1 .INCOME TAX ON SALARIES-(01.06.2015) - Copy.ppt

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1. AN OVERVIEW OF INCOME-TAX LAW IN INDIA
PRESENTED BY:
SIB SANKAR BANIK, W.B.A&A.S
INTERNAL AUDIT OFFICER,
FINANCE (INTERNAL AUDIT)DEPARTMENT
GOVERNMENT OF WEST BENGAL
MOB:[phone]
E-MAIL ID: [email protected]

2. BASIC COMPONENTS
Income-tax is the most significant direct tax. The
income-tax law in India consists of the following
components:
•Income Tax Act
•Annual Finance Acts
•Income Tax Rules
•Circulars/Notifications
•Legal decisions of Courts

3. Salary Taxation
www.incometa
xindia.gov.in

4. D.D.O’s RESPONSIBILITY
•Everypersonwhoisresponsibleforpayinganyincome
chargeableunderthehead"Salaries"shalldeductincome-
taxontheestimatedincomeoftheassesseeunderthe
head"Salaries"forthefinancialyear2014-15.Theincome-
taxisrequiredtobecalculatedonthebasisoftherates
giveninthiscircular,subjecttotheprovisionsrelatedto
requirementtofurnishPANaspersec206AAoftheAct,
andshallbedeductedatthetimeofeachpayment.Notax,
however,willberequiredtobedeductedatsourceinany
caseunlesstheestimatedsalaryincomeincludingthevalue
ofperquisites,forthefinancialyearexceedsRs.2,50,000/-
orRs.3,00,000/-asthecasemaybe,dependinguponthe
ageoftheemployee.

5. What is TDS
•With holding tax or Tax deduction at source
means, deduction of tax as and when the
transaction takes place i.e, when the payment
is made or payable, which ever is earlier.
•Since Government needs revenue to function,
it is very important to have a flow of revenue to
meet the expenditure.

6. TDS Cycle
•Tax deduction and remittance
•Collection of CIN/BIN (Book Identification
Number)
•Preparation of Quarterly e-TDS returns
•Uploading the e-TDS return through TIN-FC
•Issue of Form No.16/16A

7. INCOME TAX ON SALARIES.
1.The levy of income tax in India is at present
governed by two acts.
a)The Income Tax Act,1961
b)The Finance Act passed each year by the
Parliament.
2.Income Tax is leviable annually for each
Financial Year commencing on the 1
st
day of
April and ending on the 31
st
day March
following.
3.Income tax on salaries is computed on annual
basis and recovered as TDS on monthly basis
for the sake of our convenience.

8. INCOME TAX ON SALARIES
4.For the purpose of computing IT on salaries the
term ‘salary’ includes following elements:
a)Pay as defined in FR 9(21),leave salary and
advance of pay.
b)Bonus
c) Dearness allowance
d)Compensatory allowance
e)House rent allowance-subject to exemption
f) Value of Rent Free quarters
g) Fees retainable by the employees.
h) Honorarium

9. INCOME TAX ON SALARIES
i)Reimbursement of tuition fees.
j) Subsistence allowance
k) Interim relief
l) Overtime allowance
m) Government Contribution to the NPS.
5.Following items are not to be taken in to
account for the purpose of computing IT on
salaries :
a)Sumptuary allowance and uniform allowance
b) Reimbursement of cost of medical
treatment subject to limits

10. INCOME TAX ON SALARIES
c) Value of LTC
b) cash equivalent of leave salary received at the
time of retirement.
c) TA granted for tour on duty and for transfer
d) Composite hill compensatory allowance
e) Border area /remote area /tribal area
difficult area /disturbed area allowance.
f) Conveyance allowance
g) CEA and hostel subsidy subject to limits
h) Any allowance granted for encouraging the
academic, research and other professional
pursuit
i) Transport allowance up to Rs.1600/-for orthopedically
handicapped persons and Rs.800/-for others (pm)
j) Any payment from GPF

