c

 




  

1. Introduction

2. Residential Status of an Individual

3. Residential Status of H.U.F., Firm, A.O.P.

4. Residential Status of a µCompany¶

5. Residential Status of µEvery¶ other Person

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All Taxable entities are divided in the following categories for the purpose of determining Residential
Status :

a. an individual
b. a Hindu Undivided Family ( HUF)
c. a Firm or an Association of Person (AOP)
d. a joint stock company ; and
e. every other person

Tax is levied on total income of assessee. Under the provisions of Income Tax Act, 1961 the total
income on each person is based upon his Residential Status. Sec. 6 of the Act divides the assessable
persons into Three Categories :

(i) Resident ; (ii) Resident but Not ordinarily Resident ; and (iii) Non-Resident.

The concept of Residential Status has nothing to do with nationality or domestic of a person. An
Indian, who is a citizen of India can be non-resident for Income Tax purposes, whereas an American
who is a citizen of America can be Resident of India for Income Tax purposes. Residential Status of a
person depends upon the territorial connections of the person with this country , i.e. for how many
days he has physically stayed in India.

The Residential Status of different types of persons is determined differently . Similarly, the
Residential Status of the Assessee is to be determined each year with reference to the ³Previous
Year´. The Residential Status of the Assessee may change from Year to Year. What is essential is the
Status during the Previous year and not in the assessment year.

©
   

An individual may be «

(a) Resident and ordinarily Resident in India

(b) Resident and not-ordinarily Resident in India;
(c) non-resident in India.
3.1.(a). Resident and Ordinary Resident [ Sec. 6 (1), 6(6)(a) ]

To determine the Residential Status of an Individual, Sec. 6 (1) prescribes Two Test. An individual who
fulfils any one of the following Two Tests is called Resident under the provisions of this Act. These
Tests are :

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If an individual has to become Resend of India during any previous year, his / her personal stay in
India during that year is a must although the number of days of stay differs in the two tests. It means
that if an individual does not stay in India at all in any previous year , he cannot be Resident of India
in that year. Stay in India means that the individual should have stayed in India territory and
anywhere ( cities, villages, hills, even Indian territory waters ) for such number of days.

The period of 182 days need not be at a stretch. But physical presence for an aggregate of 182 days
in the relevant previous is enough. The Status of Resident is not linked with any particular place or
town or house.

The onus to prove the number of days of stay in India lies on the assessee. It is for him to prove, if he
desires to be taxed as non-resident or not ordinarily resident.

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A person may be frequent visitor to India. In his case, the residential status will be determined on the
basis of his presence in India for 365 days in four years immediately preceding the relevant Previous
year. Along with this his presence for 60 days during the relevant previous year is another essential
conditions to be fulfilled. The purpose, object or reason of visit to and stay in India has nothing to do
with the determination of residential status.

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For Indian Citizen going abroad on a Job or as a member of crew of an Indian ship
[Explanation (a) ]

In case of Indian citizen who is going outside Indian for a Job and his contact for such employment
outside India has been approved by the Central Government or he is a member of crew of an Indian
Ship, Test (a) u/s 6(1) remains same but in Test (b) words 
days¶ have been replaced to 182 days.

For Indian Citizens and Persons of Indian Origin [Explanation (b) ]

For such person Test (a) remains the same but in Test (b) ) words 
days¶ have been replaced to
182 days.

( A person shall be deemed to be of Indian origin if he or either of his parents or any of his grand
parents was born in India or undivided India .)

3.1.(b) Resident but not Ordinarily Resident [ Sec. 6 (6) ]

A àesident Individual can be not Ordinarily àesident if he can prove that :

(i) During 10 Previous years preceding the relevant previous year he was not resident for 9
previous years. Simply, it means that such resident individual should prove that he was non-resident
for 2 or more previous years during 10 previous years preceding the relevant previous year.
OR

(ii) in case resident individual is unable to prove the test given above, he can still be regarded as
not ordinarily resident by proving that he did not stay in India for a period or periods amounting in all
to 730 days or more during seven previous years preceding the relevant previous year. Simply it
means that he should prove that during seven previous years preceding the relevant previous year his
stay in India was less than 730 days.

An individual who comes to India and is resident in a previous year remains not ordinarily
resident for first 9 previous years.

3.1.(c) Non- Resident [ Sec. 2 (30) ]

Under Sec. 2(30) of the Income Tax Act, 1961 an assessee who does not fulfill any of the two
conditions given in Sec. 6(1) (a) or (b) would be regarded as ³ Non-Resident´ assessee during he
relevant previous year for all purposes of this Act.

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The following Table given below summarize the Rule of residence for the assessment year 2009-2010.
Mn the case of an Mndian Citizen
who leaves Mndia during the
previous year for the purpose of
employment (as a member of the
crew of an Mndian Ship)
(1)
(a.) Presence of at least 182 days
in India during the previous year
2008-2009
(b) Non-functional
ADDITIONAL CONDITIONS AT A GLANCE
Mn the case of an Mndian Citizen or a
Mn the case of an individual [other
person of Mndian origin ( who is
than that mentioned in column (1)
abroad) who comes on a visit to
and (2)]
Mndia during the previous year.
(2) (3)
(a) Presence of at least 182 days
in India during the previous year
2008-2009.
(a) Presence of at least 182 days
(b) Presence of at least 60 days in
in India during the previous year
India during the precious year
2008-2009.
2008-2009 and 365 days during 4
(b) Non-functional
years immediately preceding the
relevant previous year (i.e., during
April 1, 2004 and March 31, 2008.)

½ Resident in India in at least 2 out of 10 years immediately preceding the relevant previous
year [ or must satisfy at least one o f the basic conditions, in 2 out of 10 immediately
preceding previous years ( i.e. 1998-99 to 2007-08].

½ Presence of at least 730 days in India during 7 years immediately preceding the relevant
previous year ( i.e. during April 1, 2001 and March 31, 208.)

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Section 6(2) of the Act provides that status of these persons shall be determined as per Tests given
below :
1. Resident [ Sec. 6 (2) ]
It means that if a H.U.F. , FIRM, AOP is controlled from India even partially it will be Resident
assessee.
The Control and management of affairs refers to the controlling and directing power, the Head and the
Brain. It means that decision making power for vital affairs is situated in India. The control and
management means de facto control and management and not merely the right to control or manage.

In case of a Firm, it is said that the control and management of firm is saturated at a place where
partners meet to decide the affairs of the firm. If such place is outside India , it will be said that the
control and management is outside India.

2. Non- Resident [ Sec. 2 (30) ]

a H.U.F. , FIRM, AOP shall be Non-Resident if the control and management affairs is situated wholly
outside India.

3. Not Ordinarily Resident [ Sec. 6 (6) b ]

H.U.F. will be µNot Ordinarily Resident¶ if :

(i) its manager (Karta) has not been resident in India in 9 out of 10 previous year preceding the
relevant accounting year ; or

(ii) the manage had not , during the 7 previous year preceding the relevant accounting year been
present in India for a period or periods amounting in all to 730 days.
While determining the Residential Status of a Firm or HUF Is should be noted that Residential Status
of Partners or co-parceners of a HUF is of immaterial consideration. What is important to note is that
from where the business is being controlled. There may be a situation where all the partners of a Firm
are Resident in India but even then that Firm may be Non-Resident if its full control and management
lies outside India.

