18/04/2016 ChartShowingComputationof'Salary'Income:

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CHARTSHOWINGCOMPUTATIONOFSALARY
INCOME

I.ImportantPoints:
1.Relationshipofemployerandemployeemustexisttocreatesalaryincome.
2. Only receipts from employer are taxable under this head. Receipt from a person other than
employeraretaxableunderOtherSource. TUTORIALSLIBRARY
3.IncaseSalaryisreceivedafterdeductionoffollowingitems...theseareaddedbacktogetfully GUIDE&FAQ@TAX
Salary:
GRAPHICALPRESENTATION@TAX
(i)OwnContributiontoProvidentFund.
(ii)TaxDeductedatSource(TDS) TIPS&TRICKS@TAX
(iii)RepaymentofLoanetc. MANAGERIAL&FINANCIALDECISIONS@TAX
(iv)LICPremium,ifdeductedfromsalary. 5GOLDENRULESOFTAXPLANNING
(v)GroupInsuranceScheme. FAMILYTAXPLANNING
(vi)RentofHouseprovidedbyemployer.
DEDUCTIONSFROMYOURINCOME
1.Previous
Year in case of Salaries is always Financial Year i.e. for the EXEMPTEDINCOMES
AssessmentYear20092010itis142008to3132009. HUFFORMATION,MANAGEMENT&TAXPLANNING

II.SalaryU/s17(1): COMPUTATIONOFGROSSTOALINCOME

1.Wages.FullyTaxable. INCOMETAX@GLANCE

2.AnnuityorPension.FullyTaxable MULTIPLEKNOWLEDGEBASEONTAX

3.Gratuity.Ithasbeentreatedseparately. 51TIPSONTAXPLANNING

4.(a)AnyFeesFullyTaxable APPEALSUNDERINCOMETAX

(b)CommissionFullyTaxable ASSESSMENTS

(c)BonusFullyTaxable PENALTIESUNDERITDEPATMENTS

(d)Perquisites(Perks)Thesearetreatedseparatelyu/s17(2) TAXSAVINGSCHEMES

(e)ProfitinlieuofSalaryThesearetreatedseparatelyu/s17(3) TAXREADYRECKONER

5.SalaryinlieuofLeave/LeaveEncashment.FullyTaxable. TAXRATES

6.AdvanceSalary.FullyTaxable PROSECUTIONSUNDERINCOMETAXDEPARTMENT

7.ArrearsofSalary.FullyTaxable. TAXATIONSYSTEMININDIA

8.RefundofProvidentFund(PF) CHARITABLE&RELIGIOUSTRUSTTAXATION

(a)IfSPFFullyexempted
(b)IfRPFFullyexemptedifserviceismorethan5years.
(c)IfURPFTaxableportionisaddedinsalaryincome.Taxableportionisequaltoemployers
contribution+interestonthispart.InterestonowncontributiontoURPFistaxableunderthehead
IncomefromOtherSources.
III.Allowances:
A.FullyExemptedAllowances:
ForeignAllowancegivenbyGovt.toitsemployeespostedabroad. HRA given to Judges of High
Court&SupremeCourt.
B.FullyTaxableAllowances:
(i)DearnessAllowance/AdditionalD.A./HighCostofLivingAllowanceFullyTaxable.
(ii)CityCompensationAllowances(CCA).
(iii)CapitalCompensatoryAllowance
(iv)LunchAllowance
(v)TiffinAllowance
(vi)Marriage/FamilyAllowance
(vii)OvertimeAllowance
(viii)FixedMedicalAllowance.
(ix)ElectricityandWaterAllowance
(x)EntertainmentAllowance.ItisfullyaddedinemployeesSalary.
In case of Government employees a deduction is allowed u/s 16(ii) at the rate of least of

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18/04/2016 ChartShowingComputationof'Salary'Income:
following:
(a)StatutoryLimitRs.5,000p.a.
(b)1/5(20%)thofBasicSalaryor
(c)ActualEntertainmentAllowancereceived.

C.PartlyTaxableAllowances:

1.HouseRentAllowance(HRA)

(a)FullyExempted,ifreceivedbytheJudgesofHighCourtandSupremeCourt.

