Income under the head salary

Income under the head salary(FULL NOTES)

1. Income Under The Head Salary- Under the Income Tax Act,1961 Submitted By : Parminder Kaur

2. SALARY Wages Any annuity or pension Any Gratuity Any fees, commission, perquisite or profit in lieu of salary or in addition to salary Any Advance Salary Leave Salary Amount transferred to RPF to the extent is taxable. Any other payment made or benefit extended due to the employer-employee relationship.

3. TAX TREATMENT OF DIFFERENT FORMS OF SALARY INCOME ADVANCE SALARY : taxable on receipt basis in the A/Y relevant to the P/Y in which it was received. (However relief can be claimed) ARRERS SALARY : TAXABLE ON RECEIPT BASIS, if the same has not been subjected to tax earlier on due basis. (However relief can be claimed) BONUS & COMMISSION RECEIVED : Both will be taxable in the year of receipt, if it has not been taxed before. (However relief can be claimed)

4. ENTERTAINMENT ALLOWANCE Entertainment allowances is first included in income under the head Salaries and deduction is given only to Government Employees :- Least of the following shall be exempt : Actual amount received 20% of Basic Salary ₹5,000/-

5. Rent Free Accommodation

6. Income tax on accommodation given by the government in case of unfurnished accommodation License fee determined by the Govt XXXXX Less Rent paid by the employee (XXX) Taxable value of unfurnished accommodation XXXX

7. Income tax on accommodation given by the government in case of furnished accommodation License fee determined by the Govt XXXXX Add Leased charges of furniture in case of leased furniture or 10 % depreciation on furniture in case it is owned by owner XXXX Less Rent paid by the employee (XXX) Taxable value of unfurnished accommodation XXXX

8. Unfurnished owned accommodation provided by employer(non- G ovt . employees ) Population less than 10 lakh Population exceeds 10 lakh but less than 25 lakh Population exceeds 25 lakh 7.5 % of salary 10 % of salary 15 % of salary (Less) rent paid by employee (Less) rent paid by employee (Less) rent paid by employee

9. Unfurnished leased accommodation provided by employer(non-govt. employees ) Actual rent paid by employer or 15 % of salary whichever is less XXXX Less Rent paid by the employee (XXX) Taxable value of RFA

10. Furnished owned accommodation provided by employer(non-govt. employees) Population less than 10 lakh Population exceeds 10 lakh but less than 25 lakh Population exceeds 25 lakh 7.5 % of salary 10 % of salary 15 % of salary (Less) rent paid by employee (Less) rent paid by employee (Less) rent paid by employee Value of unfurnished owned accommodation as computed above Add Leased charges of furniture in case of leased furniture or 10 % depreciation on furniture in case it is owned by owner XXXX Less Rent received (XXX) Taxable value of RFA

11. Furnished leased accommodation provided by employer(non-govt. employees) Actual rent paid by employer or 15 % of salary whichever is less XXXX Less Rent paid by the employee (XXX) Taxable value of RFA Value of unfurnished leased accommodation as computed above Add Leased charges of furniture in case of leased furniture or 10 % depreciation on furniture in case it is owned by owner XXXX Less Rent received (XXX) Taxable value of RFA

12. ACCOMODATION IN HOTEL 24% of Salary (OR) ACTUAL CHARGES {whichever is less} – actual rent paid However nothing shall be taxable if the accommodation is provided for not more than 15 days + provided on transfer of employees from one place to other. For all Government and Non-Government employees.

13. Note: 1. Salary of all employees shall be taken. 2. Only current year’s monetary payment shall be taken. 3. Salary – Basic + DA + Bonus + Commission + Taxable portion of all allowances + all monetary payments but does not include Provident Fund and exempted allowances.

14. VALUE OF INTEREST FREE LOAN Loan type = Any Rate = Rate charged by S.B.I. on 1st day of relevant P/Y However nothing shall be taxable – If Loan in aggregate do not exceed ₹20,000/- OR – If the loan provided for the treatment of specified diseases. But if such loan has been reimbursed under any medical insurance scheme & the loan is not paid to the employer, it shall be taxable.

15. USE OF MOVEABLE ASSETS a) LAPTOP & COMPUTERS : exempted b ) OTHER ASSETS : 10% p.a. of the Actual Cost if it is owned by the employer OR Actual Hire Charges if it is hired by the employer

16. TRANSFER OF MOVEABLE ASSETS Value of the benefit shall be : – Actual Cost of the assets shall be reduced by the following percentage for each completed year; ignoring fractions from the date of purchase/put to use by the employer : – Computer & Electronic Items 50% W.D.V. Motor Car 20% W.D.V. Any other assets 10% S.L.M. “ Electronic items do not include household appliances ”

17. PERSONAL EXPENDITURE BENEFITS SWEEPER / GARDNER / WATCHMAN / PERSONAL ATTENDENT : Actual cost to the employer. GAS , ELECTRICITY, WATER : Own Source : manufacturing cost per unit. Other Source : amount paid to outside agency.

