 15 days of salary for every completed years of service or part thereof in
excess of six months.
(15 / 26 x [basic salary + Dearness Allowance] x No. of years of service+1
[if fraction > 6 months]).
• Rs.3, 50,000 (amount specified by government).
(iii) Other employees.
In case of employees not falling in the above two categories, gratuity received
from the employers is exempt to the extent of minimum of following amounts:
• Actual amount of gratuity received.
• Half month average salary for every completed year of service
(1/2 x average salary of last 10 months x completed years of service).
• Rs.3, 50,000 (amount specified by government).
c) Leave Salary
Employees are entitled to various types of leave. The leave generally can be taken
(casual leave/medical leave) or it lapses. Earned leave is a kind of leave which an
employee is said to have earned every year after working for some time. This
leave can either be availed every year, or get encashment for it. If leave is not
availed or encashed, it is allowed to be carried forward. This leave keeps getting
accumulated and is encashed by employee on his retirement. The tax treatment of
leave encashment is as under:
(i) Encashment of leave while in service. This is fully taxable and so is added
to gross salary.
(ii) Encashment of leave on retirement. For the purpose of exemption of
accumulated leave encashment, the employees are divided into two
categories:
• State or Central Government employees.
Leave encashment received by government employees is fully exempted
from tax. Nothing is to be included in gross salary.
• Other employees
Leave encashment of accumulated leave at the time of retirement received
by other employees is exempted to the extent of minimum of four
amounts.
- Amount specified by Central Government (3, 00,000).
- Leave encashment actually received.
- 10 months average salary (10 x average salary of 10 months preceeding
retirement).
56
Cash equivalent of unavailed leave.
 (Leave entitlement is calculated on the basis of maximum 30 days leave
every year, cash equivalent is based on average salary of last 10 months).
d) Provident Fund
Provident Fund Scheme is a welfare scheme for the benefit of employees. Under
this scheme, certain amount is deducted by the employer from the employee’s
salary as his contribution to Provident Fund every month. The employer also
contributes certain percentage of the salary of the employee to the Fund. The
contributions are invested outside in securities. The interest earned on it is also
credited to the Provident Fund Account. At the time of retirement, the
accumulated balance is given to the employee.
Tax treatment of provident fund depends upon the type of provident fund being
maintained by the employer. Employee’s provident fund may be of the following
3 types:
(i) Statutory Provident Fund
This is set up under the provisions of Provident Fund Act, 1925 and is maintained
by Government and Semi-Government organisations, local authorities, railways,
universities and recognised educational institutions.
(ii) Recognised Provident Fund
This is set up under the Employee’s Provident Fund and Miscellaneous Provisions
Act, 1952 (PF Act, 1952) and is maintained by private sector employees. The
establishments covered under PF Act, 1952 have two options; either to follow the
same scheme at by the Government under the PF Act or draft their own scheme of
PF but get recognition from Commissioner of Income Tax.
(iii) Unrecognized Provident Fund
If a provident fund is not recognized by the Commissioner of Income Tax, it is
known as unrecognized PF.
Besides these 3 funds, a person can also become a member of Public Provident
Fund.
(iv) Public Provident Fund
The Central Government has established the Public Provident Fund for the
benefits of general public to mobilize personal savings. Any member of general
public (whether salaried or self employed) can participate in this fund by opening
a Provident Fund Account at the State Bank of India or its subsidiaries or other
nationalised banks. A salaried employee can simultaneously become member of
employees provident fund (whether statutory, recognized or unreconised) and
public provident fund. Any amount may be deposited (subject to minimum of
57
Rs.500 and maximum of Rs.70, 000 per annum) under this account. The
accumulated sum is repayable after 15 years. At present, it carries an interest rate
of 8% per annum which is credited every year but payable only the time of
maturity.
Tax treatment of these provident funds (i.e. the exemption and deduction
available in respect of contributions to and payment from these funds) is
summarised as follows:
S.
No.