11. INCOME TAX ON SALARIES
6. The salary income of a person is calculated on the total salary
due to him / her as per the guidelines provided above.
7. From the total income so arrived at(gross salary) the following
deductions to the extent permissible are to be allowed to get
taxable salary
a) HRA exemption to the extent admissible
b) Accrued interest/interest paid on HBA ,
c) Donation to any recognized charitable trust/
fund such as Prime Minister’s National relief fund
d) Professional tax paid to local bodies.
e) For handicapped employees an amount of Rs.50000 or
Rs.1,00,000/-as the case may be

12. INCOME TAX ON SALARIES
8. With this taxable salary if the person is having
any other income from other sources as
informed by him the same is to be added
9. From the taxable salary, following elements
of various forms of savingsare to be
deducted to the extent admissible.
a)Subscription to PF,LIC,PLI policies
b)Subscription to any authorized pension
fund
c)Subscription to New pension Scheme
d) Subscription to any medical insurance
10. The total amount of savings is limited to a
maximum of Rs.1,50,000/.

13. INCOME TAX ON SALARIES
11.Thus the amount of taxable income is to
arrived as follows.
a)Total salary income -- ________
b)less total of exempted
items( such as HRA exemption) --________(-)
c ) Gross Taxable income --_______
d) less savings(limited to maximum) _________(-)
e) Net taxable salary ----------__________

14. Deduction on House Rent allowance
House rent allowance granted to the employee is
exempt u/s 10(13A) to the following extent;
Provided expenditure on rent is actually incurred,
the amount of exemption granted is the least of
•(1) HRA received
•(2) Rent paid Less 10% of salary
•(3) 40% of salary, (50% in case of Mumbai,
Chennai, Kolkata & Delhi). Salary includes bonus
+ Dearness allowance, where provided by terms
of employment.

15. Section 80CCC: Deduction in respect of
Premium Paid for Annuity Plan of LIC or
Other Insurer
•This section provides deduction to an Individual for
any amount paid or deposited in any annuity plan
of LIC or any other insurer for receiving pension
from a fund referred to in Section 10(23AAB).
•In case the annuity is surrendered before the date
of its maturity, the surrender value is taxable in the
year of receipt.

16. Deductions on Section 80C, 80CCC &
80CCD
•TotalDeductionundersection80C,
80CCCand80CCD(1)togethercannot
exceedRs1,50,000forthefinancialyear
2014-15(assessmentyear2015-16).The
limitforfinancialyear2015-16isalsoRs
1,50,000.

17. New Inclusion -80 CCD(1B)
•Anewsection80CCD(1B)hasbeenintroducedto
provideforadditionaldeductionforamount
contributedtoNPSofuptoRs.50,000.
•Thereforeforfinancialyear2015-16,Total
DeductionunderSection80C,80CCC,80CCD(1)
and80CCD(1B)cannotexceedRs2,00,000.
•Fromassessmentyear2012-13,employer's
contributionundersection80CCD(2)towards
NPSisoutsidethemonetaryceilingmentioned
above.

18. Deduction from gross total income:
Section 80 TTA
•Deductionfromgrosstotalincomewithrespect
toanyIncomebywayofInterestonSavings
account
•Deductionfromgrosstotalincomeofan
individualorHUF,uptoamaximumofRs.
10,000/-,inrespectofinterestondepositsin
savingsaccountwithabank,co-operativesociety
orpostoffice.Section80TTAdeductionisnot
availableoninterestincomefromfixeddeposits.

19. DEDUCTIONS FROM TOTAL INCOME
(Section 80D):
Forfinancialyear2015-16–Deductionis
raisedfromRs15,000toRs25,000.The
deductionforseniorcitizensisraisedfromRs
20,000toRs30,000.Forfinancialyear2015-
16–DeductionisraisedfromRs15,000toRs
25,000.Thedeductionforseniorcitizensis
raisedfromRs20,000toRs30,000.

20. DEDUCTIONS FROM TOTAL INCOME
(Section 80DD):
•Section 80DD: Deduction in respect of Rehabilitation
of Handicapped Dependent Relative
•Where disability is 40% or more but less than 80% -
fixed deduction of Rs 50,000.
•Where there is severe disability (disability is 80% or
more) –fixed deduction of Rs 1,00,000.
•A certificate of disability is required from prescribed
medical authority.
•For financial year 2015-16 –The deduction limit of Rs
50,000 has been raised to Rs 75,000 and Rs 1,00,000
has been raised to Rs 1,25,000.

