Computationofincomefromsalaries 140805035647 Phpapp02

Computation of Income from Salaries
for B Com students

Based on B. Com Syllabus of Goa
University
Presented by
Dr. Sanjay P Sawant Dessai
Associate Professor
VVMs Shree Damodar College Margao
Goa
4/12/15
sanjaydessai@gmail.com
UNIT II: COMPUTATION OF INCOME

FROM SALARIES
Sections 15 -Basis of charge )

Section 16 -Deductions from salary
income)
Section 17- Definition and different
forms of salary (Perquisites and
Profit in lieu of salary)
Inclusive of allowances
(exclusive of valuation of Perquisites)
4/12/15
Sections: 15, (Basis of charge )

Section 15 stated that following income shall be chargeable to
income-tax under the head "Salaries"
(a) any salary due from an employer or a former employer to
an assessee in the previous year, whether paid or not;
(b) any salary paid or allowed to him in the previous year by or
on behalf of an employer or a former employer though not
due or before it became due to him;
(c) any arrears of salary paid or allowed to him in the previous
year by or on behalf of an employer or a former employer, if
not charged to income-tax for any earlier previous year.
4/12/15
Essential norms
Salary is taxable on due or
Receipt basis whichever is earlier
Relationship between payer and
payee
Employer and employee relationship
Remuneration paid to person in
respect of service rendered
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Exception
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" for the purposes of this section.
Its an appropriation of profit
chargeable under the head profits and
gains of business and profession
4/12/15
Definitions (17)
Salary 17(1) includes the following
Wages
Annuity or pension
Any gratuity
Any fees, commission, perquisites or profits in lieu of salary or wages
Any advance salary
Any payment received in respect of any period of leave not availed by
him (Leave encashment)
Portion of the annual accretion to the balance at the credit of an
employee participating in recognised provident fund to the extent
taxable
Transferred balance in a recognised provident fund to the extent it is
taxable
Any contribution made by central govt or any employer to the account
covered under pension scheme refereed in section 80CCD.
4/12/15
Allowances
Allowances are fixed quantity of
money or other substance given
regularly in addition to salary for the
purpose of meeting some particular
requirement connected with the
service rendered by employee.
Amount of Exemption
Amount of allowance or the actual
amount spent whichever is lower
4/12/15
Allowances
House rent allowance

Transport Allowance
Conveyance Allowances
Daily Allowance
Uniform Allowance
Helper Allowance
Research Allowance
Children Education Allowance
Childrens Hostel Expenditure Allowance.
(Covered under section 10)
4/12/15
House Rent Allowance u/s. 10 (13A).

Exemption in respect of house rent
allowance is least of the following three
Amount equal to 50 percent of salary,
where house is situated in metros and
40 percent of salary where residential
house is situated at any other place.
Actual house rent allowance received
Excess of rent paid over 10 percent of
salary
4/12/15
Transport Allowance
Transport allowance is granted to
meet his expenditure for the purpose
of commuting between the place of
his residence and place of duty .
Exemption
Up to Rupees 800 per month
Rupees 1600 per month in the case
of
blind
or
orthopedically
handicapped employee
4/12/15
10
Children Education
Allowance
The allowance is given for children's
education
Rupees 100 per month per child up
to a maximum of 2 children
4/12/15
11
Hostel Expenditure
Allowance
The allowance is granted to an
employee to meet the hostel
expenditure on his child
Rupees 300 per month per child up
to a maximum of two children.
4/12/15
12
Medical allowance
Fixed medical allowance is
chargeable to tax
Reimbursement of medical
expenses
Exemption up to Rs. 15,000 per
year
4/12/15
13
Employers contribution to approved

superannuation
Employers
contribution
towards
approved superannuation fund
chargeable to tax above Rs 1,00,000
per assessment year
4/12/15
14
Employers contribution to Provident

fund
Employers contribution to statutory
provident fund fully exempt
Employers contribution to recognised
provident fund Excess of 12
percent of salary is taxable
4/12/15
15
Interest credited to provident fund

Statutory provident fund not
taxable
Recognised provident fund excess
of 9.5 percent is taxable
Public provident fund exempt from
tax
4/12/15
16
Perquisites 17(2)
Dictionary meaning
A gain or profit incidentally made
from employment in addition to
regular salary or wages, especially
one of a kind expected or promised.
Any casual emolument or benefit
attached to an office or position in
addition to salary or wages
Back
4/12/15
17
Examples of perquisites
a. The
value
of
rent-free
accommodation
b. The value of
concession in the
matter of rent respecting any
accommodation
c. Benefit or amenity granted or
provided free of cost or at
concessional rate.
4/12/15
18
Perquisites
d. Any sum paid by an employer in respect of any
obligation but for which payment would have been
payable by assessee
e. Insurance premium on life of the employee paid by
the employer
f. The value of any specified security or sweat equity
allotted free of cost or at concessional rate
g. Contribution to an approved super annuation fund by
the employer in respect of the assessee in excess of
Rs. I lakh.
h. The value of any fringe benefit or amenity as may be
prescribed
4/12/15
19
Profit in lieu of Salary 17(3)

Profit in lieu of salary includesa. Any compensation due or received by an employee in
connection with the termination of the employment/
modification of the terms and conditions of his employment
b. Payment from employer or former employer from provident
fund or such other funds, excluding the amount exempted
form tax under section 10
c. Any sum received under Keyman Insurance policy including
the sum allocated by way of bonus on such policy
d. Amount due to or received, whether in lumpsome or
otherwise by any assessee from any person
. -before his joining any employment
. -after cessation of his employment Back
4/12/15
20
Deductions from salaries (section

16)
Entertainment allowance 16(ii)
A deduction of entertainment allowance
specifically granted by an employer to
the assessee who is in receipt of a
salary from the Government
A sum equal to one-fifth of his salary
(exclusive of any allowance, benefit or
other perquisite) or five thousand
rupees, whichever is less
4/12/15
21
Entertainment allowance deductions

Least of the following amount is to be
deducted from salary income
1. Actual amount of entertainment
allowance received
2. 1/5th of his basic salary
3. Rupees 5,000
4/12/15
22
Tax on employment 16(iii)

A deduction of any sum paid by the
assessee on account of a tax on
employment leviable by or under any
law.
Profession tax
4/12/15
23
Important items
Advance salary taxable in the year of
receipt, however assesse can claim relief u/s
89
Arrears of salary taxable on receipt basis,
however not taxed earlier
Leave salary ( leave encashment )
At the time of retirement - exempt
Leave
encashment
at
the
time
of
employment taxable, but relief under
section 89 is available
4/12/15
24

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Computation of Income from Salaries

for B Com students

UNIT II: COMPUTATION OF INCOME

Sections 15 -Basis of charge )

Sections: 15, (Basis of charge )

House rent allowance

House Rent Allowance u/s. 10 (13A).

Employers contribution to approved

Employers contribution to Provident

Interest credited to provident fund

Profit in lieu of Salary 17(3)

Deductions from salaries (section

Entertainment allowance deductions

Tax on employment 16(iii)

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