Particulars Statutory PF Recognised
PF
Unrecognised PF Public
PF
1. Employees
Contribution
to PF
Exempted
from tax
Exempted
upto 12% of
salary
excess of
employer’s
contribution
in included
in gross
salary
Exempted from tax Employer
does not
contribute
2. Deduction
under Section
80C on
employee’s
contribution
Available Available Not available Available
3. Interest
credited to PF
Exempted
from tax
Exemption
upto notified
rate (9.50%)
per annum)
Excess of
interest
included in
gross salary
Exempted from tax
Exempted
from tax
4. Lump sum
payment given
to employee
on retirement
Exempted
from tax
Exempted
from tax (if
rendered
continuous
service of
more than 5
years
Lumpsum includes :
a) Own
Contribution- Exempt
b) Interest on own
contribution - taxable as
income from other
sources
c)Employer’s contribution
and interest thereontaxable
so included in
gross salary
Exempted
from Tax
• Salary here means basic salary + dearness allowance / dearness pay (if
terms of employment provide) + commission (if fixed as percentage of
turnover achieved by employee).
CHECK YOUR PROGRESS
58
Activity C:
What are different kinds of Provident Funds of which a salaried person can be a
member? Can he be a member of two Provident Funds simultaneously?
__________________________________________________ ________________
__________________________________________________ ________________
__________________________________________________ ________________
__________________________________________________ ________________
__________________________________________________ ________________
Activity D:
Classify these key words into the following three categories of salary.
Dearness allowance, medical facility, uniform allowance, gratuity, leave travel
concession, overtime allowance, pension, free transport, servant allowance, gas,
electricity, water supply facility, provident fund, education facility, hostel
allowance, rent free house, telephone reimbursement.
1. Cash allowances ______________________________________________
__________________________________________________ __________
__________________________________________________ __________
2. Perquisites __________________________________________________
__________________________________________________ __________
__________________________________________________ __________
3. Retirement benefits__________________________________________ __
__________________________________________________ __________
__________________________________________________ __________
5.3 DEDUCTIONS FROM GROSS INCOME
The income chargeable under the head salaries is computed after making the
following deductions under Section 16:
1. Standard deduction [section 16(i)] of the Act: From assessment year 2006-
07, standard deduction has been withdrawn.
2. Entertainment Allowance [section 16(ii)] of the Act as given earlier,
entertainment allowance received from employer is first included in gross
salary and thereafter, a deduction is allowed to government employees
(State or Central Government) to the extent of least of following 3
amounts:
(i) Rs.5000
59
(ii) 20% of basic salary
(iii) Amount of Entertainment Allowance actually received during the
year.
3. Professional Tax [Section 16(iii)] of the Act.
Professional tax or tax on employment levied by a State under Article 276
of the Constitution is allowed as a deduction only in the year when it is
actually paid. If the professional tax is paid by the employer on behalf of
the employee, it is first included in gross salary as a perquisite (since it is
an obligation of employee fulfilled by employer) and then the same
amount is allowed as deduction on account of professional tax from gross
salary.
Illustration 5.4 (based on retirement benefits)
Mr. X is working in a factory in Delhi since August 1970. He gets Rs.4000 per
month as basic salary, Rs.400 per month as dearness allowance and Rs.500 per
month as house rent allowance. He resides in his own house.
On 1st January, 2005 he retires and gets Rs.40, 000 as gratuity and Rs.50, 000 as
accumulated balance from unrecognized provident fund. His own contribution
and that of factory to the fund was equal. From January 2005 onwards, he starts
getting pension of Rs.1000 per month.
Compute Net Income of Mr X for the Assessment Year 2006-07.
Solution
Computation of Net Salary of Mr. X
for the Assessment Year 2006-07
Rupees
Basic Salary (Rs.4000 x 9) 36,000
Dearness Allowance (Rs.400 x 9) 3,600
House Rent Allowance (Rs.500 x 9)
(No exemption since X resides in own house)
4,500
½ Lumsum received from unrecognized provident fund 25,000
Pension Rs.1000 x 3 3,000
Gratuity (Rs.40,000 – amount exempt Rs.68,000 NIL
Gross Salary 72,100
60
Less deductions -
Net Salary 72,100
Amount of gratuity exempt is least of following 3 amounts for other employees:
1. ½ months salary for completed years of service
(½ x 4000 x 34) = Rs.68, 000
2. Actual gratuity received (Rs.40, 000)
3. Limit by Central Government – Rs.3, 50,000
Amount exempt is Rs.68, 000; amount received is Rs.40, 000.
