Salaries Presentation

8/12/2019 Salaries Presentation

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Tax implication on Salary

Income

Presented by:

Sachin Gujar

Chartered Accountant


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Sachin Gujar, C.A2

SalarySalary is a periodical payment for Services rendered by an

employee to an employer. However under sec.17(1) of the IncomeTax Act, following items are also included :

1. Wages

2. Any annuity or pension

3. Any Gratuity

4. Any Fees, commission, perquisites or profits in lieu of or inaddition to any salary or wages.

5. Any advance for Salary.

6. Any payment received by an employee while in service inrespect of any period of leave not availed of by him. ( i.e. leaveencashment)


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Sachin Gujar, C.A3

Other items included under Salary

Dearness Allowance :It is an additional payment over & above the basic Salary for metingthe high cost of living.

Bonus :It is a payment made under a service agreement between theemployer & employee, which may be in the form of Diwali Bonus,Performance Bonus etc.

Commission / Incentive :If an employee is appointed on a fixed monthly salary pluscommission as a percentage of revenue or sales then the saidcommission shall also be included in his Salary.


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Sachin Gujar, C.A4

Exemptions under Sec.10(14)

Nature of Allowance Extent to which Exempt

1. Conveyance Allowance Rs.800/- per month

2. Children EducationAllowance Rs.100/- per month per childupto max. of 2 children

3.

Allowance to meetthe hostel expenditure of thechild

Rs.300/- per month per childupto max. of 2 children


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Sachin Gujar, C.A5

Exemption towards reimbursement of Medical

expenses

The reimbursement by employer of actual expenditure incurred by an

employee for Medical treatment of himself or any of his family

members is exempt subject to a maximum ceiling of Rs.15000/-p.a.

Family in relation to an employee means :

The Spouse and children of the employee

Parents, brothers and sisters of the employee who are wholly ormainly dependent on him


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Sachin Gujar, C.A6

Exemption towards House rent Allowance

An employee is entitled to claim the exemption towards

HRA U/s.10(13A) when all thefollowing conditions are fulfilled:

1. The allowance from the employer must be specific to meetexpenditure on payment of rent.

2. The residential accommodation occupied by the employee is notowned by him.

3. The actual payment of rent should exceed 10% of his salary.


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If all these conditions are satisfied then HRA is exempt subject toleastof the following:

Actual HRA received

Rent paid in excess of 10% of Salary

40% of Salary

For the purpose of this section Salary means Basic + D.A

Exemption towards House rent

Allowance (contd...)


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Rs.(p.a) Rs.(p.a) Rs.(p.a)Annual salary 1,44,000

House rent allowance received 86,400

Less: Exemption u/s. 10(13A)read with Rule2A:

(a)House rent allowance recd... 86,400

Rs.(b)Actual rent paid 93,600

Less: 10% of Salary 14,400 79,200

(c) 40% of salary 57,600

Least of (a), (b) & (c) is exempt 57,600 28,800

Salary income subject to deduction... 1,72,800

Let us see an example for HRA


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Sachin Gujar, C.A9

Exemption towards Leave Travel

concession

Leave travel concession / allowance received by an employee forhimself and his family in connection with his proceeding on leave to

any place in India is exempt U/s.10(5) subject to the following

conditions framed under Rule 2B:

Where the journey is performed by Air an amount not exceedingthe economy air fare of the National carrier and where the journeyis performed by Rail or any other mode of transport an amount notexceeding the First Class A.C rail fare by the shortest route to the

place of destination.

The said exemption is available in respect of two journeysperformed in a block of 4 calendar years.

It is important to understand that the LTA is exempted onlytowards the expenses incurred for the mode of transport andexcluding hotel, food, entertainment expenses etc.


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Sachin Gujar, C.A10

Deductions available from Salary (Way

to save your TAX )

After computing the net salary as mentioned in the previous provisionsan individual is entitled to claim deductions under various othersections of the Income Tax Act, which are mentioned here under:

1. Deduction U/s.80C:

Amount invested in specified savings like Life Insurance Premium, PF,

PPF, NSC, ELSS Mutual Fund & Housing Loan principal repayment.

2. Deduction U/s.80CCC:

Contribution towards pension plans subject to a maximum payment ofRs.10000/- It may however be noted that the overall ceiling forinvestment U/s.80C & 80CCC is restricted to Rs.1.00 Lac p.a.

3. Deduction U/s.80D:

Medical insurance premium paid for the health of the individual andspouse or dependent parents or dependent children subject to amaximum of Rs.10000/-p.a.


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Sachin Gujar, C.A11

4. Deduction U/s.80DD:

Expenditure incurred for maintenance and medical treatment ofa dependent who is a person with disability subject to deductionof Rs.50000/- p.a. or Rs.75000/-p.a. if such person has severe

disability as mentioned in the provision.

