WELCOME Presentation by: CS Deepak p. Singh www.aarviencon.com

Salary Taxation

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

TDS rates for Financial Year 2013-14 Senior Citizen Woman Others Tax (%)  For Income Between 0 to 2,50,000  For Income Between 0 to 2,00,000  For Income Between 2,50,001 to 5,00,000  For Income Between 2,00,001 to 5,00,000 10  For Income Between 5,00,001 to 10,00,000 20  For Income above 10,00,001 30 Surcharge Education Cess 3

Topics OF TOTAL INCOME. WHAT IS SALARY PERQUISITES ALLOWANCES INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME. DEDUCTION UNDER SECTION 16 DEDUCTION OF INTEREST PAID/ACCRUED ON SOP DEDUCTIONS UNDER CHAPTER VI A. DUTIES OF PERSONS RESPONSIBLE FOR DEDUCTION TAX

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

What 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 ALLOWANCE u/s.10(13A) The least of the following exempted Actual HRA received Rent paid in excess of 10% of salary 50% of salary in metro cities 40% in other places. For this purpose “Salary” includes dearness allowance if terms of employment so provide

House Rent Allowance 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 received or limit specified, which ever is less Children Education Allowance : Exempt up to actual amount received per child or Rs.100 p.m. per child up to maximum of two children, which ever is less. Hostel Expenditure Allowance : Exempt up to actual amount received per child or Rs.300 p.m. per child up to maximum of two children, which ever is less. Transport Allowance :Exempt to the extent of Rs.800 p.m.

PERQUISITES The value of any benefit or amenity granted or provided free of cost or at concessional rate. With effect from 1.4.2010 (assessment year 2010-11), the value any specified security (stock option) or sweat equity shares allotted or transferred.

S.10 – Incomes which do not form part of total income. These payments will not be part of salary subject to limits prescribed LTC (Sec. 10(5)) The exemption is allowed only in respect of fare only. Gratuity (Sec. 10(10)) Commuted value of pension (Sec. 10(10A)) Leave encashment at the time of retirement (Sec. 10(10AA)) Provident fund receipts and RPF receipts (Sec. 10(11) & 10(12))

Gratuity Death Cum Retirement Gratuity received by the Central Govt./State Govt. /Local Authorities. Covered by gratuity Act, 1972 & Any other gratuity, least of the following is exempted. Actual amount received. 15 days salary for each year of completed service Rs.10,00,000/-.

EL Encashment Central Govt / State Govt Employees – Exempt Other Employees - Exemption will be determined with reference to the leave to their credit at the time of retirement on superannuation, or otherwise, subject to a maximum of ten months’ leave. This exemption will be further limited to the maximum amount of Rs. 3,00,000.

Deduction under section 16 Tax on employment (professional tax) paid is allowable as deduction from salary. Entertainment Allowance : This deduction is allowed only to a Government employee to the least of following. Actual amount received. 20% of salary exclusive of any allowance. Rs.5000.

Deduction on income from House property interest up to a maximum limit of Rs. 1,50,000 is allowed Loan taken on or after 1-4-1999 for constructing/acquiring the residential. house and completed within three years from the end of the financial year in which capital was borrowed. No limits for the let out property Only one property is eligible for deduction

Deductions under chapter VI A –u/s.80C,80CCD&80CCD The following investments are eligible for deduction: Life Insurance Premium, Statutory Provident Fund, RPF, PPF, NSC, ULIP, Notified Units of Mutual Fund, Re-payment of housing loan, Tuition Fee paid, fixed deposit for 5 years or more with a scheduled Bank, Senior Citizen Saving Scheme, five year time deposit scheme in Post Office etc.

Deductions u/s.80C,80CCD&80CCD Amount of deduction allowable; gross qualifying amount or Rs.1,00,000 which ever is lower.