© ©      ©

An Indian Company is always Resident in India. A foreign Company is resident in India, only if, during
the previous year , control and management of its affairs is situated wholly in India. Conversely, a
Foreign Company is treated as Non-Resident if, during the previous year, Control and Management of
its affairs is either wholly or partially situated out of India.

The Table given below highlights the same proposition ---

Residential Status
An Indian A Company other
Place of Control company than an Indian
Company
Control and Management of the affairs of a company is situated : -

½ Wholly in India Resident Resident

½ Wholly outside India Resident Non- Resident
Resident Non- Resident
½ Partly in Indian and partly outside India

Not-Ordinarily àesident- Not Possible ± A company can never be ³ Ordinarily´ or ³ not Ordinarily
Resident´ in India.

© !      ! 

Every other person is resident in India if Control and Management of his affairs is, wholly or partly,
situated within India during the relevant previous year.

On the other hand, every other person is non-resident in India if control and management of its affairs
is wholly situated outside India.
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E- Local Authority
A- Individuals & HUFs
F- Domestic Company
B- AOPs & BOIs
G- Other Company
C- Co-operative Society
H- I.Tax Rates / Tax Slab after BUDGET 2011-
D- Firm
12

A. Individuals and HUFs

In case of individual (other than II and III below) and HUF:-
Income Level / Slabs Income Tax Rate
Where the total income does not exceed
i. NIL
Rs.1,60,000/-.
Where the total income exceeds Rs.1,60,000/- but 10% of amount by which the total income exceeds
ii.
does not exceed Rs.5,00,000/-. Rs. 1,60,000/-
Where the total income exceeds Rs.5,00,000/- but Rs. 34,000/- + 20% of the amount by which the
iii.
does not exceed Rs.8,00,000/-. total income exceeds Rs.5,00,000/-.
Rs. 94,000/- + 30% of the amount by which the
iv. Where the total income exceeds Rs.8,00,000/-.
total income exceeds Rs.8,00,000/-.

II. In case of individual being a woman resident in India and below the age of 65 years
at any time during the previous year:-
Income Level / Slabs Income Tax Rate
Where the total income does not exceed
i. NIL
Rs.1,90,000/-.
Where total income exceeds Rs.1,90,000/- but 10% of the amount by which the total income
ii.
does not exceed Rs.5,00,000/-. exceeds Rs.1,90,000/-.
Where the total income exceeds Rs.5,00,000/- but Rs. 31,000- + 20% of the amount by which the
iii.
does not exceed Rs.8,00,000/-. total income exceeds Rs.5,00,000/-.
Rs.91,000/- + 30% of the amount by which the
iv. Where the total income exceeds Rs.8,00,000/-
total income exceeds Rs.8,00,000/-.

III. In case of an individual resident who is of the age of 65 years or more

at any time during the previous year:-
Income Level / Slabs Income Tax Rate
Where the total income does not exceed
i. NIL
Rs.2,40,000/-.
Where the total income exceeds Rs.2,40,000/- but 10% of the amount by which the total income
ii.
does not exceed Rs.5,00,000/- exceeds Rs.2,40,000/-.
Where the total income exceeds Rs.5,00,000/- but Rs.26,000/- + 20% of the amount by which the
iii.
does not exceed Rs.8,00,000/- total income exceeds Rs.5,00,000/-.
Rs.86,000/- + 30% of the amount by which the
iv. Where the total income exceeds Rs.8,00,000/-
total income exceeds Rs.8,00,000/-.

B. Association of Persons (AOP) and Body of

Individuals (BOI)
i. Income-tax:
Income Level / Slabs Income Tax Rate
Where the total income does not exceed
i. NIL
Rs.1,60,000/-.
Where the total income exceeds Rs.1,60,000/- but 10% of amount by which the total income exceeds
ii.
does not exceed Rs.5,00,000/-. Rs. 1,60,000/-
Where the total income exceeds Rs.5,00,000/- but Rs. 34,000/- + 20% of the amount by which the
iii.
does not exceed Rs.8,00,000/-. total income exceeds Rs.5,00,000/-.
Rs. 94,000/- + 30% of the amount by which the
iv. Where the total income exceeds Rs.8,00,000/-.
total income exceeds Rs.8,00,000/-.
ii. Education Cess: 3% of the Income-tax.

C. Co-operative Society
i. Income-tax:
Income Level / Slabs Income Tax Rate
Where the total income does not exceed
i. 10% of the income.
Rs. 10,000/-.
Where the total income exceeds Rs.10,000/- but Rs. 1,000/- + 20% of income in excess of Rs.
ii.
does not exceed Rs.20,000/-. 10,000/-.
Rs. 3.000/- + 30% of the amount by which total
iii. Where the total income exceeds Rs.20,000/-
income exceeds Rs.20,000/-.
ii. Surcharge: Nil

iii. Education Cess: 3% of the Income-tax.

D. Firm
i. Income-tax: 30% of total income.

ii. Surcharge: The amount of income tax as computed in accordance with above rates, and after being
reduced by the amount of tax rebate shall be increased by a surcharge at the rate of 7.5% of such income
tax, provided that the total income exceeds Rs. 1 crore.

iii. Education Cess: 3% of the total of Income-tax and Surcharge.

E. Local Authority
i. Income-tax: 30% of total income.

ii. Surcharge: Nil

iii. Education Cess: 3% of Income-tax.

 F. Domestic Company
i. Income-tax: 30% of total income.

ii. Surcharge: The amount of income tax as computed in accordance with above rates, and after being
reduced by the amount of tax rebate shall be increased by a surcharge at the rate of 7.5% of such income
tax, provided that the total income exceeds Rs. 1 crore.

iii. Education Cess: 3% of the total of Income-tax and Surcharge.

G. Company other than a Domestic Company

i. Income-tax:

½ ± 50% of on so much of the total income as consist of (a) royalties received from Government or
an Indian concern in pursuance of an agreement made by it with the Government or the Indian
concernafter the 31st day of March, 1961 but before the 1st day of April, 1976; or (b) fees for
rendering technical services received from Government or an Indian concern in pursuance of an
agreement madeby it with the Government or the Indian concern after the 29th day of February,
1964 but before the 1st day of April, 1976, and where such agreement has, in either case, been
approved by the CentralGovernment;
½ ± 40% of the balance

ii. Surcharge: The amount of income tax as computed in accordance with above rates, and after being
reduced by the amount of tax rebate shall be increased by a surcharge at the rate of 2.5% of such income
tax, provided that the total income exceeds Rs. 1 crore.

iii. Education Cess: 3% of the total of Income-tax and Surcharge.



 

  


1.1. WHAT IS ³ GROSS SALARY´ AND HOW IT IS COMPUTED ?

Any amount received by an Employee from an Employer is known as Salary. To receive / give salary,
there was to be an Employee-Employer relationship.

What is GROSS SALARY according to Income-Tax ?

GROSS SALARY means :

1. Basic Salary or Wages, Bonus, Pension, Gratuity (beyond exempted limit), Leave Salary or
encashment, Advance Salary, Salary arrears, Fee or Commission, Remuneration for extra
work, Ex-gratia, Award for excellence etc.
2. Allowances such as House Rent Allowance, Dearness Allowance, City Compensatory Allowance,
Children¶s Education Allowance, Conveyance Allowance, Fixed Medical Allowance and any other
Special Allowances.
3. Perquisites - viz., Rent Free Accommodation, Amount spent or paid by the Employer on behalf
of the Employee in respect of Gas, Electricity, Water Charges, Children¶s School Fee, Club
Fees, etc.
4. Benefit received in place of Salary which includes Retrenchment Compensation (Amount given
to an employee when his services are no more required).
5. Pension received from former Employer is taxable as ³Salaries´. However, Family Pension is
taxed as income from other sources and is eligible for deduction up to Rs.15,000 or 33.33%
 whichever is less u/s 57 (ii a).