18. PERSONAL EXPENDITURE BENEFITS CHILDREN EDUCATION : If the education facility is owned by employer. OR Free education is provided in any other educational institution by the reason of employee being in employment of that employer. FAIR MARKET VALUE OF SUCH SIMILAR EDUCATION. HOWEVER NOTHING SHALL BE TAXABLE IF VALUE PER CHILD DOESNOT EXCEED ₹ 1,200 /- PER MONTH.

19. LEAVE TRAVEL CONCESSION By Air: If the Journey is made by National carrier then Fare up to Economy Class By Train: 1 st class AC fare By Bus: 1 st class fare

20. Conditions of LTC The exemption is restricted only to the travel cost incurred by the employee. The  exemption  is not valid for the costs incurred during the entire trip which might include expenses such as food expenses, shopping expense and other expense . The exemption is not available for more than two children of the individual born after October 01, 1998. Exemption is allowed for only two travels within a block of four years. The current block is between 2014-2017. If the individual doesn’t take advantage of the exemption within this block, they can carry it over to the next block . Leave Travel Allowance covers only domestic travel and does not cover international travel The mode of travel should be either air travel, railway or public mode of transport

21. MEDICAL PERQUISITE WITHIN INDIA :• Expenditure incurred or reimbursed on any medical treatment provided to an employee or any member of his family is FULLY EXEMPT without any limit for treatment in any hospital, dispensary, etc., if – Maintained by the Employee – Maintained by Government – Maintained by any local authority – Approved by Govt. for treatment of Government or other employees – Approved for a specified disease only for treatment of specified disease.

22. WITHIN INDIA : • Health Insurance Premium incurred or reimbursed for insurance on the health of employee or any member of his family is FULLY EXEMPT. • REIMBURSEMENT BY EMPLOYER of any amount actually spent by the employee for obtaining his or his family member’s treatment in any hospital, nursing home or a clinic up to maximum ₹15,000/ - for P/Y.

23. OUTSIDE INDIA : • Such medical expenses shall be tax-free to the extent permitted by R.B.I. • Expenses on stay abroad of the employee or any member of his family for medical treatment with one attendant who accompanies the patient in connection with such treatment to the extent permitted by R.B.I. • TRAVEL EXPENSES of patient ( employee or his family member) and one attendant. . Who accompanies the patient in connection with such treatment shall be exempt, IF Gross Total Income (excluding such travel expenses but after including taxable medical and boarding) doesn’t exceed ₹2,00,000/ -.

24. Family for the purpose of Medical perks Spouse & Children of the employee (Whether dependent or not). Dependent : – Parents – Brother – Sister of the employee

25. VALUATION OF MOTAR CAR (A) When car is owned or hired by employer and used for: Office purposes- Nil Personal purposes- Actual Running & Maintenance + Actual Chauffeur Expenses + wear & tear @ 10% of Cost OR Actual HIRE CHARGES

26. 3. Partly Official & Partly Personal Purpose Running & Maintenance Expenditure is borne by EMPLOYER up to 1.6 Litres CC ₹1,800 p.m. Exceeding 1.6 Litres CC ₹2,400 p.m. Running & Maintenance Expenditure is borne by EMPLOYEE up to 1.6 Litres CC ₹600 pm Exceeding 1.6 Litres CC ₹900 pm Add : ₹900 per month of Chauffeur ₹900 pm (BOTH CASES)

27. ( B) WHEN CAR IS OWNED BY EMPLOYEE AND USED : 1. Exclusively for Official Purpose: NIL 2. Exclusively for Personal Purpose : Actual Expenditure incurred by employer 3. Partly Official Partly Personal : • Up to 1.6 Litres CC ₹1,800 p.m . • Exceeding 1.6 Litres CC ₹2,400 p.m.

28. Valuation Of Perquisite In Respect Of Gifts, Voucher Or Token If the amount of Gift exceeds ₹5,000/ - in aggregate during the previous year, then such excess amount shall be taxable . If any amount of gift received in cash or cash equivalent is fully taxable.

29. VALUATION OF CREDIT CARD Expenditure incurred by employer                                                            * * * Less: expenditure on its use for official purposes                                       (* * *)   Less: any amount received or recovered from the employee                   ( * * *  ) Taxable value of the Perk                                                                        * * *

30. VALUATION OF PERQUISITE : CLUB EXPENDITURE STEP 1 : Expenditure incurred by employer in respect of club expenditure. STEP 2 : Less : Amount incurred for official purpose Less : Amount recovered from employee BALANCE IF POSITIVE WILL BE TAXABLE Note : Health Club, Sports facilities etc. provided uniformly to all classes of employees by the employer shall be EXEMPTED. Note : Initial deposit / Fees for Corporate or institutional membership, where benefit doesn’t remain with the particular employee after the cessation of employment are exempt.

31. Employer’s CONTRIBUTION TOWARDS APPROVED SUPERANNUATION FUND : The amount of any contribution to an approved superannuation fund by the employer in respect of the assessee ( employee), to the extent it exceeds ₹1,00,000/ -. It is taxable in the year in which contribution is made.