21. DEDUCTIONS FROM TOTAL INCOME
(Section 80DDB):
•DeductioninrespectofMedicalExpenditureonSelfor
DependentRelative.
•AdeductiontotheextentofRs.40,000/-ortheamount
actuallypaid,whicheverislessisavailableforexpenditure
actuallyincurredbyresidentassesseeonhimselfor
dependentrelativeformedicaltreatmentofspecified
diseaseorailment.Thediseaseshavebeenspecifiedin
Rule11DD.Acertificateinform10Iistobefurnishedby
theassesseefromanyRegisteredDoctor.
•Incaseofseniorcitizenthedeductioncanbeclaimedupto
Rs60,000oramountactuallypaid,whicheverisless.
•Forfinancialyear2015-16–forveryseniorcitizensRs
80,000isthemaximumdeductionthatcanbeclaimed.

22. Section 80E: Deduction with respect
to Interest on Loan for Higher Studies
•Deduction in respect of interest on loan taken
for pursuing higher education. This loan is
taken for higher education for the assessee,
spouse or children or for a student for whom
the assessee is a legal guardian.

23. Deduction for First Time Home
Owners (Section 80EE):
This section provided deduction on the Home
Loan Interest paid and is valid for financial years
2014-15 (Assessment year 2015-16) only.
The deduction under this section is available only
to Individuals for first house purchased where the
value of the house is Rs 40lakhs or less and loan
taken for the house is Rs 25lakhs or less. And the
Loan has been sanctioned between 01.04.2013 to
31.03.2014. The total deduction allowed under
this section is Rs 1,00,000.

24. Section 80U: Deduction with respect to
Person suffering from Physical Disability
•DeductionofRs.50,000/-toanindividualwho
suffersfromaphysicaldisability(including
blindness)ormentalretardation.Further,ifthe
individualisapersonwithseveredisability,
deductionofRs.100,000/-shallbeavailableu/s
80U.CertificateshouldbeobtainedfromaGovt.
Doctor.TherelevantruleisRule11D.
•Forfinancialyear2015-16–Thedeductionlimit
ofRs50,000hasbeenraisedtoRs75,000andRs
1,00,000hasbeenraisedtoRs1,25,000.

25. INCOME TAX ON SALARIES
12. After arriving the net taxable income IT has to be calculated
as follows. Education cess @3% of IT is to levied in all cases.
NET TAXABLE INCOME RATE OF INCOME TAX
UP TO AGE OF 60 YRS.
Upto Rs.2,50,000 NIL
Rs.2,50,000 –Rs.5,00,00010% of income exceeding Rs.2,50,000/-
Rs.5,00,001-Rs.10,00,000Rs.25,000/-plus 20% of income exceeding Rs.5,00,000
Rs.10,00,001 –and aboveRs1,25,000/-+ 30% of income exceeding Rs.10,00,000
Education CessandSecondary & Higher Education Cess= 3%
on Tax

26. INCOME TAX ON SALARIES
12 (b) .After arriving the net taxable income IT has to be
calculated as follows. Education cess @3% of IT is to levied in
all cases.
NET TAXABLE INCOME RATE OF INCOME TAX
Above 60 Yrs. at any time in Prev. Year
Upto Rs.3,00,000 NIL
Rs.3,00,000 –Rs.5,00,00010% of income exceeding Rs.3,00,000/-
Rs.5,00,001-Rs.10,00,000Rs.20,000/-plus 20% of income exceeding Rs.5,00,000
Rs.10,00,001 –and aboveRs1,20,000/-+ 30% of income exceeding Rs.10,00,000
Education CessandSecondary & Higher Education Cess= 3%
on Tax

27. INCOME TAX ON SALARIES
12 (c) .After arriving the net taxable income IT has to be
calculated as follows. Education cess @3% of IT is to levied in
all cases.
NET TAXABLE INCOME RATE OF INCOME TAX
Above 80 Yrs. at any time in Prev. Year
Upto Rs.5,00,000 NIL
Rs.5,00,001-Rs.10,00,00020% of income exceeding Rs5,00,000/-
Rs.10,00,001 –and aboveRs1,00,000/-+ 30% of income exceeding Rs.10,00,000
Education CessandSecondary & Higher Education Cess= 3%
on Tax