However Gross Salary does not include :

(1) Retirement Gratuity / Death Gratuity u/s 10(10)
(2) Sumptuary Allowance
(3) Medical treatment Reimbursement (with restrictions)
(4) Leave Travel Concession
(5) Uniform Allowance
(6) Leave encashment at retirement u/s 10(10AA)
(7) Free Meals / Refreshment provided during office hours. How Salary is Computed :

This can be depicted in the form of Chat given below

Exemptions at a Glance
Income-Tax Act provides certain exemptions from the Gross Income. Some of the popular exemptions
provided under the act (subject to eligibility & fulfillment of conditions specified in the relevant provisions
of the act ) are :

Exempted, Amount of Categories of Assesses

SL.NO. I.T. Section
Allowance, Perks Exemption Entitled

Actual Amount spent

in respect of 2
journeys in a block of
1 10(5) Leave Travel 4 calendar years
(Current Block is All Employees
2006-20)
2 10(10)(i) Retirement/ Death Actual Amount Govt. employees
Gratuity

Gratuity Received Least of : 15 days

under Payment of salary or 3.5 lakh or
3 10(10)(ii) Gratuity Act, 1972 Gratuity Received Non-Govt. employees

Least of : 15 days
average salary or 3.5
4 10(10)(iii) Any other Gratuity lakh or Gratuity Non-Govt. employees
Received

State/Central Govt.
Full Amount ,Defense & Civil
5 10(10A)(i) Commuted Pension Service Employees

Commuted Pension 33.33% of the Employees

(where employee is Commuted Value of excluding as
6 10(10A)(ii)a eligible for Gratuity) Pension mentioned at SL.No.5

Commuted Pension
50% of the
(where employee is Other Employees not
10(10A)(ii)b Commuted Value of
7 Not eligible for covered at SL.No-5
Pension
Gratuity)

Exemptions mentioned at SL. No. 2 to 7 are allowed once in the life time service of an
employee.

Compensation as
Any compensation
computed in
received by a
accordance with
workman under the
8 10(10B) Sec.25F(b) of Individual
Industrial Disputes
Industrial Disputes
Atc, 1947 at the time
Act or Rs. 5 Lakhs
of retrenchment.
whichever ls less.

All Employees
Exemptions will not
Voluntary Retirement
allowed for an amt. in
Benefits [if Voluntary Max. limit Rs. 5
9 10 (10C) respect of which relief
Retirement Scheme is Lakhs.
u/s 89 has been
approved by IT Dept.)
allowed to assessee for
any A/Y.

House Rent ×
 


10 10 (13A) All Employees
Allowance 

Maturity Value
11 10 (10D) including Bonus Full Amount Any Assessee
received from Life
Insurance Cos. expect
**

Amount received
from Provident Fund
Full Amount Individual / H.U.F.
12 10 (11) & Public Fund &
Public Provident Fund

^

   

 

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Money spent towards children¶s tuition fees at the time of admission and throughout
the course¶s duration can be deducted from your taxable income u/s 80C. However,
other payments made to the school or college, like donations, development fees
and other expenses of similar nature are not eligible for tax exemption. The relief is
given to tuition fees paid towards full-time education of any two children of an
individual. Also, the relief can be availed of only if the children study in universities,
colleges, schools or educational institutions in India.
The following deductions are allowed from salary:
Professional Tax -Actual amount paid by the employee.
What are the permissible Deductions an assessee can claim under l.T. Act?

Important Deductions that can be claimed under Chapter VI A of I.T. Act

are:

SI. I.T. Allowance/Perks Amount of Categories of

No. Sec. Allowed Deduction Assessees

1. Life Insurance Premia,

a. 80 C Provident Fund **NSc Individuals/HUF
ELSS,Post-Otf ice 5 year
Time Deposit, Tuition
Fees
(max.2 Children),Sr.
Maximum
Citizen
overall deductions
Saving Scheme 2004.
allowed under
Repayment of principal of
section
Housing Loan,Bank Fixed
80C,
Deposit of 5 Yrs period,
8OCCC 8OCCD
Notified NABARD Bonds
b. 80 CCC is Individuals/HUF
Rs. 1 lakh.
Premium paid towards
approved Pension Fund
(like LIC¶s Jeevan
c. 80 CCD Suraksha) max. 1 Lakh Central Govt.
 Contribution to Central Employees /
Govt. pension/NPS Non
Schemes. Upto 10% of Govt.
Salary with matching Employees
contribution from Govt.

d. 80 CCF Deduction of an additional

amount allowed over & above
the limit of Rs.1 Lakh shown
above for investment in long
term infrastructure bonds.

1 Rs.15,000 for
SeIf/
(a) Medical Insurance Spouse/Children.
Premium paid by cheque AddI.
for policies taken from 15,000 for Parents.
2. 80 D GIC/ other IRDA It Individuals/HUF.
approved Insurers Parents are Sr.
Citizens
(b) For Senior Citizens As. 20,000.
2. For Senior Citizen
As. 20,000

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3. o0 DD (a)Any expenditure for Individuals?
Medical, Nursing & HUF
Rehabilitation incurred on
dependent relative
suffering from permanent *Individuals
Rs. ë



-
Physical Disability* AND suffering from
with an additional
Rs. 50000/-, if the permanent
disability is severe disability
(b) Deposits under LIC, exceeding including
UTrs Scheme & other blindness,
80% i.e. Rs. 1 Lakh
IRDA approved Insurers mental r e I a r
for d at i o n
the benefit of Physically autism, cerebral
Handicapped dependent palsy or multiple
(e.g. LICs Jeevan Aadhar) disabilities.
4. o0DDB Upto Individuals/
(a) Actual expenditure Rs. 40,000 HUF
incurred on Medical
treatment of Self or
dependent relative or a
member of HUE suffering
from terminal disease
like, Cancer, AIDS, Renal
Upto Rs.60,000
 failure, etc.

(b) For Senior Citizens

5. o0E Interest on Loan taken
from Financial/Charitable Resident
Instn.for Self/ Spouse/ Individuals
Any amount
Children for Higher
Education above X Std.
(for a max. period of 8
years)
6a. o0G Donations made to 100% of All Assesses
National Defence Fund, Donation
P.M.¶s Relief Fund,
Political parties/Electrol
Trusts, Approved Funds of
reputed Educational
Institutions National Trust
for welfare of persons
with Autism, Cerebral
Palsy etc.
6b. o0G Donations made to 50% of All Assesses
Jawaharlal Memorial Donation.
Fund, PM¶s Drought Relief In some cases
Fund, National Children donation is
Fund, Any Charitable restricted to
Institution! Trust, 10% of gross
Religious Institutions, A total income.
corporation established by 100% in some
the Government for cases like
promoting interest of the National
members of a Minority Defence Fund
Community

7. o0GG Deduction in respect of 25% of Individuals (no

rents paid, provided no income or exemption is
house is owned by self, rent paid in allowed to those
spouse, minor child or excess of 10% who are in
HUF in the place of work of income or receipt of HRA &
and is residing in any of ceiling of claiming
the specified cities and Rs. 24,000 p.a. deduction
subject to tiling of whichever u/slO(13A)]
declaration in Form No. is less
1OBA
8. o0U Persons suffering from Rs. 50,000
Permanent Physical (Rs. 1,00,000 in
Disability as specified case of Severe
in Rule l1D Disability)
9. 24 Int. on Housing Loan: As. 30,000 Assesses having
Taken upto 31-3-99 max. As. 1.5 akh Self Occupied
of Taken after 01-4-99 House Property.
 max. of #*0$0'0"2(5'#.*',#4'52#52'9
 $Al, the above deductions will be allowed only on satisfying the conditions specified in
the relevant sections of the Income Tax Act. Deduction u/s 80C to 80U cannot exceed
Gross Total Income.