So, entire amount of gratuity is exempt.
CHECK YOUR PROGRESS
Activity E:
What are the differences between Public Provident Fund and Recognized
Provident Fund?
__________________________________________________ ________________
__________________________________________________ ________________
__________________________________________________ ________________
__________________________________________________ ________________
__________________________________________________ ________________
5.4 COMPUTATION OF INCOME FROM
SALARIES
61
Computation of Net Salary of Mr. X
for the Assessment Year 2006 -2007
Rupees
Particulars Amount
Basic Salary
Fees, Commission and Bonus
Taxable value of cash allowances
Taxable value of perquisites
Retirement Benefits
GROSS SALARY
Less: Deductions from Gross Salary
1. Standard Deduction
2. Entertainment allowance deduction
3. Professional tax deduction
NET SALARY
Illustration 5.5
Mr. X is a lecturer in a private college in Chennai. During the previous year
2005-06, he gets the following emoluments: Basic salary Rs.10, 000 per month,
dearness allowance: 10% of basic salary, city compensatory allowance: Rs.300
per month, children education allowance: Rs.500 per month (for 3 children),
house rent allowance: 20% of salary (rent paid Rs.2000 per month). He gets
Rs.18, 000.
a) Reimbursement from his employer in respect of medical expenditure incurred
on treatment of his wife in a private clinic. Besides, he gets Rs.11, 400 as
reimbursement from the employer in respect of books and journals purchased
by him in discharging his official work.
He contributes 11% of his salary to statutory provident fund to which a
matching contribution is made by the employer. During the year, he spends
Rs.15, 000 for maintaining a car for going to the college. Determine his net
income under the head salaries.
62
Computation of Net Salary of Mr. X
for the Assessment Year 2006 -2007
Rupees
Particulars Amount
Basic Salary (Rs.10, 000 x 12) 1, 20,000
Dearness allowance (10% of 1, 20,000) 12,000
City compensatory allowance (Rs.300 x 12) 3,600
Children education allowance (Rs.500 x 12 less
amount exempt Rs.100 x 12 x 2)
3,600
House Rent Allowance (20% of 1, 20,000 less amount
exempt Rs.12, 000)
12,000
Reimbursement of medical expenses (Rs.18, 000 -
Rs.15, 000)
3,000
Reimbursement of expenses on books (not chargeable
to tax)
-
GROSS SALARY 1, 54,200
Less Standard deduction NIL
NET SALARY 1, 54,200
Working Notes:
1. Amount of HRA exempt is least of 3 figures:
a) 50% of Salary (1, 20,000) 60,000
b) Actual HRA received (20% of 1, 20,000) 24,000
c) Rent paid in excess of 10% of Salary
2000 x 12 - 10 / 100 x 1, 20,000 12,000
Amount of HRA exempt is 12,000
2. Expenditure on maintenance of car is an application of income, not
deductible.
3. Contribution of employer towards employee’s statutory provident fund is
exempt upto 12%.
4. Reimbursement of medical expenditure by employer in private clinic is
exempt upto Rs.15, 000.
5. Children education allowance is exempt to the extent of Rs.100 per month
per child for maximum 2 children.
Illustration 5.6
Mr. X, a production manager of A Ltd. receives the following emoluments during
the previous year 2005-06.
63
Basic salary Rs.12,000 per month, bonus : Rs.12,000 per annum, commission :
Rs.6,000 per annum, entertainment allowance : Rs.4,000 per annum, A rent free
house has been provided in Bombay, Lease rent of the house : Rs.1,50,000 per
annum.
Employer has provided him free use of an optra car for official as well as personal
use. Employer spent Rs.50, 000 on car, 30% of which is attributable to personal
use. The employer pays a sum of Rs.400 on account of professional tax on behalf
of X. A Ltd. gifts a computer to X on its founder’s day (cost of computer Rs.24,
560). Employer’s contribution towards recognized provident fund Rs.18, 000 per
annum. Determine net salary of X for the Assessment year 2006-07.
