Income Exempt from Tax - Salaries

8/14/2019 Income Exempt from Tax - Salaries

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Incomes Exempt from TaxIncomes Exempt from Tax

SalariesSalaries [[Sections 10(5)Sections 10(5)to 10(10A)]to 10(10A)]

Prepared By:Prepared By:ReenaReena AhujaAhuja (08061)(08061)

SulabhSulabh MahetaMaheta (08084)(08084)

AminAmin PattaniPattani (08100)(08100)


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Example:

Mr. X went on holiday on 25.12.2006 to Delhi

with his wife and three children (one son age 5

years; twin daughters - age 2 years). They went

by flight (economy class) and the total cost of

tickets reimbursed by his employer was

Rs60,000 (Rs45,000 for adults and 15,000 for

the three minor children).

And

If among his three children the twins were 5

years old and the son 3 years old.


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Exemption in the case of

individuals, who are not citizens

of India [Section 10(6)]

(i) Section 10(6)(ii) grants exemption to a

person in respect of the remunerationreceived by him for services as high

commission, legation, consulate or the trade

representation of a foreign State or as a

member of the staff of any of these officials.


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Cont..Cont..

Conditions:

(a) The remuneration received by our

corresponding Government officers resident

in such foreign countries should be exempt.

(b) The above mentioned officers should be

the subjects of the respective countries and

should not be engaged in any otherbusiness or profession or employment in

India.


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(ii)(ii) SectionSection 1010((66)(vi))(vi) providesprovides thatthat remunerationremuneration

receivedreceived byby aa foreignforeign nationalnational asas anan employeeemployee ofof

aa foreignforeign enterpriseenterprise forfor serviceservice renderedrendered byby himhimduringduring hishis staystay inin IndiaIndia isis alsoalso exemptexempt fromfrom taxtax..

(1) the foreign enterprise is not engaged in a

business activity in India.

(2) The employees stay in India does not exceed

a total of 90 days in the previous year;

(3) the remuneration is not liable to be deducted

from the employers income chargeable to tax

under the Act.

Condition:


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(iii) section 10(6)(viii) provides that employee who is also

non-resident for services rendered

in connection with his employment

on a foreign ship where his total

stay in India does not exceed a

total of 90 days in the previous

year.(iv) Section 10(6)(xi) provides that any remuneration

received by employees of foreign

Government from their respective

Government during their stay in

India in connection with theirtraining in any establishment or

office of the Government or any

public sector undertaking is

exempt from tax.


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Allowances payable outside India

[Sec. 10(7)]

AllowancesAllowances oror perquisitesperquisites paidpaid oror allowedallowed

asas suchsuch outsideoutside IndiaIndia byby thethe GovernmentGovernment

toto aa citizencitizen ofof IndiaIndia forfor servicesservices renderedrendered

outsideoutside IndiaIndia areare exemptexempt fromfrom taxtax..


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Co-operative technical assistance

programmers [Section 10(8) and 10(9)]

Individuals who are assigned duties in India in

connection with any co-operative technical assistance

programs and projects would be exempt from tax on

their receipts by way of:

(a) Remuneration received directly or indirectly from the

Government of a foreign State for rendering such

services;

(b) Any other income accruing or arising outside India inrespect of which the individual is required to pay

income tax or other social security tax to the

Government of that foreign State.


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Gratuity [Sec. 10(10)]

1) Retirement gratuity received under thePension Code Regulations applicable tomembers of the Defence Service is fullyexempt from tax.

2) Central / State Government Employees

3) Non government employees covered by thePayment of Gratuity Act, 1972

4) Non government employees not covered bythe Payment of Gratuity Act, 1972


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Example:Example:

Mr. X retired on 15.06.2006 after completion of

26 years 8 months of service and receivedgratuity of Rs. 6 lakh. At the time of retirement

his salary was;

Basic salary: Rs. 5000 p.m.D.A. : Rs.3000 p.m.

Find his taxable gratuity assuming;

1.He is non-government employee andcovered by the payment of gratuity act 1972

2. He is non-government employee and no

covered by the payment of gratuity act 1972

3. He is a government employee


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Payment of commutation of

pension [Sec. 10(10A)]

Pension is of 2 types

1. Commuted Pension

2. Un-commuted Pension

A) Employees of the central government/local

authorities/statutory corporation/members of

the defence services

B) Non government employee


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ExampleExample

Mr. X retired on 01.10.06 receiving Rs. 5000

p.m. as pension. On 01.02.07, he commuted

60% of his pension and received Rs. 3 lakh as

commuted pension. Required to compute his

taxable pension assuming:1) He is government employee

2) He is non government employee, receiving

gratuity of Rs. 5 lakh at the time of

retirement

3) He is non government employee and is in

receipt of no gratuity at the time of

retirement


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Income Exempt from Tax - Salaries