WELCOME Salary Taxation Department Website

WELCOME

Salary Taxation

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

TDS rates for Financial Year 2013 -14 Senior Citizen above 60 Years Woman Others For Income Between 0 to For Income Between 0 2, 50, 000 2, 000 to 2, 000 For Income Between 2, 50, 001 Between 2, 00, 001 to 5, 00, 000 to 5, 000 Tax (%) 0 10 For Income Between 5, 001 Between 5, 00, 001 to 10, 00, 000 to 10, 000 20 For Income above 10, 001 Surcharge 30 Education Cess For Income above 10, 00, 001 >1, 00, 00, 000 10 3

SECTION 87 A l Individual whose net income does not exceed Rs. 5, 000/-is entitled for rebate u/s 87 A for Rs. 2, 000/-. l This is in addition to benefits of slab rates given by Govt. l AY 2014 -15

Topics • • • WHAT IS SALARY ALLOWANCES INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME. • • DEDUCTION UNDER SECTION 16 DEDUCTIONS UNDER CHAPTER VI A

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

What 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 exempted in case of Certain Person l Indian Citizen – Govt. Servant Working Outside India l SC and HC Judge l UNO Employees l Chairman, Member or Retired Member of UPSC [10(45)]

HOUSE RENT ALLOWANCE u/s. 10(13 A) • The least of the following exempted • • • Actual HRA received Rent paid in excess of 10% of salary 50% of salary in metro cities 40% in other places. For this purpose “Salary” includes dearness allowance if terms of employment so provide

House Rent Allowance • 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.

Allowances exempt, amount received or limit specified, which ever is less 1. Children Education Allowance : Exempt up to actual amount received per child or Rs. 100 p. m. per child up to maximum of two children, which ever is less. 2. Transport Allowance : Exempt to the extent of Rs. 800 p. m. 3. Washing Allowance : Exempt to the extent of actual expenditure.

S. 10 – Incomes which do not form part of total income. These payments will not be part of salary subject to limits prescribed • LTC (Sec. 10(5)) • The exemption is allowed only in respect of fare only. Gratuity (Sec. 10(10)) Commuted value of pension (Sec. 10(10 A)) Leave encashment at the time of retirement (Sec. 10(10 AA)) • Provident fund receipts and RPF receipts (Sec. 10(11) & 10(12)) • • •

LTC l LTA tax exemption can be claimed twice in block of 4 years 01 -Jan-2006 – 31 -Dec-2009 l 01 -Jan-2010 – 31 -Dec-2013 l 01 -Jan-2014 – 31 -Dec-2017 l Amt spent on self, spouse, children (maximum of two children), parent, brother, sister, and dependent. l Travel within India via rail, air, road through shortest route l lodging, boarding, food, cab fare, auto fare, driver tip/allowance. l

Gratuity • Death Cum Retirement Gratuity received by the Central Govt. /State Govt. /Local Authorities - EXEMPT • Covered by gratuity Act, 1972 least of the following is exempted. Actual amount received. 15 days salary (based on last drawn salary) for each year of completed service - (i. e. 15 days Salary x Length of Service) 3. Rs. 10, 000/-. 1. 2.

EL Encashment Central Govt / State Govt Employees – Exempt • Other 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, 000/Average Salary x 10 (Maximum 30 Days for each completed year of Service minus Leave Available ) x Average Salary

Deduction under section 16 • Tax on employment (professional tax) paid is allowable as deduction from salary. (max: - 2, 500/- P. A) • Entertainment Allowance : This deduction is allowed only to a Government employee to the least of following. • • • Actual amount received. 20% of salary exclusive of any allowance. Rs. 5000.

