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					Tax implication on
Salary Income




           Presented by:

           Sachin Gujar
           Chartered Accountant
                         “Salary”
Salary is a periodical payment for Services rendered by an
employee to an employer. However under sec.17(1) of the Income
Tax Act, following items are also included :

1.     Wages
2.     Any annuity or pension
3.     Any Gratuity
4.     Any Fees, commission, perquisites or profits in lieu of or in
       addition to any salary or wages.
5.     Any advance for Salary.
6.     Any payment received by an employee while in service in
       respect of any period of leave not availed of by him. ( i.e. leave
       encashment)


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Sachin Gujar, C.A
Other items included under Salary
   Dearness Allowance :
    It is an additional payment over & above the basic Salary for meting
    the high cost of living.

   Bonus :
    It is a payment made under a service agreement between the
    employer & employee, which may be in the form of Diwali Bonus,
    Performance Bonus etc.

   Commission / Incentive :
    If an employee is appointed on a fixed monthly salary plus
    commission as a percentage of revenue or sales then the said
    commission shall also be included in his Salary.


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Sachin Gujar, C.A
Exemptions under Sec.10(14)
Nature of Allowance                      Extent to which Exempt

1. Conveyance Allowance                    Rs.800/- per month



2. Children Education                      Rs.100/- per month per child
   Allowance                               upto max. of 2 children



3.       Allowance to meet                 Rs.300/- per month per child
         the hostel expenditure of the      upto max. of 2 children
         child


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     Sachin Gujar, C.A
 Exemption towards reimbursement of
 Medical expenses


The reimbursement by employer of actual expenditure incurred by an
employee for Medical treatment of himself or any of his family
members is exempt subject to a maximum ceiling of Rs.15000/-p.a.

“Family” in relation to an employee means :

      The Spouse and children of the employee

      Parents, brothers and sisters of the employee who are wholly or
       mainly dependent on him


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 Sachin Gujar, C.A
 Exemption towards House rent
 Allowance


An employee is entitled to claim the exemption towards
HRA U/s.10(13A) when all the following conditions are fulfilled:

1.       The allowance from the employer must be specific to meet
         expenditure on payment of rent.

2.       The residential accommodation occupied by the employee is not
         owned by him.

3.       The actual payment of rent should exceed 10% of his salary.

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     Sachin Gujar, C.A
Exemption towards House rent
Allowance (contd...)




 If all these conditions are satisfied then HRA is exempt subject to
     least of the following:

     Actual HRA received
     Rent paid in excess of 10% of Salary
     40% of Salary

     For the purpose of this section Salary means Basic + D.A

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     Sachin Gujar, C.A
Let us see an example for HRA

                                            Rs.(p.a) Rs.(p.a)   Rs.(p.a)
Annual salary                                                   1,44,000
House rent allowance received                        86,400
Less: Exemption u/s. 10(13A)read with Rule2A:
       (a)House rent allowance recd...   86,400
                                 Rs.
        (b)Actual rent paid   93,600
        Less: 10% of Salary 14,400     79,200

        (c) 40% of salary                   57,600

    Least of (a), (b) & (c) is exempt                57,600       28,800

    Salary income subject to deduction...                       1,72,800

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    Sachin Gujar, C.A
Exemption towards Leave Travel
concession
Leave travel concession / allowance received by an employee for
himself and his family in connection with his proceeding on leave to
any place in India is exempt U/s.10(5) subject to the following
conditions framed under Rule 2B:

   Where the journey is performed by Air an amount not exceeding
    the economy air fare of the National carrier and where the journey
    is performed by Rail or any other mode of transport an amount not
    exceeding the First Class A.C rail fare by the shortest route to the
    place of destination.
   The said exemption is available in respect of two journeys
    performed in a block of 4 calendar years.
   It is important to understand that the LTA is exempted only
    towards the expenses incurred for the mode of transport and
    excluding hotel, food, entertainment expenses etc.

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 Sachin Gujar, C.A
 Deductions available from
 Salary (Way to save your TAX )
       After computing the net salary as mentioned in the previous provisions
       an individual is entitled to claim deductions under various other
       sections of the Income Tax Act, which are mentioned here under:

1.     Deduction U/s.80C:
       Amount invested in specified savings like Life Insurance Premium, PF,
       PPF, NSC, ELSS Mutual Fund & Housing Loan principal repayment.

2.     Deduction U/s.80CCC:
       Contribution towards pension plans subject to a maximum payment of
       Rs.10000/- It may however be noted that the overall ceiling for
       investment U/s.80C & 80CCC is restricted to Rs.1.00 Lac p.a.

3.     Deduction U/s.80D:
       Medical insurance premium paid for the health of the individual and
       spouse or dependent parents or dependent children subject to a
       maximum of Rs.10000/-p.a.
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 Sachin Gujar, C.A
Deductions available from
Salary (Way to save your TAX ) contd…


4.     Deduction U/s.80DD:
       Expenditure incurred for maintenance and medical treatment of
       a dependent who is a person with disability subject to deduction
       of Rs.50000/- p.a. or Rs.75000/-p.a. if such person has severe
       disability as mentioned in the provision.