Taxable & Non-Taxable Perquisites

Perquisites may be defined as any casual emolument or benefit attached to an office or position in addition
to salary or wages. It also denotes something that benefits a man by going into his own pocket; it does not,
however cover mere reimbursement of necessary disbursements. Perquisites can be divided in the following
3 categories:

1. Perquisites taxable in all cases

2. Perquisites not taxable
3. Perquisites which are taxable only in the hands of specified Employees.

TAXABLE (Subject to Conditions)

Following are few perquisites which shall be taxable.

1) Rent Free Accommodation.

2) Provision of Motor Car or any other Conveyance for perstnal use.

3) Provision of Free or Concessional Education Facilities.

4) Reimbursement of Medical Expenditure.

5) Expenditure on Foreign travel and stay during medical expenditure.

6) Supply of Gas, Electricity & Water.

NON TAXABLE

½ Leave travel concession subject to conditions & only actual amount spent.
½ Comp / Laptop for official/personal use.
½
Initial fees paid for corporate membership of a

½ Refreshment provided during working hours in office premises.

½ Payment of annual premium on personal accident policy.
½ Subscription to periodicals and journals required for discharge of work.
½ Provision of Medical Facilities.

½ Gift not exceeding Rs. 5000 p.a.

½ Use of health club, sports facility.

½ Free telephones: fixed or mobiles.

½ Interest free / concessional loan not exceeding Rs. 20,000 (limit not applicable for medical
treatment).
½ Children Education Allowance (Rs.1 00 p.m. per child ² max. 2 children) &
 ½ Hostel Allowance (Rs. 300 p.m. per child ² max. 2 children) is exempt.

½ Transport Allowance: Rs. 800 p.m.² Rs.1,600 p.m. (If handicapped)

½ Fixed Medical Allowance is taxable in the hands of employees however, Medical Faciliües in a private
clinic is exempt to the extent of Rs. 15,000 and in government hospitals to any extent.

½ Contribution to Medical Insurance Policy by employer is exempt to tax in th hands of employees to

any extent.

½ Amount spent for providing free educaonal facilies and training of the employee is not taxable in the
hands of employees to any extent
½ Gift to employees of Movable Assets (other than computer/laptop, electronic items and car) after
using for 10 yrs.

½ Contribution to recognised Provident Fund / approved super annuation fund, pension or deferred
annuity scheme & staff group insurance scheme.
½ Free meal provided during working hours or through paid non transferable vouchers not exceeding
Rs. 50 per meal or free meal provided during working hours in a remote area.
½ The value of any benefit provided free or at a concessional rate (including goods sold at
concessional rate) by a company to the Employees byway of allotment of shares etc., under the

  
   
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"



Perquisites may be defined as any casual emolument or benefit attached to an office or position in
addition to salary or wages. It also denotes something that benefits a man by going into his own
pocket; it does not, however cover mere reimbursement of necessary disbursements. Perquisites can
be divided in the following 3 categories:

1. Perquisites taxable in all cases

2. Perquisites not taxable
3. Perquisites which are taxable only in the hands of specified Employees.

TAXABLE (Subject to Conditions)

Following are few perquisites which shall be taxable.

1) Rent Free Accommodation.

2) Provision of Motor Car or any other Conveyance for perstnal use.

3) Provision of Free or Concessional Education Facilities.

4) Reimbursement of Medical Expenditure.

5) Expenditure on Foreign travel and stay during medical expenditure.

6) Supply of Gas, Electricity & Water.

NON TAXABLE

½ Leave travel concession subject to conditions & only actual amount spent.
½ Comp / Laptop for official/personal use.
½
 Initial fees paid for corporate membership of a

½ Refreshment provided during working hours in office premises.

½ Payment of annual premium on personal accident policy.
½ Subscription to periodicals and journals required for discharge of work.
½ Provision of Medical Facilities.

½ Gift not exceeding Rs. 5000 p.a.

½ Use of health club, sports facility.

½ Free telephones: fixed or mobiles.

½ Interest free / concessional loan not exceeding Rs. 20,000 (limit not applicable for medical
treatment).
½ Children Education Allowance (Rs.1 00 p.m. per child ² max. 2 children) &
½ Hostel Allowance (Rs. 300 p.m. per child ² max. 2 children) is exempt.

½ Transport Allowance: Rs. 800 p.m.² Rs.1,600 p.m. (If handicapped)

½ Fixed Medical Allowance is taxable in the hands of employees however, Medical Faciliües in a
private clinic is exempt to the extent of Rs. 15,000 and in government hospitals to any
extent.

½ Contribution to Medical Insurance Policy by employer is exempt to tax in th hands of

employees to any extent.

½ Amount spent for providing free educaonal facilies and training of the employee is not
taxable in the hands of employees to any extent
½ Gift to employees of Movable Assets (other than computer/laptop, electronic items and car)
after using for 10 yrs.

½ Contribution to recognised Provident Fund / approved super annuation fund, pension or

deferred annuity scheme & staff group insurance scheme.
½ Free meal provided during working hours or through paid non transferable vouchers not
exceeding Rs. 50 per meal or free meal provided during working hours in a remote area.
½ The value of any benefit provided free or at a concessional rate (including goods sold at
concessional rate) by a company to the Employees byway of allotment of shares etc., under
the Employees stock opton plan as per Central Government Guidelines

½ Employees stock opton plan as per Central Government Guidelines

Taxable & Non-Taxable Perquisites

Perquisites may be defined as any casual emolument or benefit attached to an office or position in addition
to salary or wages. It also denotes something that benefits a man by going into his own pocket; it does not,
however cover mere reimbursement of necessary disbursements. Perquisites can be divided in the following
3 categories:

1. Perquisites taxable in all cases

2. Perquisites not taxable
3. Perquisites which are taxable only in the hands of specified Employees.

TAXABLE (Subject to Conditions)

 Following are few perquisites which shall be taxable.

1) Rent Free Accommodation.

2) Provision of Motor Car or any other Conveyance for perstnal use.

3) Provision of Free or Concessional Education Facilities.

4) Reimbursement of Medical Expenditure.

5) Expenditure on Foreign travel and stay during medical expenditure.

6) Supply of Gas, Electricity & Water.

NON TAXABLE

½ Leave travel concession subject to conditions & only actual amount spent.
½ Comp / Laptop for official/personal use.
½
Initial fees paid for corporate membership of a

½ Refreshment provided during working hours in office premises.

½ Payment of annual premium on personal accident policy.
½ Subscription to periodicals and journals required for discharge of work.
½ Provision of Medical Facilities.