Computation of Net Salary of Mr. X
for the Assessment Year 2006 -2007
Rupees
Particulars Amount
Basic Salary (Rs.12, 000 x 12) 1, 44,000
Bonus 12,000
Commission 6,000
Entertainment Allowance 4,000
Rent free house (See note 1) 33,200
Motor Car NIL
Computer gifted by employer NIL
Employer’s contribution towards recognized PF
(Rs.18, 000 - 12 / 100 x 1, 44,000)
720
Professional tax paid by employer 400
GROSS SALARY 2, 00,320
Less: Standard deduction NIL
Less: Professional tax 400
NET SALARY 1, 99,920
Working Notes:
1. Computation of value of rent free house
Rent free salary
Basic salary (1, 44,000) + bonus (12,000) + commission (6,000) +
entertainment allowance (4,000) = Rs.1, 66,000
Value of house in Bombay
20% of Rent free salary (1, 66,000) = Rs.33, 200
2. Perquisite in respect of car and gift of computer to employees are
chargeable to tax in the hands of employer under fringe benefit tax.
64
5.5 LET US SUM UP
1. Heads of Income: There are 5 heads of income into which income of
persons can be divided namely Income from salary, house property,
business or profession, capital gains and other sources.
2. Meaning of Salary: Any remuneration paid by an employer to an
employee in consideration of his services is called salaries. It includes
monetary value of those benefits and facilities which are provided by the
employer and are taxable.
3. Income forming part of salary: They include basic salary, advance salary,
fees, commission, and bonus, taxable value of cash allowances, perquisites
and retirement benefits.
4. Allowances: These are of three types
(a) Taxable Allowances: Dearness allowance, Medical allowance, Servant
allowance, Warden Allowance, Family allowance, City Compensatory
allowance etc.
(b) Allowances exempt upto specified limit: House rent allowances,
Entertainment allowance, Certain Special allowances, etc.
(c) Fully exempted allowances: Foreign allowance, sumptuary allowance to
High Court / Supreme Court Judges, Allowances from U.NO.
5. Perquisites: These are of three types:
(a) Taxable perquisites for all employees: Facility of rent-free house or house
at concessional rent, payment of employee’s obligations, payment of life
insurance premium of the employee, etc.
(b) Perquisites taxable in specified cases only: Facility of servant, gardener,
gas, electricity, water, education, etc.
(c) Tax-free perquisites: Free Medical facility or reimbursement of medical
expenses, free facility of refreshments, entertainment, telephone, family
planning, scholarship, leave travel concession, free motor car, club
facility, gifts etc.
6. Valuation of perquisites: See Rule 3 of Income Tax Rules.
7. Deductions: Following three deductions are admissible:
(a) Standard Deduction: This has been withdrawn from Assessment Year
2006-07.
65
(b) Entertainment Allowance:
(i) Government employees – 1/5th of salary or Rs.5, 000, whichever is
less.
(ii) Others - Nil
(c) Employment Tax – Full Amount
8. Provident Funds: These are of four types:
(a) Statutory provident fund
(b) Recognized provident fund
(c) Unrecognized provident fund and
(d) Public provident fund
5.6 GLOSSARY
Terms used in the lesson are as explained herein:
1. Fringe Benefits - Means any privilege, service, facility, or amenity,
directly or indirectly provided by an employer to his employee, also
includes expense made by employer in the course of business on
entertainment , hospitality, conferences, sales promotion, etc.
2. Encashment of Leave – Getting cash equivalent of leave which is not availed
by an employee based on his salary.
3. Carried Forward – In context of earned leave, this means it can be taken
over to next year if not availed during the year.
4. Substantial interest – a person who holds 20% or more of shares / voting
power in a company is considered as having substantial interest in that
Company.