5. Deduction U/s.80E:

Expenditure incurred on interest on loan (and not repayment ofprincipal amount) taken from any financial institution for thepurpose of higher education.100% of interest repayment isallowed as a deduction for 8 successive years beginning fromthe year in which the repayment starts.

Deductions available from

Salary (Way to save your TAX ) contd


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Sachin Gujar, C.A12

Deductions available from

Salary (Way to save your TAX ) contd

6. Deduction U/s.80G:

Donations to approved funds, Institutions & Trusts qualifyfor 50% or 100% deduction as applicable, U/s.80G.

It may however be noted that the total deduction U/s.80Gshould not exceed 10% of gross total income.

7. Deduction U/s.80GG:Where a individual is not entitled to HRA and who is payingrent in excess of 10% of his total income and who files adeclaration in form no.10BA is eligible for deduction underthis section subject to the following conditions:-

a. The Assessee does not own any other residential

accommodation at the place / city where he performs hisduties for employment and

b. Subject to max. of 25% of total income or Rs.2000/- permonth whichever is less


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Sachin Gujar, C.A13

Deduction for Housing Loan Repayment

One of the important deduction available under the

Income Tax Act is repayment of your housingloan.

The Interest component is exempt with a upperlimit of Rs.1.50 Lacs p.a. U/s.24

The principal component is deductible with aupper limit of Rs.1.00 Lac p.a. (together withother specified savings) U/s.80C


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Sachin Gujar, C.A14

Income Tax RatesIndividual Tax Payable for Mar07

If the net income is upto

1 Lac p.a.

Nil

Between Rs.1.00 Lac p.a. toRs.1.50 Lacs p.a.

10% of the amount by which the totalincome exceeds Rs. 1,00,000/ p.a.

Between Rs. 1,50,000/-p.a. to

Rs.2,50,000/- p.a.

Rs. 5000 + 20% of the amount by

which the total income exceeds Rs.1,50,000/-p.a.

Rs.2,50,000/-p.a. and above Rs. 25,000/- + 30% of the amount bywhich the total income exceeds Rs.2,50,000/-p.a.

Surcharge 10 % of the tax payable if totalincome exceeds Rs. 10.00 lacs p.a.

otherwise NIL

Education Cess 2 % of Tax Payable


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Sachin Gujar, C.A15

Income Tax rates for WomenIndividual Tax Payable for Mar07

If net income is upto

Rs.1.35 Lac p.a.

Nil

Between Rs.1.35 Lac p.a. toRs.1.50 Lacs p.a.

10% of the amount by which the.total income exceeds Rs.1,35,000/-p.a.

Between Rs.1,50,000/-p.a. toRs.2,50,000/-p.a.

Rs. 1500 + 20% of the amount bywhich the total income exceedsRs. 1,50,000/-p.a.

Rs.2,50,000/-p.a. and above Rs. 21500/- + 30% of the amountby which the total income exceedsRs. 2,50,000/-p.a.

Surcharge 10 % of the tax payable if totalincome exceeds Rs. 10.00 lacs p.a.otherwise NIL

Education Cess 2 % of Tax Payable


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Sachin Gujar, C.A16

Illustration No.1

Tax payable by an individual having total income of Rs.2.00 lacs

On Rs.1.00 Lac p.a. NIL

On Rs.1.00 Lac p.a. to Rs.1.50Lacs p.a. @ 10%

5000/-

On Rs.1.50 Lacs p.a. to Rs.2.00Lacs p.a. @ 20%

10000/-

Tax Payable 15000/-

Add: Education Cess @ 2% 300/-

Net Tax Payable 15300/-


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Sachin Gujar, C.A 17

Illustration No.2

Tax payable by a Womenhaving total income of Rs.2.00 lacs

On Rs.1.35 Lac p.a. NIL

On Rs.1.35 Lac p.a. to Rs.1.50Lacs p.a. @ 10%

1500/-

On Rs.1.50 Lacs p.a. to Rs.2.00Lacs p.a. @ 20%

10000/-

Tax Payable 11500/-

Add: Education Cess @ 2% 230/-

Net Tax Payable 11730/-


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Due Date For Filing your Tax Return

The Due date for filing your Tax Return is 31stJuly

Non Filing of your Return in time can attract Interest /Penalty

You have to file your Tax Return in Form No.2D ( Saral ).


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Budget Implications for F.Y 2007-08

Basic exemption increased from Rs.1.00 Lac p.a. to Rs.1.10 Lacs

p.a. and from Rs.1.35 Lacs p.a. to Rs.1.45 Lacs p.a. for women.

Deduction U/s.80D for medical insurance premium increased fromRs.10000/-p.a. to Rs.15000/-p.a.

Education cess increased from 2% to 3%.


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Thank You..!!!


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Contact Us:

Sachin Gujar

Chartered Accountant

1040, Sadashiv Peth,

Bahar Apts,

Near Nagnath Par,

Pune411 030

: 020-24477990

Email : [email protected]
mailto:[email protected]:[email protected]

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Salaries Presentation