½ Gift not exceeding Rs. 5000 p.a.

½ Use of health club, sports facility.

½ Free telephones: fixed or mobiles.

½ Interest free / concessional loan not exceeding Rs. 20,000 (limit not applicable for medical
treatment).
½ Children Education Allowance (Rs.1 00 p.m. per child ² max. 2 children) &
½ Hostel Allowance (Rs. 300 p.m. per child ² max. 2 children) is exempt.

½ Transport Allowance: Rs. 800 p.m.² Rs.1,600 p.m. (If handicapped)

½ Fixed Medical Allowance is taxable in the hands of employees however, Medical Faciliües in a private
clinic is exempt to the extent of Rs. 15,000 and in government hospitals to any extent.

½ Contribution to Medical Insurance Policy by employer is exempt to tax in th hands of employees to

any extent.

½ Amount spent for providing free educaonal facilies and training of the employee is not taxable in the
hands of employees to any extent
½ Gift to employees of Movable Assets (other than computer/laptop, electronic items and car) after
using for 10 yrs.

½ Contribution to recognised Provident Fund / approved super annuation fund, pension or deferred
annuity scheme & staff group insurance scheme.
½ Free meal provided during working hours or through paid non transferable vouchers not exceeding
Rs. 50 per meal or free meal provided during working hours in a remote area.
½ The value of any benefit provided free or at a concessional rate (including goods sold at
concessional rate) by a company to the Employees byway of allotment of shares etc., under the
 Employees stock opton plan as per Central Government Guidelines

Leave Encashment & Arrear of Salary

LEAVE ENCASHMENT
For an employee of State or Central Government , any amount received as cash equivalent of Leave Salary
at the time of super annuation / retirement is exempt from tax to the extent of 3 Lakhs. For other than the
Government Employees least of the following is applicable :

(1) The earned leave entitlement con not exceed 30 days for every year of actual service or

(2) 10 months average salary or

(3) Actual leave encashment received at the time of retirement, or exempted amount specified by the
Government (3 lakhs)
ARREARS OF SALARY
Salary in arrears / advance, received in lump sum, is liable to tax in the year of receipt. Relief can be
obtained for salary arrears u/s 89(1) of the Income Tax Act.

Method of Calculation to obtain relief

a) Calculate the tax on total income of the previous year in which additional salary was received.

b) Calculate the Tax on total income as reduced by additional salary of the previous year.

c) From the amount arrived at...

(i) deduct the amount arrived at

(ii) to arrive at tax on additional salary received.

d) Ascertain the previous years to which the additional salary relates. Add the amount of additional salary
to the total income of such years.

e) Calculate the Tax on total income as increased by the relevant additional salary in respect of each of
such previous years.

f) Calculate the tax on the total income without the additional salary of each of the said previous years.

g) From amount obtained at ...

(i) deduct the amount arrived at

(ii) to calculate aggregate tax on additional salary.

h) The relief is the difference of (c) and (g)

Exemptions under Capital Gains
There are certain Exemptions in respect of Long-Term Capital Gains. A few are given below :
I. Profit on Sale of Residential House (Sec.54) :

Capital Gain earned by selling a house meant for residential accommodation whether self-occupied or let-
out, is fully exempted subject to the following :

1. The Assessee should be an Individual or H.U.F.

2. The Hose is held for more than 3 years by the Assessee.
3. The Assessee has :

1. Purchased a new house one year before the sale / two years after the sale of original house

OR
 1. Constructed a new house or has purchased a site and constructed a house thereon, within a
period of 3 years after the sale of the original house.

1. If the amount of Capital Gain is not utilized for the above purpose, before the due date of filling
Annual Returns, it should be deposited in a Bank under Capital Gains 1988 Account Scheme.
2. Cost of new house is equal or more than the Capital Gain earned.

Note :

1. If Capital Gain is more than the cost of new house, the difference amount is chargeable to tax at
20% as Long-Term Capital Gain of the Previous Year in which the original house was sold.

1. If Capital Gain is more than the cost of new house, the difference amount is chargeable to tax at
20% as Long-Term Capital Gain of the Previous Year in which the original house was sold.

1. If the new house is sold within 3 years from the date of purchase or construction, the cost of the
new house will be reduced by the amount of Capital Gain exempted earlier on the original house
and the difference between sale price of the new house and such reduced cost will be treated as
³Short Term Capital Gains´ and charged to tax during the year in which the new house was sold.

II Profit on sale of any Long-Term Capital asset is exempted if the Profit / Capital Gain is invested in Long
Term Specified Assets of NHAI or Rural Electrification Corporation ( Sec. 54EC) Subject to the following :

1. The Profit / Capital Gain earned / accrued from the sale of a Long-Term Capital Asset.

1. The Assessee Invests the whole or part of the Capital Gain in the Specified Assets, ( i.e. Bonds of
NHAI or REC with a lock-in period of 3 years) within 6 months from the date of sale of original
Asset.

1. The investment made is not less than the Capital Gain. If a part of the gain is invested, amount
proportionate to the investment only will be exempted and balance is taxable.

1. The Assessee has to retain the newly invested Specified Asset for a minimum period of 3 years

III. Profit on sale of any Capital asset (other than a residential house) is exempt from ax, if the investment
is made on a Residential House, subject to the following ( Sec. 54F) :

1. The Assessee is an Individual / HUF.

2. The Capital Gain is by sale of Long-Term Capital Asset (other than residential house)

3. The Assessee has purchased a new house one year before the sale of the Capital Asset or two years
after the sale of the Capital Asset or construct a house within 3 years or purchases a Site or
constructs a house thereon within 3 years from the date of sale of the Capital Asset.

4. The cost of the new house is not less than the entire sale value excluding cost of transfer of original
Capital Asset sold. If only a part is invested, amount invested only will be exempt. The balance is
taxable.

5. If the full amount of sale value is not utilized for the above purpose before the due date for filling of
Returns u/s 139(1), it should be deposited in a Bank under Capital Gains Scheme 1988 A/c.

6. On the date of sale of the original Capital Asset, the assessee...

 7. Does not own more than one residential house other than new house.

Does not purchase within 2 years, or construct within 3 years any other residential house from the date of
purchase / construction of the new house.

Gift-Taxable under Income Tax

(Cash / Non Cash Pay the Tax)
Till last year if one has received a dazzling jewellery ² say worth As 2 lakhs from a friend or a non-relative,
he would not be liable to pay tax. But, from 1-10-2009, one is liable to pay tax on receipt of any property
(movable or immovable) or cash received from non-relatives.

From 1-10-2009 any property received from a non-relative where the value is in excess of Rs 50,000 in a
particular year will be considered as income in the hands of the recipient.

Earlier, gifts in the form of cash from non- relatives were exempted upto a limit of Rs. 50,000 a year (if sum
exceeds Rs. 50,000, then entire amount is eligible for being taxed). While this limit remains unchanged, the
key change proposed is aimed at bringing in non-cash gifts into the tax ambit. Earlier, gifts in non-cash form
(like shares and securities, jewellery, archeological collections, paintings and gold), even if they were in
excess of As 50,000, were exempt from any tax in the hands of the recipient.

