Income from Salary - Allowance - Perquisites - Profit in Lieu of Salary

Income from Salary - Allowance - Perquisites - Profit in Lieu of Salary

1. Income from Salaries Mr.N.Devaram ., M.Com ., NET., TNSET Assistant Professsor Sri Ramakrishna College of Arts & Science

2. Income from Salaries [Sections 15–17] 📘 Meaning: “Income from Salaries” refers to all income received by an individual from an employer–employee relationship. It includes all payments made by an employer to an employee as remuneration for services rendered, whether in cash or kind, and whether due or paid.

3. ALLOWANCE – Under Income from Salaries [Sections 15–17] 📘 Meaning: An allowance is a fixed amount of money paid regularly by the employer to the employee to meet certain specific expenses related to his employment or personal needs. ➡️ It is in addition to the basic salary and is generally taxable, unless specifically exempt under Section 10 of the Income Tax Act, 1961.

4. Fully Exempted 1. Foreign Allowance – only in case of Government employees posted outside India 2. House Rent Allowance given to Judges of High Court and Supreme Court 3. Sumptuary Allowance given to Judges of High Court and Supreme Court 4. Allowances from United Nations Organisation (UNO) 5. Allowance to teacher or professor from SAARC member states

5. Fully Taxable 1. Dearness Allowance / Additional Dearness Allowance / High Cost of Living Allowance 2. City Compensatory Allowance 3. Capital Compensatory Allowance 4. Lunch Allowance 5. Tiffin Allowance 6. Marriage Allowance 7. Family Allowance 8. Deputation Allowance 9. Wardenship Allowance 10. Non-Practising Allowance

6. Fully Taxable 11. Project Allowance 12. Overtime Allowance 13. Fixed Medical Allowance 14. Entertainment Allowance for Non-Government Employees 15. Water and Electricity Allowance 16. Servant Allowance 17. Holiday Trip Allowance 18. Transport Allowance (for normal employees) 19. Any other allowance neither fully nor partially exempted 20. Allowance to Chairman/Retired Chairman, Member/Retired Member of UPSC [w.e.f. A.Y. 2021–22]

7. Partially Taxable 1. House Rent Allowance (HRA) 2. Entertainment Allowance for Government employees 3. Allowances covered u/s 10(14) ( i ) Helper Allowance (ii) Uniform Allowance (iii) Academic Allowance (iv) Conveyance Allowance (v) Travelling Allowance (vi) Daily Allowance

8. 4. Allowances covered u/s 10(14) ( i ) Special Compensatory Allowance (Hill, High Altitude, Uncongenial Climate, Snow Bound, Avalanche) (ii) Border/Remote/Difficult/Disturbed Area Allowance (iii) Transport Allowance for specified handicapped employees (iv) Tribal Area Allowance (v) Running Allowance (Transport Sector) (vi) Children Education Allowance (vii) Hostel Expenditure Allowance (viii) Compensatory Field Area Allowance (ix) Compensatory Modified Field Area Allowance (x) Counter-Insurgency Allowance (Armed Forces away from base for >30 days)

9. House Rent Allowance Tax Treatment of HRA (Section 10(13A) read with Rule 2A): Out of the total HRA received, the minimum of the following three amounts is exempt from tax, and the balance (if any) is taxable : 50% of salary (if residing in Mumbai, Kolkata, Delhi, or Chennai ) 40% of salary (for all other cities ) Actual HRA received Rent paid – 10% of salary → Taxable HRA = Actual HRA received – Exempted amount Important Notes: ( i ) Meaning of " Salary" For the purpose of HRA exemption: Salary = Basic Pay + DA (if it enters into retirement benefits) + DP + Commission (on turnover)

10. Children Education Allowance Exempt up to ₹100 per child per month maximum 2 children Hostel Expenditure Allowance Exempt up to ₹300 per child per month maximum 2 children

11. Perquisites – Income from Salary [Section 17(2)] 📘 Meaning: A perquisite (often called a “perk”) is any benefit or facility provided by an employer to an employee, in addition to salary or wages. It may be in cash or in kind — for example, rent-free accommodation, free car, free gas/electricity, medical facility, etc.

