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Presentation by:CS Deepak p. Singh

www.aarviencon.com

Salary Salary TaxationTaxation

Department WebsiteDepartment Website

• The relevant Acts, Rules, The relevant Acts, Rules, Forms and Notifications are Forms and Notifications are available at the website of available at the website of the Income-tax Department -the Income-tax Department -www.incometaxindia.gov.inwww.incometaxindia.gov.in

TDS rates for Financial Year 2013-14TDS rates for Financial Year 2013-14

Senior CitizenSenior Citizen WomanWoman OthersOthers Tax (%)Tax (%)

  For Income For Income Between 0 to Between 0 to 2,50,0002,50,000

  For Income For Income Between 0 to Between 0 to 2,00,0002,00,000

  For Income Between 0 For Income Between 0 to 2,00,000to 2,00,000 00

  For Income For Income Between 2,50,001 Between 2,50,001 to to 5,00,0005,00,000

  For Income For Income Between 2,00,001 Between 2,00,001 toto 5,00,000 5,00,000

  For Income Between For Income Between 2,00,001 to 2,00,001 to 5,00,0005,00,000 1010

  For Income For Income Between 5,00,001 Between 5,00,001 toto 10,00,000 10,00,000

  For Income For Income Between 5,00,001 Between 5,00,001 toto 10,00,000 10,00,000

  For Income Between For Income Between 5,00,001 to 105,00,001 to 10,00,000,00,000 2020

  For For Income Income above above 10,00,00110,00,001

  For For Income Income above above 10,00,00110,00,001

  For Income For Income above above 10,00,00110,00,001 3030

SurchargeSurcharge SurchargeSurcharge 00

Education CessEducation Cess Education CessEducation Cess 33

TopicsTopics• WHAT IS WHAT IS SALARYSALARY• PERQUISITESPERQUISITES• ALLOWANCES ALLOWANCES • INCOMES WHICH DO NOT FORM PART INCOMES WHICH DO NOT FORM PART OF TOTAL INCOMEOF TOTAL INCOME..• DEDUCTION UNDER SECTION 16DEDUCTION UNDER SECTION 16• DEDUCTION OF INTEREST PAID/ACCRUED DEDUCTION OF INTEREST PAID/ACCRUED

ON SOPON SOP• DEDUCTIONS UNDER CHAPTER VI ADEDUCTIONS UNDER CHAPTER VI A..• DUTIES OF PERSONS RESPONSIBLE FOR DUTIES OF PERSONS RESPONSIBLE FOR

DEDUCTION TAXDEDUCTION TAX

What is salaryWhat is salary ? ?(Sec.15,16&17)(Sec.15,16&17)

• Employer and Employee relationship

• An income can be taxed under the head salaries only if there is a relationship of an employer and employee between the payer and payee.

What is salaryWhat is salary ? ?• Salary includesSalary includes• Wages, Wages, • Annuity Annuity • Pension, Pension, • Gratuity, Gratuity, • Fees, Fees, • Commission, Commission, • Perquisites, Perquisites, • Leave encashment, Leave encashment, • Arrears of salary Arrears of salary • others.others.

What is salaryWhat is salary ? ?• Any salary, bonus, commission

or remuneration, by whatever name called, due to, or received by, a partner of a firm from the firm shall not be regarded as “Salary”.

HOUSERENT HOUSERENT ALLOWANCE ALLOWANCE u/s.10(13A)u/s.10(13A)

• The least of the following exemptedThe least of the following exempted• Actual HRA receivedActual HRA received• Rent paid in excess of 10% of salaryRent paid in excess of 10% of salary• 50% of salary in metro cities50% of salary in metro cities• 40% in other places.40% in other places.• For this purpose “Salary” includes For this purpose “Salary” includes

dearness allowance if terms of dearness allowance if terms of employment so provideemployment so provide

House Rent House Rent AllowanceAllowance

• The disbursing authorities should satisfy themselves in this regard by insisting on production of evidence of actual payment of rent.

• It has been decided as an administrative measure that salaried employees drawing house rent allowance up to Rs. 3,000 per month will be exempted from production of rent receipt.