In case of immovable property, the value as determined by the stamp duty ready reckoner will be
considered for tax purposes.
In case of transactions involving immovable property but wherein a consideration is involved, the amount
eligible for being taxed would be the difference between the stamp duty and the consideration paid (for
other movable property, µfair market value¶ would be considered as against stamp duty).
Further, the law also provides for certain exceptions. The money/property received in the circumstances
mentioned below is not taxed:

1. From any relative.

2. On the occasion of the marriage of the individual.
3. Under a Will or by way of inheritance &
4. In contemplation of death of the payer.

As per the explanation given under the above section µrelative¶ means:
1) Spouse of the individual.
2) Brother or sister of the individual.
3) Brother or sister of the spouse of the individual.
4) Brother or Sister of either of the Parents
5) Any lineal ascendant or descendant of the individual.
6) Any lineal ascendant or descendant of the spouse of the individual and
7) Spouse of the person referred to in clauses (2) to (6).
It is customary in our country that in certain occasions such as festivals, birthdays or anniversaries, relative
and friends give gifts as a token of love and affection. If such cash gifts are of small amounts then there is
no botherat ion both for the giver as well as the taker from the taxation angle. If the amount of cash/non-
cash gift exceeds Rs.50,000 then the person who receives the gift should know the change in the law
mentioned above.
This is because the cash gift is nothing but money received without consideration and accordingly attracts
tax liability.
One should also ensure that proper gift deeds are made to avoid legal complications, if any, in future. In any
case the tax payers should take advice from their tax consultants before taking any such steps. Those who
make or receive such gift or money without consideration should furnish full details in their annual income
tax returns.
On wedding day, gift received from anyone (relatives or not) would not fall under ³Gift´ and not taxable
under income tax. Money received under ³Will´, by way of inheritance, and benefits from employer for the
service to the employee or to the dependent in his absence also will not be treated as Gift taxable under
Income Tax.
Guide to various Tax Saving Schemes
1. SENIOR CITIZENS SAVINGS SCHEME
2. POST OFFICE TIME DEPOSIT ACCOUNT
3. PUBLIC PROVIDENT FUND (PPF)
4. BANK DEPOSITS
5. UNIT LINKED INSURANCE PLAN (ULIP)
6. LIFE INSURANCE POLICIES (LIC)
7. LIC¶S JEEVAN AKSHAY VI
8. PENSION PLANS
9. EQUITY LINKED SAVINGS SCHEME (ELSS)
10. NATIONAL SAVINGS CERTIFICATES


 G   

X Individual above 60 years (VRS persons 55 and
above) can invest.

X Duration 5 years. Can be extended for further

3 years.
X Multiple/Joint accounts are allowed.

X Maximum Limit 15 Lakhs.

X Lock-in period 1 year. Premature closure
allowed with penal interest.

X Interest ± 9% p.a. payable Qly.

X Effective post-tax return about 6% for highest
tax bracket.
X 1 lakh invested earns Rs. 2250 per Qtr.
X Interest earned is taxable.
X Tax Exemption:

Eligible exemption u/s o0C for overall

Investment upto Rs. 1 Iakh. tnt. earned is
taxable.

a
G
 G a
 G 
×G

X Any individual can open an account singly or
jointly.
X More than one account can be opened without
any limit.
X Account can be opened for 1,2,3, & 5yrs.
X Interest for 5 years deposit is 7.5%
X Premature withdrawal after 1 year attracts 2%
penalty on interest applicable.
X Amount withdrawn before 5 years period, tax
will have to be paid on the withdrawn amount
treating it as the income of that year.
X Tax Exemption: Only 5 years term deposit
with a Max. Investment of Rs. 1 lakh eligible u/s
80C.

a× a
 G×

aa
X An individual can open only one account
besides his GPF account.
X Option to pay each contribution in one lump
sum p.a or in 12 installments.
X Period:15 yrs (Min.16 annual contributions).
Can be contd. further every 5 yrs.
X Option to continue aftermaturityforevery 5
years.
X Investment: Mm. 500; Max: 70000 p.a.
X mt. ± 8% compounded annually.
X Canwithdraw50%of the balancefrom 7th
year onwards.
X An amount equal to withdrawal can be invested
from current year¶s income to make the account
a self sustaining one.
X Loan upto 25% of balance available (2 years
ago) is allowed upto the end of 5th year.
X Second loan is given after clearing the first
loan.
X No loan is given after 6 years from the date of
first subscription.
X After 15 years entire balance can be
withdrawn.
X Interest earned is totally exempt u/s
10(11).
X Tax Exemption:Investment upto Rs. 70,000
qualifies for deduction u/s 80C.

 a
 G
X A term Deposit to be opened with a scheduled
Bank in the prescribed form.
X Mi Investment Rs. 100/- Max. 1 Lakb.
X The Term will be 5 Years.
X Premature encashment not permited.
X Income-tax benefit amount of term deposit
invested along with PPF/LIC/ NSC/ULIP, etc upto
a max. of Rs. 1 Lakh is eligible for deduction u/s
80C.
X Interest earned on the deposit is taxable.

× G  × a 

× a
X Can be invested Singly/Jointly.
X Duration: 10 or 15 years.
X ULlPcan betakeninthenameof spouse & children
- major/minor.
X Provides Life Insurance, Accident
Insurance coverage and also reinvestment
of dividend in units.
X Target amount: Minimum-Rs. 15,000.
Maximum - As. 5 lakhs.
X Personal Accident cover upto Rs. 50,000.
X On maturity, NAV+Bonus @ 5% for 10 yrs
& 7.5% for 15 yrs term (cash equivalent of
units will be paid).
X Can remain in the plan to participate in further
growth (0.5% additional maturity bonus).
X Tax exemption:
Investment upto Rs. 1 lakh is eligible for tax
exemption ufs8OC. Dividend declared is
fullyexemptu/s 10(35). Maturitybonus is taxable
in the year of maturity.

  ×  a
  

 
X Variety of Plans available.
X Major Benefit: Life Risk Cover.
X Encourages to save compulsorily.
X Besides covering life risk, gets tax benefit both
at entry (premiums paid) & exit point (Maturity
+ Bonus).
X Asset is created without having one.
X Tax Exemption:
Eligible u/s 80C for overall Investment upto As.
1 lakh & maturity amount (lnvestment+Bonus) is
totally exempt u/s 10(1OD).
From the F/Y 2003-04, premiums exceeding
20% of the S.A., in any year, will not enjoy tax
free returns u/s 10(10 D( or benefit u/s 80C.

    
X Immediate Pension Plan for individual between
40 & 79 years.
X Mm. Investment: Rs. 50,000.
X e.g. Investment of As. 10 lakhs for age at
entry 40 will give monthly pension of Rs. 5858.
X Tax Exemption:
Eligible for exemption u/s o0C for overall
Investment upto Rs. 1 Iakh.

a
a 
X Any individual between 18 & 70 years can take
a policy.
X Investment: Mm. Premium - As. 2,500 pa.; As.
10,000 for Single Premium; Max. - No Limit.
X Minimum pension starting age is 50 years &
maximum is 79 years.
X Guaranteed Pension eitherfor 5,10,15, 20
years or for life time.
X Option to commute 25% of Pension.
X Tax Exemption: Premium paid upto As. 1
Lakh p.a., either under Single Premium or
regular Policy is totally exempt u/s 8OCCC
(Under 80C).