5.7 SELF ASSESSMENT QUESTIONS
1. Mrs. X (Age: 29 years) is a part time lecturer in Delhi University. The
details of her salary income are as follows:
Rupees
Basic Salary 60,000
Dearness Allowance 2,400
Education Allowance for 2 children 3,600
Hostel expenditure allowance for one child 6,080
House Rent Allowance
(Rent paid by Mrs. X is Rs.900 per month)
8,000
66
She is a member of statutory Provident Fund to which she contributes 12%
of her salary and similar amount is contributed by the College. Besides,
College reimburses Rs.21, 600 being expenditure incurred by Mrs. X on
medical treatment of her daughter in a private clinic. She spent Rs.700 on
purchase of books for teaching purpose. She has maintained a scooter for
commuting to College and spends Rs.500 per month on it. Compute net
salary of Mrs. X for assessment year 2006-07.
Ans. Net income from salary = Rs.77, 080
Hints: (1) Medical expenditure incurred in private hospital is exempt upto Rs.15,
000
(2) HRA taxable is Rs.4, 400
(3) No deduction is given for expenses incurred in earning salary
income
2. Mr. X receives the following incomes during the year ending on 31st
March, 2006
Rupees
Salary @ Rs.12,500 per month 1,50,000
Leave Travel Concession for proceeding on Leave
(actual expenditure Rs.4,100)
3,800
Tiffin allowance (actual expenditure Rs.2,700) 4,000
Reimbursement of medical expenses of X and his family
in private clinic
31,300
Besides, X enjoys the following perks:
Free unfurnished flat in Delhi (rent paid by the employer Rs.80, 000)
The employer provides a watchman and a gardener / salary paid to both
@Rs.7, 000 per month)
Free use of Maruti Car for private and official purposes. Expenditure
incurred by employer Rs.30, 000
Free meal at place of work: Rs.14, 700 paid directly to the canteen by
employer.
Determine the income under the head salaries.
Ans. Net income from salaries: Rs.2, 17,900.
Hints: 1. Leave Travel Concession is fully exempt from tax.
2. Tiffin allowance is fully taxable
3. Value of rent free flat is calculated as 20% of salary or lease rent
paid by employer, whichever is less. [Value of flat: Rs.30, 800].
4. Free Car and free meals are taxable in the hands of employer as
fringe benefits under fringe benefit tax and so are not taxable for
employees who receive them.
67
3. Mr. X, an employee of A Ltd. receives the following salary and
perquisites from his employer during the previous year 2005-06.
Basic salary Rs.96,000, Bonus Rs.4,500, Commission on Sales @ 2
percent of turnover (turnover of the year 2005-06 achieved by X
Rs.4,50,000), advance salary of April, May and June 2006 received in
March 2006 Rs.24,000, employer’s contribution to recognized provident
fund Rs.13,220, interest credited to the provident fund account @ 14.5 per
cent Rs.8,700, rent free furnished house in Calcutta (lease rent of
Rs.78,550 paid by employer, rent of furniture Rs.23,500). Free services of
gardener (salary paid Rs.6, 000); watchman (salary Rs.7, 200) and cook
(salary Rs.7000) were provided by the employer.
Determine taxable income of X for the Assessment year 2006-07.
Ans. Net income from salaries – Rs.1, 92,720.
Hints: 1. Advance salary is taxable on receipt basis, so is included in salary.
2. Employers’ contribution to recognized provident fund is exempt to
the extent of 12% of basic salary + commission – Rs.620.
3. Interest credited to the extent of 9.5 per cent is exempt, balance is
taxable – Rs.3000.
4. Salary of watchman, gardener and cook is fully taxable.
5. Value of rent free house – Rs.21900.
5.8 SOURCES AND FURTHER READINGS
1. Singhania V.K. and Monica Singhania (2006), Students Guide to Income
Tax, Taxmann Publications, and New Delhi.
2. Chandra Mahesh and D.C. Shukla (2006), Income Tax Law and Practice,
Pragati Publication, New Delhi.
3. Mehrotra H.C. (2006), Income Tax Law and Accounts, Sahitya Bhawan,
Agra.
4. Ahuja Girish and Ravi Gupta (2006), Systematic Approach to Income Tax
and Sales Tax, Bharat Publication, Sahitya Bhawan, Agra.
Hey faaiz, many thanks for sharing such a great information and i am really impressed by your work. Well, i am also uploading a document where you find more detailed information on income under head salary.
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