5.     Deduction U/s.80E:
       Expenditure incurred on interest on loan (and not repayment of
       principal amount) taken from any financial institution for the
       purpose of higher education.100% of interest repayment is
       allowed as a deduction for 8 successive years beginning from
       the year in which the repayment starts.


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  Sachin Gujar, C.A
Deductions available from
Salary (Way to save your TAX ) contd…
  6.      Deduction U/s.80G:
          Donations to approved funds, Institutions & Trusts qualify
          for 50% or 100% deduction as applicable, U/s.80G.
          It may however be noted that the total deduction U/s.80G
          should not exceed 10% of gross total income.

  7.      Deduction U/s.80GG:
          Where a individual is not entitled to HRA and who is paying
          rent in excess of 10% of his total income and who files a
          declaration in form no.10BA is eligible for deduction under
          this section subject to the following conditions:-
          a. The Assessee does not own any other residential
          accommodation at the place / city where he performs his
          duties for employment and
          b. Subject to max. of 25% of total income or Rs.2000/- per
          month whichever is less

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 Sachin Gujar, C.A
Deduction for Housing Loan Repayment




   One of the important deduction available under the
    Income Tax Act is repayment of your housing
    loan.

     The Interest component is exempt with a upper
      limit of Rs.1.50 Lacs p.a. U/s.24

     The principal component is deductible with a
      upper limit of Rs.1.00 Lac p.a. (together with
      other specified savings) U/s.80C
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 Sachin Gujar, C.A
Income Tax Rates
Individual                      Tax Payable for Mar’07
If the net income is upto       Nil
1 Lac p.a.
Between Rs.1.00 Lac p.a. to     10% of the amount by which the total
Rs.1.50 Lacs p.a.               income exceeds Rs. 1,00,000/ p.a.
Between Rs. 1,50,000/-p.a. to   Rs. 5000 + 20% of the amount by
Rs.2,50,000/- p.a.              which the total income exceeds Rs.
                                1,50,000/-p.a.
Rs.2,50,000/-p.a. and above     Rs. 25,000/- + 30% of the amount by
                                which the total income exceeds Rs.
                                2,50,000/-p.a.
Surcharge                       10 % of the tax payable if total
                                income exceeds Rs. 10.00 lacs p.a.
                                otherwise NIL
Education Cess                  2 % of Tax Payable
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 Sachin Gujar, C.A
Income Tax rates for Women
Individual                     Tax Payable for Mar’07
If net income is upto          Nil
Rs.1.35 Lac p.a.
Between Rs.1.35 Lac p.a. to    10% of the amount by which the.
Rs.1.50 Lacs p.a.              total income exceeds Rs.
                               1,35,000/-p.a.
Between Rs.1,50,000/-p.a. to   Rs. 1500 + 20% of the amount by
Rs.2,50,000/-p.a.              which the total income exceeds
                               Rs. 1,50,000/-p.a.
Rs.2,50,000/-p.a. and above    Rs. 21500/- + 30% of the amount
                               by which the total income exceeds
                               Rs. 2,50,000/-p.a.
Surcharge                      10 % of the tax payable if total
                               income exceeds Rs. 10.00 lacs p.a.
                               otherwise NIL
Education Cess                 2 % of Tax Payable
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 Sachin Gujar, C.A
Illustration No.1
Tax payable by an individual having total income of Rs.2.00 lacs
On Rs.1.00 Lac p.a.                                          NIL

On Rs.1.00 Lac p.a. to Rs.1.50                             5000/-
Lacs p.a. @ 10%
On Rs.1.50 Lacs p.a. to Rs.2.00                           10000/-
Lacs p.a. @ 20%
Tax Payable                                               15000/-

Add: Education Cess @ 2%                                    300/-


Net Tax Payable                                           15300/-

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  Sachin Gujar, C.A
Illustration No.2
Tax payable by a Women having total income of Rs.2.00 lacs
On Rs.1.35 Lac p.a.                                          NIL

On Rs.1.35 Lac p.a. to Rs.1.50                          1500/-
Lacs p.a. @ 10%
On Rs.1.50 Lacs p.a. to Rs.2.00                        10000/-
Lacs p.a. @ 20%
Tax Payable                                            11500/-

Add: Education Cess @ 2%                                 230/-


Net Tax Payable                                        11730/-

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  Sachin Gujar, C.A
Due Date For Filing your Tax Return



      The Due date for filing your Tax Return is 31st July

      Non Filing of your Return in time can attract Interest /
       Penalty

      You have to file your Tax Return in Form No.2D ( Saral ).




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  Sachin Gujar, C.A
Budget Implications for F.Y 2007-08




   Basic exemption increased from Rs.1.00 Lac p.a. to Rs.1.10 Lacs
    p.a. and from Rs.1.35 Lacs p.a. to Rs.1.45 Lacs p.a. for women.

   Deduction U/s.80D for medical insurance premium increased from
    Rs.10000/-p.a. to Rs.15000/-p.a.

   Education cess increased from 2% to 3%.




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    Sachin Gujar, C.A
      Thank You……..!!!




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Sachin Gujar, C.A
Contact Us:
 Sachin Gujar
 Chartered Accountant
 1040, Sadashiv Peth,
 Bahar Apts,
 Near Nagnath Par,
 Pune – 411 030

                    : 020-24477990

 Email              : gujar_sachin@hotmail.com
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Sachin Gujar, C.A

				
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