Allowances exempt, amount Allowances exempt, amount received or limit specified, received or limit specified,

which ever is lesswhich ever is less1.1. Children Education Allowance : Exempt up to Children Education Allowance : Exempt up to

actual amount received per child or Rs.100 p.m. actual amount received per child or Rs.100 p.m. per child up to maximum of two children, which per child up to maximum of two children, which ever is less.ever is less.

1.1. Hostel Expenditure Allowance : Exempt up to Hostel Expenditure Allowance : Exempt up to actual amount received per child or Rs.300 p.m. actual amount received per child or Rs.300 p.m. per child up to maximum of two children, which per child up to maximum of two children, which ever is less.ever is less.

1.1. Transport Allowance :Exempt to the extent of Transport Allowance :Exempt to the extent of Rs.800 p.m.Rs.800 p.m.

1.1. The value of any benefit or The value of any benefit or amenity granted or provided free amenity granted or provided free of cost or at concessional rate.of cost or at concessional rate.

2.2. With effect from 1.4.2010 With effect from 1.4.2010 (assessment year 2010-11), the (assessment year 2010-11), the value any specified security value any specified security (stock option) or sweat equity (stock option) or sweat equity shares allotted or transferred.shares allotted or transferred.

PERQUISITESPERQUISITES

S.10 – Incomes which do not S.10 – Incomes which do not form part of total income.form part of total income.

These payments will not be part of salary subject These payments will not be part of salary subject to limits prescribedto limits prescribed• LTC (Sec. 10(5))LTC (Sec. 10(5))• The exemption is allowed only in respect of fare The exemption is allowed only in respect of fare

only.only.• Gratuity (Sec. 10(10))Gratuity (Sec. 10(10))• Commuted value of pension (Sec. 10(10A))Commuted value of pension (Sec. 10(10A))• Leave encashment at the time of retirement (Sec. Leave encashment at the time of retirement (Sec.

10(10AA))10(10AA))• Provident fund receipts and RPF receipts (Sec. Provident fund receipts and RPF receipts (Sec.

10(11) & 10(12))10(11) & 10(12))

GratuityGratuity• Death Cum Retirement Gratuity Death Cum Retirement Gratuity

received by the Central Govt./State received by the Central Govt./State Govt. /Local Authorities.Govt. /Local Authorities.

• Covered by gratuity Act, 1972 & Any Covered by gratuity Act, 1972 & Any other gratuity, least of the following is other gratuity, least of the following is exempted.exempted.

1.1. Actual amount received.Actual amount received.2.2. 15 days salary for each year of 15 days salary for each year of

completed servicecompleted service3.3. Rs.10,00,000/-.Rs.10,00,000/-.

• Central Govt / State Govt EmployeesCentral Govt / State Govt Employees – Exempt– Exempt

• Other EmployeesOther Employees - Exemption will be - Exemption will be determined with reference to the leave to determined with reference to the leave to their credit at the time of retirement on their credit at the time of retirement on superannuation, or otherwise, subject to superannuation, or otherwise, subject to a maximum of ten months’ leave. This a maximum of ten months’ leave. This exemption will be further limited to the exemption will be further limited to the maximum amount of Rs. 3,00,000. maximum amount of Rs. 3,00,000.

EL Encashment

• Tax on employment (professional tax) Tax on employment (professional tax) paid is allowable as deduction from paid is allowable as deduction from salary.salary.

• Entertainment Allowance : This Entertainment Allowance : This deduction is allowed only to a deduction is allowed only to a Government employee to the least of Government employee to the least of following.following.

• Actual amount received.Actual amount received.• 20% of salary exclusive of any 20% of salary exclusive of any

allowance.allowance.• Rs.5000.Rs.5000.

Deduction under section 16

Deduction on income fromDeduction on income fromHouse propertyHouse property

• interest up to a maximum limit of interest up to a maximum limit of Rs. Rs. 1,50,0001,50,000 is allowed is allowed o Loan taken on or after 1-4-1999 Loan taken on or after 1-4-1999 o for constructing/acquiring the residential. for constructing/acquiring the residential.

house and house and o completed within three years from the end completed within three years from the end

of the financial year in which capital was of the financial year in which capital was borrowed. borrowed.

o No limits for the let out propertyNo limits for the let out propertyo Only one property is eligible for deductionOnly one property is eligible for deduction