(b)FullyTaxable,ifreceivedbyanemployeewhoislivinginhisownhouseorinahousefor
whichnorentispaid.

(c)Exempteduptoleastoffollowingforthoseemployeeswhoarelivinginrentedhouses:

(i)ActualHRAreceivedbytheemployee.

(ii)Rentpaid10%ofSalaryor

(iii) 40% of Salary in ordinary town 50% of Salary in Mumbai, Kolkata, Chennai or
Delhi.

TaxableHRA=HRAReceivedLeastofAbove.

Salary=Pay+D.A.whichentersintoPayforServiceorRetirementBenefits+Commission
onTurnoverAchievedbyHim.

Following Allowances are Exempted upto actual expenditure incurred for employment.
Excess,ifany,shallbetaxable...

2.UniformAllowance

3.ConveyanceAllowance
MostPopularTopics:
4.TravelingAllowance
CorporateTax(TaxationinCompanies)
FollowingAllowanceareExempteduptoamountsonotified.. FAQonTDSonSalaries
FAQonTaxableIncome
5.SpecialCompensatoryAllowance FAQonFilingofIncomeTaxReturn
GraphicalChatPresentationofProvisionofMotorCar
/OtherVehicles[Rule3(2)(A)&(B)]
6.BorderAreaAllowance
TaxAmendmentataGlanceforYear2015
'Appeals'UnderIncomeTaxAct.1961.
7. Tribal Area Allowance Exempted upto Rs. 200 p.m. if received in the States of M.P.,
TamilNadu,U.P.,Karnataka,Tripura,Assam,WestBengal,Bihar,orOrissa. 'Assessments'UnderIncomeTaxAct.1961.
ListofExemptedIncomes(TaxFree)UnderSection
10
8. Childrens EducationAllowance Exempted up to Rs.100 p.m. per child for education in
IncomeUndertheHead'BusinessandProfessions'
Indiaofowntwochildrenonly. [Section28to44]
IncomeUndertheHead'CapitalGain'
9.HostelExpenditureAllowanceExempteduptoRs.300p.m.perchildforHostelexpenditure IncomeUndertheHead'HouseProperty'[Section
onowntwochildrenonly. 2225]
IV.Perquisites: IncomeUndertheHead"Salary"
A.ExemptedPerquisites: [Section1517]
IncomeTaxon'PartnershipFirms'
1.LeaveTravelConcessionsubjecttoconditions&actualspentonlyfortravels.
PENALTIESUnderIncomeTaxAct.1961.
2.Computer/Laptopprovidedforofficial/personaluse. TaxSavingSchemesforIndividualforAY20152016
InstantGuide
3.InitialFeespaidforcorporatemembershipofaclub. IncomeTaxRates/TaxSlabs(AY20142015&
4.RefreshmentprovidedbytheEmployerduringworkinghoursinofficepremises. 20152016)
"ExemptedIncomes"underIncomeTaxAct.
5.PaymentofannualpremiumonPersonalAccidentPolicy. Charitable&ReligiousTrust:Formation,Registration,
&Taxation
6.Subscriptiontoperiodicalsandjournalrequiredfordischargeofwork.
HinduUndividedFamily[HUF]Formation,
7.ProvisionofMedicalFacilities. ManagementandTaxation

8.GiftnotexceedingRs.5,000p.a.
9.UseofHealthClub,Sportsfacility.
10.Freetelephoneswhetherfixedormobilephones.
11.InterestFree/concessionalloanofanamountnotexceedingRs.20,000(limitnotapplicationin
thecaseofmedicaltreatment)
12.ContributiontorecognisedProvidentFund/approvedsuperannuationfund,pensionordeferred
annuityscheme&staffgroupinsurancescheme.
13. Free meal provided during working hours or through paid non transferable vouchers not
exceedingRs.50permealorfreemealprovidedduringworkinghoursinaremotearea.
The value of any benefit provided free or at a concessional rate (including goods sold at
concessional rate) by a company to the Employees by way of allotment of shares etc., under the
EmployeesstockoptionplanasperCentralGovernmentGuidelines.
B.TaxablePerquisites:
1.RentFreeAccommodation