Deduction u/s.80CCF Deduction in respect of subscription to long term infrastructure bonds. · This deduction applicable from the assessment year 2011-12 Maximum deduction allowable is Rs.20,000. Not available from 2012-13

Deduction 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.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 u/s.80DD Deduction in respect of maintenance including medical treatment of a handicapped dependent : Furnish a certificate issued by the medical authority in form No.10-IA. Amount of deduction Rs.50,000 is allowed. In case severe disability (80% or more), Rs.1,00,000 is allowed. The person claiming deduction under this section, he should not claim any deduction under section 80U.

Deduction u/s.80DDB This deduction is not allowable by the employer. Medical treatment of dependent or self for specified disease/ailment. Amount of deduction Rs.40,000: if the person is a senior citizen Rs.60,000 is allowed. This deduction is not allowable by the employer.

Deductions -u/s.80E Payment of interest on loan taken for higher education: spouse or children The loan has to be taken from any financial institution or approved charitable institution. Such amount is paid out of his income chargeable to tax. The deduction is available for a maximum of 8 years or till the interest is paid, whichever is earlier.

Deductions -u/s.80G Deduction in respect of donations to certain funds, charitable institutions etc. · Deduction can be allowed by the employer only in respect of donations made to Prime Minister Relief Fund, Chief Ministers Relief Fund, Earthquake Fund, etc. · In respect of donations to charitable institutions, deductions cannot be allowed by the employer.

Deductions -u/s.80GG Deduction in respect of rent paid The assessee should not be receipt of HRA and he should not own any house The least of the following amount is exempted 1. Rent paid in excess of 10% of total income before allowing deduction under this section. 2. Rs.2000 per month. 3. 25% of total income before allowing deduction under this section

Deduction-u/s.80GGC This deduction is not allowable by the employer. Any amount of contribution made by a person to a political party or an electoral trust is deductible. This deduction is not allowable by the employer.

Deductions under Chapter VI A-u/s.80U Deduction in case of a person with disability: blindness, low vision, leprosy, hearing impairment, mental retardation and mental illness. Conditions: Furnish a certificate issued by the medical authority in form No.10-IA. Amount of deduction (fixed)Rs.50,000 is allowed. In case severe disability (80% or more), Rs.1,00,000 is allowed.

Particulars of income other 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 u/s.89(1) Relief is available when salary is received in arrears or advance. Application in Form-10E has to be obtained from the employee. Form 10E is required to allow claim of 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 deducting tax Method of calculation : Estimate the salary including perquisites for the financial year 2012, apply the rates, calculate the tax and divide it by 12.

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

Duties of Persons responsible for deducting tax DDOs to satisfy themselves of the genuineness of claim: The Drawing and Disbursing Officers should satisfy themselves about the actual deposits/subscriptions/payments made by the employees, by calling for such particulars/information as they deem necessary before allowing the aforesaid deductions.

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

Duties of Persons responsible for deducting tax File Quarterly statements in form No.24Q within time i.e. 15th July, 15 th October, 15th January of the relevant financial year and for the last quarter is 15th May following financial year. Challans for deposit of TDS - for salaries challan No.ITNS-281.

Attn: Govt. DDOs’ 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

FORM 16 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 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

Points to Ponder If the House Property is transferred before expiry of five years no deduction in the year of transfer and earlier deductions allowed will become income in the year of transfer . No deductions u/s. 80C for the repayment of principal amount if the loan is taken from the private persons and also not for commercial properties. ?

Points to Ponder Any contributions made towards the ULIP, deposit under Senior Citizen Saving Scheme, Time deposit in Post Office during the financial year and the same terminates within 5 years and LIP terminates within 2 years. The above contributions not qualified for deduction u/s.80C.

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

NOT DEDUCTING TAX STARTING FROM FINANCIAL YEAR I will submit the details in February You may not be able to cover the tax liability. Employee may not submit the details to arrive at the correct liability.

NOT DEDUCTING TAX STARTING FROM FINANCIAL YEAR Withholding of salary leading to grievance of employees. Employee paying tax on his own indicating failure of the DDO. Don’t deduct, I will pay

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