× G   


X Most favourite investment.
X Open ended. Lock-in 3 period years.
X Manyof the Funds have given excellent returns
during recent past. Max. tax benefit plus max.
returns
 X Tax Exemption/Benefit: Eligible for
exemption u/s 80C for overall Investment upto
As. 1 lakh
X Dividend earned is exempt u/s 10(33)

 G
   G   G
X Can buy Singly/Joinfy.
X Duration 6 years.
X Interest rate from 1.3.2003 is o% p.a.
(compounded half yearly).
X Interest accrued between Ist. ¶ & 5 th. year is deemed to have been
reinvested.
X Investment & deemed reinvestment upto Rs. 1,00,000 is eligible
U/s o0C
Rs. 1000 NSC accrues interest as shown below:

Total
YEAR I II Ill IV V VI
Interest

INT. @o% (on or

o1.60 oo.25 95.45 103.25 111.65 120.75 600.95
afterl.3.2003)

   


 

#
! 
 
Till last year if one has received a dazzling jewellery ² say worth As 2 lakhs from a friend or a non-
relative, he would not be liable to pay tax. But, from 1-10-2009, one is liable to pay tax on receipt of
any property (movable or immovable) or cash received from non-relatives.

From 1-10-2009 any property received from a non-relative where the value is in excess of Rs 50,000
in a particular year will be considered as income in the hands of the recipient.

Earlier, gifts in the form of cash from non- relatives were exempted upto a limit of Rs. 50,000 a year
(if sum exceeds Rs. 50,000, then entire amount is eligible for being taxed). While this limit remains
unchanged, the key change proposed is aimed at bringing in non-cash gifts into the tax ambit. Earlier,
gifts in non-cash form (like shares and securities, jewellery, archeological collections, paintings and
gold), even if they were in excess of As 50,000, were exempt from any tax in the hands of the
recipient.

In case of immovable property, the value as determined by the stamp duty ready reckoner will be
considered for tax purposes.

In case of transactions involving immovable property but wherein a consideration is involved, the
amount eligible for being taxed would be the difference between the stamp duty and the consideration
paid (for other movable property, µfair market value¶ would be considered as against stamp duty).

Further, the law also provides for certain exceptions. The money/property received in the
circumstances mentioned below is not taxed:

1. From any relative.

2. On the occasion of the marriage of the individual.
3. Under a Will or by way of inheritance &
4. In contemplation of death of the payer.

As per the explanation given under the above section µrelative¶ means:
1) Spouse of the individual.
2) Brother or sister of the individual.
3) Brother or sister of the spouse of the individual.
4) Brother or Sister of either of the Parents
5) Any lineal ascendant or descendant of the individual.
6) Any lineal ascendant or descendant of the spouse of the individual and
7) Spouse of the person referred to in clauses (2) to (6).

It is customary in our country that in certain occasions such as festivals, birthdays or anniversaries,
relative and friends give gifts as a token of love and affection. If such cash gifts are of small amounts
then there is no botherat ion both for the giver as well as the taker from the taxation angle. If the
amount of cash/non-cash gift exceeds Rs.50,000 then the person who receives the gift should know
the change in the law mentioned above.

This is because the cash gift is nothing but money received without consideration and accordingly
attracts tax liability.

One should also ensure that proper gift deeds are made to avoid legal complications, if any, in future.
In any case the tax payers should take advice from their tax consultants before taking any such steps.
Those who make or receive such gift or money without consideration should furnish full details in their
annual income tax returns.

On wedding day, gift received from anyone (relatives or not) would not fall under ³Gift´ and not
taxable under income tax. Money received under ³Will´, by way of inheritance, and benefits from
employer for the service to the employee or to the dependent in his absence also will not be treated
as Gift taxable under Income Tax.

Chat Showing Computation of 'SALARY' Income

CHART SHOWING COMPUTATION OF ³SALARY´

INCOME

I. Important Points :

1. Relationship of employer and employee must exist to create salary income.

2. Only receipts from employer are taxable under this head. Receipt from a person other
 than employer are taxable under ³Other Source´.

3. In case Salary is received after deduction of following items... these are added back to
get fully Salary :

(i) Own Contribution to Provident Fund.

(ii) Tax Deducted at Source (TDS)

(iii) Repayment of Loan etc.

(iv) LIC Premium, if deducted from salary.

(v) Group Insurance Scheme.

(vi) Rent of House provided by employer.

1. Previous Year in case of Salaries is always Financial Year i.e. for

the Assessment Year 2009-2010 it is 1-4-2010 to 31-3-2011.

II. Salary U/s 17(1) :

1.Î
Fully Taxable.

2. a  Fully Taxable

3.  It has been treated separately.

4. (a) Any Fees -- Fully Taxable

(b) Commission -- Fully Taxable

(c) Bonus -- Fully Taxable

(d) Perquisites -- (Perks) These are treated separately u/s 17(2)

(e) Profit in lieu of Salary -- These are treated separately u/s17(3)

5.     !  " #$  Fully Taxable.

6.
 "  Fully Taxable

7.     Fully Taxable.

8.Refund of Provident Fund (PF)

 (a) If SPF -- Fully exempted

(b) If RPF -- Fully exempted if service is more than 5 years.

(c) If URPF -- Taxable portion is added in salary income. Taxable portion is equal to
employer¶s contribution + interest on this part. Interest on own contribution to URPF is
taxable under the head ³ Income from Other Sources.´

III. Allowances :

%$&
 ' "(

Foreign Allowance given by Govt. to its employees posted abroad. HRA given to Judges
of High Court & Supreme Court.

G %  ' "(

(i) Dearness Allowance / Additional D.A. / High Cost of Living Allowance -- Fully
Taxable.

(ii) City Compensation Allowances (CCA).

(iii) Capital Compensatory Allowance

(iv) Lunch Allowance

(v) Tiffin Allowance

(vi) Marriage / Family Allowance

(vii) Overtime Allowance

(viii) Fixed Medical Allowance.

(ix) Electricity and Water Allowance

(x) Entertainment Allowance. It is fully added in employee¶s Salary.

In case of Government employees a deduction is allowed u/s 16(ii) at the rate of least
of following :
(a) Statutory Limit Rs. 5,000 p.a.

(b) 1/5 (20%) th of Basic Salary ; or

 (c) Actual Entertainment Allowance received.

a G %  ' "(

1.   ' "



(a) Fully Exempted, if received by the Judges of High Court and Supreme Court.

(b) Fully Taxable, if received by an employee who is living in his own house or in a
house for which no rent is paid.

(c) Exempted upto least of following for those employees who are living in rented
houses:

(i) Actual HRA received by the employee.

(ii) Rent paid - 10% of Salary ; or

(iii) 40% of Salary in ordinary town ; 50% of Salary in Mumbai, Kolkata,

Chennai or Delhi.

Taxable HRA = HRA Received - Least of Above.

Salary = Pay + D.A. which enters into Pay for Service or Retirement Benefits +
Commission on Turnover Achieved by Him.

'
 ' "  %$&
 & "  %&
  "
 
$&$ %")  )#  % 

2. Uniform Allowance

3. Conveyance Allowance

4. Traveling Allowance

'
 ' " %$&
& $   


5. Special Compensatory Allowance

6. Border Area Allowance

7. Tribal Area Allowance -- Exempted upto Rs. 200 p.m. if received in the States of
M.P., Tamil Nadu, U.P., Karnataka, Tripura, Assam, West Bengal, Bihar, or Orissa.

8. Children¶s Education Allowance -- Exempted up to Rs.100 p.m. per child for

 education in India  ' '"#
  .