28. INCOME TAX ON SALARIES
13.TheITandeducationcesssoarrivedatisto
bedivedby12andthesameistobe
recoveredonmonthlybasis.

29. Average rate of deduction
Thestatuteenjoinstheemployertocomputethetaxliabilityof
theemployeeonthebasisoftheratesinforceandtodeductthe
taxattheaverageratecomputedonthebasisofthesame.Thus,
theemployerisrequiredtocomputeatthebeginningofthe
financialyear,thetotalsalaryincomepayabletoanemployee
duringthefinancialyear.Further,theemployershouldalsotake
intoaccountanyotherincomeasreportedbytheemployee.
Afterconsideringtheincomesexempt,deductionsandrelief,
thetaxliabilityoftheemployeeshouldbedeterminedonthe
basisoftheratesinforceforthefinancialyear.Everymonth,
1/12ofthisnettaxliabilityascomputedaboveisrequiredto
bededucted.

30. Tax deduction and remittance
•It is the duty of the deductor(who is responsible of signing the
bills or the paying authority) to deduct income tax at the time of
payment as per the prevailing rates and make sure correctness
of the details of PAN which is submitted by the deductee/payee.
•Remittance:
•1. By Challan (No.281, for the TDS payments)
•2. By Book-adjustment (through Treasury or PAO)
•Time Limit:
•1. If the tax is to be paid by challan–7
th
of the following month
•2. If the tax adjusted through Book-adjustment –same day

31. Mode of Payment of TDS
•CompulsoryfilingofStatementbyPAO,Treasury
Officer,etcincaseofpaymentofTDSbyBookEntry.
*OfficeoftheStateGovernment,wheretaxhasbeen
paidtothecreditoftheCentralGovernmentwithout
theproductionofachallan[BookEntry],thePayand
AccountsOfficerortheTreasuryOfficersubmita
statementinFormNo.24Gwithintendaysfromthe
endofthemonthtoM/sNationalSecurities
DepositoryLtdinrespectoftaxdeductedbythe
deductorsintimatethenumber(BookIdentification
NumberorBIN)generatedbytheagency.

32. Mode of Payment of TDS
The deposition of TDS may be made through
challan No. ITNS 281. The deductor must
ensure that the details like employer’s name
and address, PAN, TAN, the Assessing Officer
having jurisdiction, the amount of tax and
surcharge and cess, the date of payment, the
salary from which TDS has been done and the
tax which is being paid, are correctly filled.

33. Interest, Penalty & Prosecution for Failure
to Deposit Tax Deducted.
•Interestattherateof1.5%p.m,orpartof
themonth,fromthedateofdeductiontothe
dateofactualpayment,u/s201(1A)ofIT
Act,1961.
•iffailtodeductTDS,interestattherateof1%
p.morpartofthemonth,fromthedateon
whichtaxdeductabletothedateofactual
paymentu/s201(1)oftheITAct,1961.

34. Failure to pay tax deducted at source
prosecution u/s 276B foIT Act, 1961
•Punishablewithfineandrigorous
imprisonment–minimum03months,
maximum07years.

35. Furnishing of Certificate for Tax Deducted
•Section 203 requires the DDO to furnish to
the employee a certificate in Form 16
detailing the amount of TDS and certain
other particulars :
•Valid permanent account number (PAN) of the
deductee;
•Valid tax deduction and collection account
number (TAN) of the deductor;
•Book identification number or numbers (BIN)

36. TRACES
•TRACESisaweb-basedapplicationofthe
Income-taxDepartmentthatprovidesan
interfacetoallstakeholdersassociatedwithTDS
administration.Itenablesviewingofchallan
status,downloadingofNSDLFile,Justification
ReportandForm16/16Aaswellasviewingof
annualtaxcreditstatements(Form26AS).Each
deductorisrequiredtoRegisterintheTraces
portal.Form16/16Aissuedtodeducteesshould
mandatorilybegeneratedanddownloadedfrom
theTRACESportal.