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18/04/2016 ChartShowingComputationof'Salary'Income:
2.ProvisionofMotorCaroranyotherConveyanceforpersonaluseofEmployee. MostPopularLinks:
3.ProvisionofFreeorConcessionalEducationFacilities.
ClubingofIncome DeductionU/s80C
4.ReimbursementofMedicalExpenditure.
AllowancesUs17(3) ExemptionSalary
5.ExpenditureonForeignTravelandstayduringmedicalexpenditure. TaxAmendment2015 TaxableIncome
6.SupplyofGas,Electricity&Water. ClubingofIncome TaxDeductions
7. Sale of an Asset to the Employee at concessioanal price including sale of Share in the HUFDeduction HUFInvestment
EmployerCompany. GiftbyHUF HUFTaxPlanningTips
C.PerksExemptedforEmployeesbutTaxableforEmployerunderFringeBenefit TaxSavingSchemes TaxPlanningTips
Tax. RefundofTax FringeBenefitTaxFBT
Valueofthefollowingbenefitsisnottaxableinthehandsofanemployee.Theemployerhastopay ReturnFiling Assessment/Scrutiny
taxondeemedincomecalculatedaspercentageofexpenditureincurred. NoticefromI.T.Dept. IncomesTypes@TDS
ExemptionsTaxReturns SummonU/s131
1.Any free or concessional ticket provided by the employer for private 'BlackMoney'@I.Tax BigGiftsToBeTaxed
journeysofhisemployeeortheirfamilymembers 'Appeals'underI.Tax Assessment@I.Tax
ExemptedIncomes CapitalGain
2.Anycontributionbytheemployertoanapprovedsuperannuationfundfor
Business&Professions HouseProperty
employees
Salaries@I.Tax PartnershipFirm
'Penalty'underI.TaxAct. TaxReadyReckoner
3.
CharitableTrust UsefulLinks@I.Tax
1.Expenditureincurredonentertainment

2.Expenditureincurredonprovisionofhospitalityofeverykindbythe
employertoanyperson.

3.Expenditureincurredonconferencelike conveyance, tour & travel

(including foreign travel) , on hotel, or boarding and lodging in
connection with any conference shall be deemed to be expenditure
incurredforthepurposesofconference.

4.Expenditureincurredonsalespromotionsincludingpublicity

5.Expenditureincurredonemployeeswelfare

6.Expenditureincurredonconveyance

7.ExpenditureincurredonHotel,Boarding&Lodgingfacilities

8.Expenditure incurred on Repair, Maintenance of Motor Cars and the Enteryouremailaddress:

amountofDepreciationthereon. [GetIncomeTaxManagementKnowledgeBASEFeed
deliveredbyeMail]
9.ExpenditureincurredonuseoftelephoneandMobilePhones.

10.Expenditure incurred on maintenance of any accommodation in the

natureofGuestHouseotherthanusedforTrainingpurpose. Subscribe

11.ExpenditureincurredonFestivalCelebrations. DeliveredbyFeedBurner

12.ExpenditureincurredonuseofHealthClubandsimilarfacilities.

13.Expenditureincurredongifts

FringeBenefitTax(FBT)isnotapplicableincaseoffollowingtypeofemployers.

1.AnIndividualorasoleProprietor

2.AHinduUndividedFamily

3.Government

4.APoliticalParty

5.Apersonwhoseincomeisexemptu/s10(23c)

6.ACharitableInstitutionregisteredu/s12AA.

7.RBI

8.SEBI

V.ProfitsinLieuofSalary:
ReceiptswhichareincludedundertheheadSalarybutExemptedu/s10.
1.LeaveTravelConcession(LTC)Exemptuptorules.
2.AnyForeignAllowanceor perksIfgivenbyGovt.toitsemployeespostedabroadarefully
exempted.
3. Gratuity : A Govt. Employee or semiGovt. employee where Govt. rules are applicable
FullyExempted.
A.ForemployeescoveredunderPaymentofGratuityAct.
Exemptuptoleastoffollowing:
(a)Notifiedlimit=Rs.10,00,000
(b)15daysAverageSalaryforeveryonecompletedyearof
service(periodexceeding6months=1year)

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