12. Type of Accommodation Taxable Value Owned by Employer Based on city population (as per 2011 Census): • Population ≤ 15 lakhs → 5% of Salary • Population > 15 lakhs ≤ 40 lakhs → 7.5% of Salary • Population > 40 lakhs → 10% of Salary Taken on Lease/Rent by Employer Lower of the following: • Actual Rent Paid by Employer, or • 10% of Employee’s Salary Value Rent-Free Accommodation (Unfurnished) CASE I – Government Employees Taxable Value = License fee or rent fixed by the Government It does not matter whether the house is owned or rented by the employer. CASE II – Non-Government Employees Note: Fair Rental Value / Market Value of house is not considered.

13. ✅ Valuation of Furnished Accommodation Taxable Value = Unfurnished RFA Value + Furniture Cost Component If Furniture is… Add to Perquisite Value Owned by Employer 10% of the Actual Cost of Furniture (per annum) Taken on Hire by Employer Actual Hire Charges Paid

14. Rent-Free Accommodation in Hotel (for Non-Government Employees) Value of perquisite = 24% of salary or actual hotel charges paid by employer , whichever is less , provided the stay exceeds 15 days . If stay ≤ 15 days → No perquisite

15. Purpose  Engine capacity up to 1.6 liters Engine capacity over 1.6 liters Official use only No taxable value, provided a logbook and records are maintained. No taxable value, provided a logbook and records are maintained. Partly personal, partly official A monthly fixed amount is added to income: • ₹1,800 if the employer covers expenses. • ₹600 if the employee covers expenses. • Add ₹900 per month if a chauffeur is also provided. A monthly fixed amount is added to income: • ₹2,400 if the employer covers expenses. • ₹900 if the employee covers expenses. • Add ₹900 per month if a chauffeur is also provided. Exclusively personal use The entire actual cost of running and maintenance is taxable. This includes wear and tear (10% per year) and any driver's salary. The entire actual cost of running and maintenance is taxable. This includes wear and tear (10% per year) and any driver's salary. Car Perk

16. PENSION Type Meaning Tax Treatment (Old Regime) 1. Uncommuted Pension Periodic monthly payments Fully taxable under "Salary" 2. Commuted Pension Lump-sum payment instead of periodic pension Category Exemption Govt. employees Fully exempt Non-Govt. employees receiving gratuity 1/3rd of full value of commuted pension exempt Non-Govt. employees not receiving gratuity 1/2 of full value of commuted pension exempt Commuted Pension – Exemption (Sec. 10(10A))

17. Category of Employee Exemption under Sec. 10(10AA) Limit / Details Government Employees Fully exempt 100% Exempt Non-Government Employees Least of the following: 1️⃣ ₹3,00,000 / 2500000 2️⃣ Actual leave encashment received 3️⃣ 10 months’ average salary 4️⃣ Cash equivalent of unutilized earned leave (max 30 days/year of service) ₹3,00,000 / 2500000 limit

18. Particulars Amount (₹) Basic Salary xxx Add: Advance Salary xxx Add: Arrears of Salary xxx Add: Pension (Uncommuted / Taxable Portion) xxx Add: Fully / Partly Taxable Allowances xxx Add: Bonus / Fees / Commission xxx Add: Value of Taxable Perquisites xxx Add: Taxable Leave Encashment xxx Add: Taxable Gratuity xxx Add: Taxable Commuted Pension xxx Add: Employer’s Contribution to PF (Taxable Portion) xxx Add: Interest on PF (Taxable Portion) xxx Add: Taxable Retrenchment Compensation xxx Add: Compensation under VRS (Taxable Portion) xxx Add: Any Other Payments from Employer (Not Exempt) xxx GROSS SALARY xxx Less: Deductions u/s 16 (i) Standard Deduction u/s 16(ia) xxx (ii) Entertainment Allowance u/s 16(ii) xxx (iii) Professional Tax / Employment Tax u/s 16(iii) xxx TOTAL DEDUCTIONS xxx INCOME UNDER THE HEAD “SALARIES” xxx

19. Deduction Type Limit / Eligibility Applicable To Standard Deduction (16( ia )) ₹50,000 flat All salaried/pensioners  Old regime Standard Deduction (16( ia )) ₹75,000 flat All salaried/pensioners  New regime Entertainment Allowance (16(ii)) Full allowance Government employees only EA(LIMIT) 5000 ACTUAL xx 1/5 th of salary xx Least is deducted Professional Tax (16(iii)) Actual PT paid Salaried employees who pay PT

20. THANK YOU 10