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Presentation by: P.Imran Khan


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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 201011


Senior Citizen
For Income Between 0 to 2,40,000 For Income Between 2,40,001 to 5,00,000 For Income Between 5,00,001 to 8,00,000 For Income above 8,00,001 Surcharge Education Cess

Woman
For Income Between 0 to 1,90,000 For Income Between 1,90,001 to 5,00,000 For Income Between 5,00,001 to 8,00,000 For Income above 8,00,001

Others
For Income Between 0 to 1,60,000 For Income Between 1,60,001 to 5,00,000 For Income Between 5,00,001 to 8,00,000 For Income above 8,00,001 Surcharge Education Cess

Tax (%)

0 10 20 30
0 3

Topics
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.

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What is salary ?
Salary includes
Wages, Any annuity or Pension, any Gratuity, any Fees, Commission, Perquisites, Leave encashment, Arrears of salary and others.

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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.
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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
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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 WWW.SIMPLETAXINDIa.org will be exempted from production of

Allowances exempt, amount received or limit specified, which ever is less


1. 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. 2. Hostel Expenditure Allowance : Exempt up to actual amount received per child or Rs.300 p.m. per child up to WWW.SIMPLETAXINDIa.org maximum of two children, which ever

PERQUISITES
1. The value of any benefit or amenity granted or provided free of cost or at concessional rate. 2. With effect from 1.4.2010 (assessment year 2010-11), the value any specified security (stock option) or sweat equity shares allotted or transferred.
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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)) WWW.SIMPLETAXINDIa.org Provident fund receipts and RPF receipts (Sec.

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. 1. Actual amount received. 2. 15 days salary for each year of completed service 3. Rs.3,50,000/-.
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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.
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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 WWW.SIMPLETAXINDIa.org allowance.

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.
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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, Repayment of housing loan, Tuition Fee paid, fixed deposit for 5 years or more WWW.SIMPLETAXINDIa.org with a scheduled Bank, Senior Citizen

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

Amount of deduction allowable; gross qualifying amount or Rs.1,00,000 which ever is lower.
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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.
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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
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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.
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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 WWW.SIMPLETAXINDIa.org this section, he should not claim any

Deduction u/s.80DD

Deduction u/s.80DDB
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.


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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. WWW.SIMPLETAXINDIa.org

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


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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 WWW.SIMPLETAXINDIa.org allowing income before

Deduction-u/s.80GGC
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.

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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 WWW.SIMPLETAXINDIa.org disability (80% or more), Rs.1,00,000

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.
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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)

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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.
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Estimation of Income for deducting tax


Method of calculation : Estimate the salary including perquisites for the financial year 2010, apply the rates, calculate the tax and divide it by 12.
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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.
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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.
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DDOs to satisfy themselves of the genuineness of claim:


In case the DDO is not satisfied about the genuineness of the employees 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.
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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.
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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 Incometax (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 theWWW.SIMPLETAXINDIa.org deductors in respect of

Form -24G

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

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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. WWW.SIMPLETAXINDIa.org

Revised Form -16

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Annexure A of Revised Form -16

Government deductors to enclose Annexure-A if WWW.SIMPLETAXINDIa.org tax is paid without production of an income-tax

Annexure B of Revised Form -16

Non-Government deductors and if tax is WWW.SIMPLETAXINDIa.org 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.

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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.
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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.

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NOT DEDUCTING TAX STARTING FROM FINANCIAL YEAR


You may not be able to cover the tax liability. Employee may not submit the details to arrive at the correct liability.

I will submit the details in February

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NOT DEDUCTING TAX STARTING FROM FINANCIAL YEAR


Withholding of salary leading to grievance of employees.
Dont deduct, I will pay

Employee paying tax on his own indicating failure of WWW.SIMPLETAXINDIa.org the DDO.

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