Deductions under chapter VI Deductions under chapter VI AA –u/s.80C,80CCD&80CCD –u/s.80C,80CCD&80CCD

• The following investments are eligible for The following investments are eligible for deduction:deduction:

• Life Insurance Premium, Statutory Life Insurance Premium, Statutory Provident Fund, RPF, PPF, NSC, ULIP, Provident Fund, RPF, PPF, NSC, ULIP, Notified Units of Mutual Fund, Re-payment Notified Units of Mutual Fund, Re-payment of housing loan, Tuition Fee paid, fixed of housing loan, Tuition Fee paid, fixed deposit for 5 years or more with a deposit for 5 years or more with a scheduled Bank, Senior Citizen Saving scheduled Bank, Senior Citizen Saving Scheme, five year time deposit scheme in Scheme, five year time deposit scheme in Post Office etc.Post Office etc.

Deductions Deductions u/s.80C,80CCD&80CCDu/s.80C,80CCD&80CCD

• Amount of deduction allowable; gross qualifying amount or Rs.1,00,000 which ever is lower.

Deduction u/s.80CCFDeduction u/s.80CCF• Deduction in respect of Deduction in respect of

subscription to long term subscription to long term infrastructure bonds.infrastructure bonds.

• · This deduction applicable · This deduction applicable from the assessment year from the assessment year 2011-122011-12

• Maximum deduction Maximum deduction allowable is Rs.20,000.allowable is Rs.20,000.

• Not available from 2012-13Not available from 2012-13

Deduction u/s.80DDeduction u/s.80D• Medical insurance premium

(Med claim Policy) paid: On the health of taxpayer, spouse, parents and dependent children

• The premium can be paid by any mode other than cash.

• It is paid out of income chargeable to tax.

Deduction u/s.80DDeduction u/s.80D• Amount of deduction

Rs.15,000 – • additional deduction Rs.5,000

is allowed if the policy is taken on the health of senior citizen.

• Preventive Medical Check up Rs. 5000 for 2012-13

• Deduction in respect of maintenance Deduction in respect of maintenance including medical treatment of a including medical treatment of a handicapped dependent :handicapped dependent :

• Furnish a certificate issued by the Furnish a certificate issued by the medical authority in form No.10-IA.medical authority in form No.10-IA.

• Amount of deduction Rs.50,000 is Amount of deduction Rs.50,000 is allowed.allowed.

• In case severe disability (80% or In case severe disability (80% or more), Rs.1,00,000 is allowed.more), Rs.1,00,000 is allowed.

• The person claiming deduction under The person claiming deduction under this section, he should not claim any this section, he should not claim any deduction under section 80U.deduction under section 80U.

Deduction u/s.80DD

Deduction Deduction u/s.80DDBu/s.80DDB

• Medical treatment of dependent or self Medical treatment of dependent or self for specified disease/ailment.for specified disease/ailment.

• Amount of deduction Rs.40,000: if the Amount of deduction Rs.40,000: if the person is a senior citizen Rs.60,000 is person is a senior citizen Rs.60,000 is allowed.allowed.

• This deduction is not This deduction is not allowable by the employer.allowable by the employer.

Deductions -u/s.80EDeductions -u/s.80E• Payment of interest on loan taken for higher Payment of interest on loan taken for higher

education: spouse or childreneducation: spouse or children• The loan has to be taken from any financial The loan has to be taken from any financial

institution or approved charitable institution.institution or approved charitable institution.• Such amount is paid out of his income Such amount is paid out of his income

chargeable to tax.chargeable to tax.• The deduction is available for a maximum of The deduction is available for a maximum of

8 years or till the interest is paid, whichever 8 years or till the interest is paid, whichever is earlier.is earlier.

Deductions -u/s.80GDeductions -u/s.80G• Deduction in respect of donations to certain Deduction in respect of donations to certain

funds, charitable institutions etc.funds, charitable institutions etc.• · Deduction can be allowed by the employer · Deduction can be allowed by the employer

only in respect of donations made to Prime only in respect of donations made to Prime Minister Relief Fund, Chief Ministers Relief Minister Relief Fund, Chief Ministers Relief Fund, Earthquake Fund, etc.Fund, Earthquake Fund, etc.