37. POINTS TO BE REMEMBERED..
•Anassessee,beinganindividualresidentinIndia,
whosetotalincomedoesnotexceedfivehundred
thousandRs.5lakhshallbeentitledtoa
deduction,fromtheamountofincome-tax(as
computedbeforeallowingthedeductionsunder
thisChapter)onhis/hertotalincomewithwhich
he/sheischargeableforanyassessmentyear,of
anamountequaltohundredpercentofsuch
income-taxoranamountoftwothousandrupees
(2000/-),whicheverisless.

38. POINTS TO BE REMEMBERED
•E-filing of income tax return is must for
assessee with annual income above Rs. 5 lakh.
•Tax payers with salary income of up to Rs. 5
lakh and interest from savings bank accounts
up to `10,000 is required to file income tax
returns in either mode manually or through E-
filing.

39. Deduction at Source from payments to Contractors and
Subcontractors under section 194C.
*Personresponsibleforpayinganysumfor
carryinganyworktoanyresidentcontractor
shoulddeducttaxatsource.
* Tax should be deducted at source only if the
contract is between the contractor and the
following specified persons:

40. Deduction at Source from payments to Contractors and
Subcontractors under section 194C.
1. The Central Government or any State Government.
2. Any local authority.
3. Any corporation established by or under a Central, State or Provincial Act
4. A company
5. Any Co-operative Society.
6. Any authority, constituted in India by or under any law, engaged either for the
purpose of dealing with and satisfying the need for housing accommodation
or for the purpose of planning development or improvement of cities, towns
and villages,.
7. Any Society registered under the Societies Registration Act, 1960 or any law
corresponding to that Act in any part of India.
8. Any Trust.
9. Any University established by or under any Central, State or Provincial Act or
any institution declared to be a University under the University Grants
Commission Act.

41. Deduction at Source from payments to Contractors and
Subcontractors under section 194C.
10. Any firm.
11. Any individual or Hindu Undivided Family whose books are required to be
audited under section 44AB during the immediately preceding financial year.
[The turnover from business/professional exceeds the limits specified u/s
44AB during the immediately preceding financial year].
12. Association of persons or Body of Individuals, whether incorporated or not,
whose books are required to be audited under section 44AB during the
immediately preceding financial year.
??????Income Tax should be deducted at the time of payment or
credit to the account of the contractor whichever is earlier.
??????Income Tax is to be deducted at source @ 1% if the
contractor/sub contractor payee is an individual or HUF.
Payment of amounts to person other than Individual/HUF
would attract TDS rate of 2%.

42. Deduction at Source from payments to Contractors and
Subcontractors under section 194C.
•Provisions of Section 194C are applicable only where the contract is either a
“contract for carrying out any work” or a “contract for supply of labour for
works contract”. Hence, these provisions are not applicable for payments
made under the contract of sale of goods.
•For the purpose of this section, the following contracts are also included in
the scope of “Work”:
•1. Advertising.
•2. Broadcasting and telecasting including production of programs for
•broadcasting and telecasting.
•3. Carriage of goods and passengers by any mode of transport other than
•Railways.
•4. Catering.

43. Deduction at Source from payments to Contractors and
Subcontractors under section 194C.
•No deduction of tax at source shall be made under this section
in the following circumstances:
Iftheamountpaid/payableorcredited/likelytobecreditedtothe
contractor/sub-contractordoesnotexceedRs.30,000/-inasingleinstance.
However,thetotalofamountspaidorcreditedduringthefinancialyearshould
notexceedRs.75,000/-.IfthesaidamountexceedsRs.75,000/-,then,the
liabilityforpaymentarisesonthewholeofamountpaidorcreditedandnoton
theamountinexcessofRs.75,000/-.
•In a case where advance payments are made in pursuance of contract be
adjusted against work to be done, tax has to be deducted at the time of the
advance payments.