Deduction on income from House property • interest up to a maximum limit of Rs. 1, 50, 000 is allowed Loan taken on or after 1 -4 -1999 for constructing/acquiring the residential. house and o completed within three years from the end of the financial year in which capital was borrowed. o No limits for the let out property o Only one property is eligible for deduction o o

Section 80 EE Deduction for interest on loan on Residential House l Inserted wide FY 2013 -14 l Deduction upto Rs. 1, 000 l Loan taken during FY 2013 -14 l Loan Amount does not Exceed 25 Lacs l Value or Residential Property does not Exceed 40 Lacs

Deductions under chapter VIA –u/s. 80 C, 80 CC &80 CCD The following investments are eligible for deduction: • Life Insurance Premium, Statutory Provident Fund, RPF, PPF, NSC, ULIP, Notified Units of Mutual Fund, Re-payment of housing loan, Tuition Fee paid, fixed deposit for 5 years or more with a scheduled Bank, Senior Citizen Saving Scheme, five year time deposit scheme in Post Office etc. •

Deductions u/s. 80 C, 80 CC&80 CCD • Amount of deduction allowable; gross qualifying amount or Rs. 1, 000 which ever is lower.

Deduction u/s. 80 D • 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. 80 D • 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 u/s. 80 DD • • • Deduction in respect of maintenance including medical treatment of a handicapped dependent : Furnish a certificate issued by the medical authority in form No. 10 -IA. Amount of deduction Rs. 50, 000 is allowed. In case severe disability - Rs. 1, 000 is allowed. The person claiming deduction under this section, he should not claim any deduction under section 80 U.

Deduction u/s. 80 DDB Medical treatment of dependent or self for specified disease/ailment. • Amount of deduction Rs. 40, 000: if the person is a senior citizen Rs. 60, 000 is allowed. • • This deduction is not allowable by the employer.

Deductions -u/s. 80 E Payment of interest on loan taken for higher education: spouse or children • The loan has to be taken from any financial institution or approved charitable institution. • The deduction is available for a maximum of 8 years •

Deductions -u/s. 80 G Deduction in respect of donations to certain funds, charitable institutions etc. • Deduction can be allowed by the employer only in respect of donations made to Prime Minister Relief Fund, Chief Ministers Relief Fund, Earthquake Fund, National Childern Fund, etc. • • In respect of donations to charitable institutions, deductions cannot be allowed by the employer. ·

Deductions u/s. 80 GG Deduction in respect of rent paid The assessee should not be receipt of HRA and he should not own any house • The least of the following amount is exempted • • Rent paid in excess of 10% of total income before allowing deduction under this section. • Rs. 2000 per month. • 25% of total income before allowing deduction under this section •

Rajeev Gandhi Equity Saving Scheme – 80 CCG l Total Income does not Exceed 12 Lacs l Investment – 50, 000 (Max. ) l Deduction – 50% of Investment. l For 3 Consecutive Years. l Lock-in Period – 3 Years. l Over & above Deduction of 1, 000/- under 80 C

Deductionu/s. 80 GGC • • Any amount of contribution made by a person to a political party or an electoral trust is deductible. This deduction is not allowable by the employer.

Deductions under Chapter VI A-u/s. 80 U Deduction in case of a person with disability: blindness, low vision, leprosy, hearing impairment, mental retardation and mental illness. • Conditions: Furnish a certificate issued by the medical authority in form No. 10 -IA. • Amount of deduction (fixed)Rs. 50, 000 is allowed. In case severe disability Rs. 1, 000 is allowed. •

Relief u/s. 89(1) Relief is available when salary is received in arrears or advance. • Application in Form-10 E has to be obtained from the employee. • Form 10 E is required to allow claim of 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 Not Taxable in the year of 12% of Salary (refer of Contribution note 1 below) Employee's Contribution to the Fund Deduction under section No Benefit Available 80 C available Interest Credited to the Fund Exempt up to 9. 5% rate Not Taxable at the time of Interest of Credit Lumpsum amount withdrawn from the Fund Exempt under section 10(11) Exempt under section 10(12) subject to : Completed 5 Years Employer : Taxable Employee: Exempt

Points to Ponder If the House Property is transferred before expiry of five years no deduction in the year of transfer and earlier deductions allowed will become in the year of transfer. • No deductions u/s. 80 C for the repayment of principal amount if the loan is taken from the private persons and also not for commercial properties. • ?

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