• ·· In respect of donations to In respect of donations to charitable institutions, charitable institutions, deductions cannot be deductions cannot be allowed by the employerallowed by the employer. .

Deductions Deductions -u/s.80GG-u/s.80GG

• Deduction in respect of rent paid Deduction in respect of rent paid • The assessee should not be receipt of HRA The assessee should not be receipt of HRA

and he should not own any houseand he should not own any house• The least of the following amount is The least of the following amount is

exemptedexempted• 1. Rent paid in excess of 10% of total 1. Rent paid in excess of 10% of total

income before allowing deduction under this income before allowing deduction under this section.section.

• 2. Rs.2000 per month.2. Rs.2000 per month.• 3. 25% of total income before allowing 3. 25% of total income before allowing

deduction under this sectiondeduction under this section

Deduction-u/Deduction-u/s.80GGCs.80GGC

• Any amount of contribution made Any amount of contribution made by a person to a political party or by a person to a political party or an electoral trust is deductible.an electoral trust is deductible.

• This deduction is not This deduction is not allowable by the employer.allowable by the employer.

Deductions under Deductions under Chapter VI A-u/s.80UChapter VI A-u/s.80U

• Deduction in case of a person with Deduction in case of a person with disability: blindness, low vision, leprosy, disability: blindness, low vision, leprosy, hearing impairment, mental retardation hearing impairment, mental retardation and mental illness. and mental illness.

• Conditions: Furnish a certificate issued Conditions: Furnish a certificate issued by the medical authority in form No.10-by the medical authority in form No.10-IA.IA.

• Amount of deduction (fixed)Rs.50,000 is Amount of deduction (fixed)Rs.50,000 is allowed. In case severe disability (80% or allowed. In case severe disability (80% or more), Rs.1,00,000 is allowed.more), Rs.1,00,000 is allowed.

Particulars of income Particulars of income other than salaryother than salary

• Employee has to furnish particulars of income under any head other than “Salaries” in a simple statement, which is properly verified by him. Such income should not be a loss under any such head other than the loss under the head “Income from House Property”.

• Relief is available when salary is Relief is available when salary is received in arrears or advance.received in arrears or advance.

• Application in Form-10E has to Application in Form-10E has to be obtained from the employee.be obtained from the employee.

• Form 10E is required to allow Form 10E is required to allow claim of relief u/s. 89(1)claim of relief u/s. 89(1)

Relief u/s.89(1)

Relief u/s.89(1)Relief u/s.89(1)• from 1-4-2010 (assessment year

2010-11) that no such relief shall be granted in respect of any amount received or receivable by an assessee on his voluntary retirement or termination of his service.

Estimation of Income for Estimation of Income for deducting taxdeducting tax

• Method of calculationMethod of calculation : :

Estimate the salary including Estimate the salary including perquisites for the financial perquisites for the financial year 2012, apply the rates, year 2012, apply the rates, calculate the tax and divide calculate the tax and divide it by 12. it by 12.

Estimation of Income for Estimation of Income for deducting taxdeducting tax

• The amount of tax so arrived The amount of tax so arrived should be deducted every month in should be deducted every month in equal installments. However, Any equal installments. However, Any excess or deficit arising out of any excess or deficit arising out of any previous deduction can be previous deduction can be adjusted by increasing or adjusted by increasing or decreasing the amount of decreasing the amount of subsequent deductions during the subsequent deductions during the same financial year. same financial year.

Duties of Persons responsible Duties of Persons responsible

for deducting taxfor deducting tax • DDOs to satisfy themselves of DDOs to satisfy themselves of

the genuineness of claimthe genuineness of claim::• The Drawing and Disbursing Officers The Drawing and Disbursing Officers

should satisfy themselves about the actual should satisfy themselves about the actual deposits/subscriptions/payments made by deposits/subscriptions/payments made by the employees, by calling for such the employees, by calling for such particulars/information as they deem particulars/information as they deem necessary before allowing the aforesaid necessary before allowing the aforesaid deductions.deductions.