44. RATE OF T.D.S
•194C(1)-1%(forPaymentindividual)&2%(for
Paymentothers)-onRs.30000/-forsingle
payment/onRs.75000/-foraggregatepayment
duringFinancialYear.
•194C(2)-PaymenttoSub-Contractors/for
Advertisements(asperrateabove).
•194 I-Rent of Land, Building or Furniture -Rs.
180000/-(annually) -10%

45. Filing of Income Tax.

46. TDS/ Filing of Annual
Information and Return to
Income Tax Authority

47. Compulsory for all Deductors to file electronically.
Who can file?

48. •TAN :-TAN or Tax Deduction and
Collection Account Number is a 10
digit alpha numeric number required
to be obtained by all persons who
are responsible for deducting or
collecting tax. It is compulsory to
quote TAN in TDS/TCS return
(including any e-TDS/TCS return),
any TDS/TCS payment challanand
TDS/TCS certificates.
Example: CALP02845D
IMPORTANT ISSUES

49. IMPORTANT ISSUES
•Why is it necessary to have TAN ?
TANisrequiredtobequotedinallTDS/TCS
returns,allTDS/TCSpaymentchallansandall
TDS/TCScertificatestobeissued.TDS/TCS
returnswillnotbereceivedifTANisnotquoted
andchallansforTDS/TCSpaymentswillnotbe
acceptedbybanks.FailuretoapplyforTANor
notquotingthesameinthespecified
documentsattractsapenaltyofRs.10,000/-.

50. Other points
IfanyemployeedoesnotfurnishhisPANtothe
employer,taxwillbededucted(witheffectfrom
April1,2010)eitheratthenormalratesoratthe
rateof20%,whicheverishigher.PANofthe
employeeshouldbementionedonany
correspondenceanddocumentwhichis
exchangedbetweentheemployerandthe
employee.

51. Types of e-Filing
•There are three ways to file returns
electronically
•Option 1: Use digital signature in which case no
paper return is required to be submitted
•Option 2: File without digital signature in which
case ITR-V form is to filed with the department.
This is a single page receipt cum verification
form.
•Option 3: File through an e-return intermediary
who would do e-Filing and also assist the
Assessee file the ITR V Form .

52. •Form 24Q-All tax deductors are required to
file the TDS statements in Form No.24Q (for
tax deducted from salaries). Tax deductors
are, therefore, advised to procure and quote
correct PAN details of all deductees in the
TDS statements for salaries in Form 24Q.
Taxpayers are also liable to furnish their
correct PAN to their deductors.
•Form 26Q
Forms for e-filing

53. Dates of filing Quarterly Statements
E-TDS Return 24Q
Sl. No.Return for the periodLast date of
Submission
1. 30th June 31st July
2. 30th September 31st October
3. 31st December 31st January
4. 31st March 15th May

54. Fee for default in furnishing 24Q
statements
•If a person fails to deliver a 24Q statement within the
time prescribed in section 200(3) in respect of tax
deducted at source he shall be liable to pay, by way of
fee a sum of Rs. 200 for every day during which the
failure continues. However, the amount of such fee
shall not exceed the amount of tax which was
deductible at source. This fee is mandatory in nature
and to be paid before furnishing of such statement.
•A DDO can also file a correction statement for
rectification of any mistake or to add, delete or
update the information furnished in the statement
delivered earlier.

55. D.D.O. SHOULD TO SATISFY THEMSELVES
ABOUT THE GENUINENESS OF CLAIM
•TheDrawingandDisbursingOfficersshouldsatisfy
themselvesabouttheactualdeposits/subscriptions/
paymentsmadebytheemployees,bycallingforsuch
particulars/informationastheydeemnecessarybefore
allowingtheaforesaiddeductions.IncasetheDDOis
notsatisfiedaboutthegenuinenessoftheemployee's
claimregardinganydeposit/subscription/payment
madebytheemployee,heshouldnotallowthesame,
andtheemployeewouldbefreetoclaimthe
deduction/rebateonsuchamountbyfilinghisreturn
ofincomeandfurnishingthenecessaryproofetc.,
therewith,tothesatisfactionoftheAssessingOfficer.

56. Relief U/S 89(1)
•Relief is available when Salary is available in
arrears or advance. Benefit is available
through application of form 10 (E).

57. Thank you