DDOs to satisfy DDOs to satisfy themselves of the themselves of the

genuineness of claimgenuineness of claim::• In case the DDO is not satisfied about the In case the DDO is not satisfied about the

genuineness of the employee’s claim genuineness of the employee’s claim regarding any regarding any deposit/subscription/payment made by the deposit/subscription/payment made by the employee, he should not allow the same, employee, he should not allow the same, and the employee would be free to claim and the employee would be free to claim the deduction/rebate on such amount by the deduction/rebate on such amount by filing his return of income and furnishing filing his return of income and furnishing the necessary proof etc., therewith, to the the necessary proof etc., therewith, to the satisfaction of the Assessing Officer.satisfaction of the Assessing Officer.

Duties of Persons Duties of Persons responsible for responsible for deducting taxdeducting tax

• File Quarterly statements in form File Quarterly statements in form No.24Q within time i.e. 15th July, No.24Q within time i.e. 15th July, 15 th October, 15th January of the 15 th October, 15th January of the relevant financial year and for the relevant financial year and for the last quarter is 15last quarter is 15thth May following May following financial year.financial year.

• Challans for deposit of TDS - for Challans for deposit of TDS - for salaries challan No.ITNS-281.salaries challan No.ITNS-281.

Attn: Govt. DDOs’1.Who are paying taxes by Book Adjustment -

submit a statement in Form No. 24G within ten days from the end of the month to the agency authorized by the Director General of Income-tax (Systems) in respect of tax deducted by the deductors and reported to him for that month; and

(b) intimate the number (hereinafter referred to as the Book Identification Number) generated by the agency to each of the deductors in respect of whom the sum deducted has been credited.

Form -24G

The deductor has to issue a certificate in Form No. 16 along with annexure A or B and 12BA before 31st May from the end of financial year, in which the deduction was made.

FORM 16

FORM 16

Form No. 16, - for SALARIES(2) The certificate referred to in sub-rule (1) shall specify:(a) valid permanent account number (PAN)(b) valid TAN (c) (i) book identification number;(ii) Challan identification number (d) (i) receipt number of the relevant quarterly statement(ii) receipt numbers of all the relevant quarterly statements for “Salaries”.

Revised Form -16

Annexure –A of Revised Form -16

Government deductors to enclose Annexure-A if tax is paid without production of an income-tax challan

Annexure –B of Revised Form -16

Non-Government deductors and if tax is paid accompanied by an income-tax challan

• If the House Property is transferred If the House Property is transferred before expiry of five years no before expiry of five years no deduction in the year of transfer deduction in the year of transfer and earlier deductions allowed will and earlier deductions allowed will become income in the year of become income in the year of transfer .transfer .

• No deductions u/s. 80C for the No deductions u/s. 80C for the repayment of principal amount if repayment of principal amount if the loan is taken from the private the loan is taken from the private persons and also not for persons and also not for commercial properties.commercial properties.

Points to Ponder

?

Points to PonderPoints to Ponder• Any contributions made towards the Any contributions made towards the

ULIP, deposit under Senior Citizen ULIP, deposit under Senior Citizen Saving Scheme, Time deposit in Post Saving Scheme, Time deposit in Post Office during the financial year and the Office during the financial year and the same terminates within 5 years and LIP same terminates within 5 years and LIP terminates within 2 years.terminates within 2 years.

• The above contributions not qualified for The above contributions not qualified for deduction u/s.80C.deduction u/s.80C.

Points to PonderPoints to Ponder• The quantum of deduction already The quantum of deduction already

taken in the preceding years would taken in the preceding years would be deemed as income of the be deemed as income of the taxpayer in the year in which taxpayer in the year in which contribution to the to the above contribution to the to the above plan/scheme/deposit is terminated.plan/scheme/deposit is terminated.

• You may not be able to You may not be able to cover the tax liability.cover the tax liability.

• Employee may not Employee may not submit the details to submit the details to arrive at the correct arrive at the correct liability.liability.

I will submit the details in February

NOT DEDUCTING TAX STARTING FROM FINANCIAL YEAR

• Withholding of Withholding of salary leading to salary leading to grievance of grievance of employees.employees.

• Employee paying Employee paying tax on his own tax on his own indicating failure indicating failure of the DDO.of the DDO.

Don’t deduct, I will pay

NOT DEDUCTING TAX NOT DEDUCTING TAX STARTING FROM STARTING FROM FINANCIAL YEARFINANCIAL YEAR

Thank youThank you