9. Hostel Expenditure Allowance -- Exempted up to Rs. 300 p.m. per child for Hostel
expenditure  ' '"#
  .

IV. Perquisites :

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a*(

1. Leave Travel Concession subject to conditions & actual spent only for travels.

2. Computer/ Laptop provided for official / personal use.

3. Initial Fees paid for corporate membership of a club.

4. Refreshment provided by the Employer during working hours in office premises.

5. Payment of annual premium on Personal Accident Policy.

6. Subscription to periodicals and journal required for discharge of work.

7. Provision of Medical Facilities.

8. Gift not exceeding Rs. 5,000 p.a.

9. Use of Health Club, Sports facility.

10. Free telephones whether fixed or mobile phones.

11. Interest Free / concessional loan of an amount not exceeding Rs.20,000 (limit not
application in the case of medical treatment)
12. Contribution to recognised Provident Fund / approved super annuation fund, pension
or deferred annuity scheme & staff group insurance scheme.
13. Free meal provided during working hours or through paid non transferable vouchers
not exceeding Rs. 50 per meal or free meal provided during working hours in a
remote area.
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 Employees stock option plan as per Central Government Guidelines.

G % a*(

1. Rent Free Accommodation

2. Provision of Motor Car or any other Conveyance for personal use of Employee.

3. Provision of Free or Concessional Education Facilities.

4. Reimbursement of Medical Expenditure.

5. Expenditure on Foreign Travel and stay during medical expenditure.

6. Supply of Gas, Electricity & Water.

7. Sale of an Asset to the Employee at concessioanal price including sale of Share in the
Employer Company.

a+%$&
 $&G %  $&



  G %

Value of the following benefits is not taxable in the hands of an employee. The employer
has to pay tax on deemed income calculated as percentage of expenditure incurred.

1. Any free or concessional ticket provided by the employer for

private journeys of his employee or their family members
2. Any contribution by the employer to an approved superannuation
fund for employees;
3.
1. Expenditure incurred on entertainment ;
2. Expenditure incurred on provision of hospitality of every
kind by the employer to any person.
3. Expenditure incurred on conference like conveyance, tour
& travel (including foreign travel) , on hotel, or boarding
and lodging in connection with any conference shall be
deemed to be expenditure incurred for the purposes of
conference.
4. Expenditure incurred on sales promotions including
publicity ;
5. Expenditure incurred on employee¶s welfare ;
6. Expenditure incurred on conveyance
7. Expenditure incurred on Hotel, Boarding & Lodging
facilities ;
8. Expenditure incurred on Repair, Maintenance of Motor Cars
and the amount of Depreciation there on.
9. Expenditure incurred on use of telephone and Mobile
Phones.
10. Expenditure incurred on maintenance of any
accommodation in the nature of Guest House other than
 used for Training purpose.
11. Expenditure incurred on Festival Celebrations.
12. Expenditure incurred on use of Health Club and
similar facilities.
13. Expenditure incurred on gifts ;

Fringe Benefit Tax (FBT) is not applicable in case of following type of employers.

1. An Individual or a sole Proprietor

2. A Hindu Undivided Family
3. Government
4. A Political Party
5. A person whose income is exempt u/s 10(23c)
6. A Charitable Institution registered u/s 12AA.
7. RBI
8. SEBI

V. Profits in Lieu of Salary :

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- G  " 

G - Exempt upto rules.

 
 ' "&+ - If given by Govt. to its employees posted abroad
are fully exempted.

/ ( A Govt. Employee or semi-Govt. employee where Govt. rules are
applicable -- Fully Exempted.

  îor employees covered under Payment of Gratuity Act.--

Exempt up to least of following :

(a) Notified limit = Rs. 3,50,000

(b) 15 days Average Salary for every one completed year of

service (period exceeding 6 months =1 year)

1/2 month¶s salary = (Average monthly salary or wages x 15/26

(c) Actual amount received.

. Jther Employees -- Exempted up to least of following provided service is more

than 5 years or employee has not left service of his own :
 (a) Notified limit = Rs. 3,50,000

(b) 1/2 month¶s average salary for every one year of completed service (months to be
ignored.)
(c) Actual amount received.

RR Average Salary = Salary for 10 months preceding the month of retirement divided by
10.

x$$   a  (

In case commuted value of pension is received --

(a) If Govt. employee -- is Fully Exempted.

(b) Mf other employee who receive gratuity also -Lump sum amount is exempted upto
commuted value of 1/3rd of Pension.

Mf other employee who does not get gratuity -- Lump sum amount is exempted upto
commuted value of 1/2 of pension.

ë  " #$ !-.

-.

(a) If received at the time of retirement by a Govt. employee---Fully Exempted

(b) If received during service---Fully taxable for all employees

(c) If received by a private sector employee at the time of retirement exempted upto :

(i) Notified limit Rs. 3,00,000

(ii) Average salary x 10 months

(iii) Actual amount received.

(iv) Average Salary x No. of months leave due.

0 G % &+& 
$&It is fully Exempted.

1  & $  "
    a  Any payment received out of SPF is Fully
Exempted.

2  & $  "
    a  Any payment received out of RPF is Fully
Exempted, If service exceeds 5 years.
 - & $ "
   &&
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is Fully
Exempted

Vi. Deduction Out Of Gross Salary [ Sec. 16]

-   $  ' "3×!-0

 4

Deduction u/s 16(ii) admission to govt. employee shall be an amount equal to least of
following :

1. Statutory Limit of Rs.5,000 p.a.

2. 1/5 th of Basic Salary
3. Actual amount of entertainment allowance received during
the previous year.

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In case any amount of professional tax is paid by the employee or by his employer on his
behalf it is fully allowed as deduction.

Vii. Deduction U/S o0C Out Of Gross Total Income (GTI)

The following are the main provisions of the newly inserted Section 80C. :

1. Under Section 80C , deduction would be available from Gross

Total Income.
2. Deduction under section 80C is available only to individual or
HUF.
3. Deduction is available on the basis of specified qualifying
investments / contributions / deposits / payments made by the
taxpayer during the previous year.
4. The maximum amount deduction under section 80C , 80CCC,
and 80CCD can not exceed Rs.1 lakh.

Deduction u/s 80C shall be allowed only to the following assessee :

1. An Individual
2. A Hindu Undivided Family (HUF)

TAX DEDUCTED AT SOURCE

(TDS Table & their Limits)
Individuals (including Proprietary concerns) and HUFs, carrying on business/profession, whose Gross Sales,
Turnover or Gross Receipts in the previous year exceeds Rs. 60 Lakhs (in case of business) and Rs. 15
 Lakhs (in case of Professionals), shall also be liable to deduct TDS on all specified payments except
payments made for personal purpose.
TDS has to be compulsorily deducted by the person responsible for paying.
If the Payee submits a declaration in Form 1 5G/1 SHin duplicate stating the following, then TDS need not
be deducted :
1. That his total income is less than basic exemption limit of Rs. 1.6 lakh.
2. Even if his total income exceeds basic exemption limit of 1.6 lakh but tax payable after deducting rebates
u/s 80C is nil.
3. Interest on security & other loans in case of Senior Citizens (For others in Form 15G).
Senior Citizen can also give self declaration in respect of Dividend & NSS. TDS in respect of
Contractors/Subcontractors under 194C to be deducted f sum exceeds Rs. 30,000 or Rs. 75,000 in
aggregate in a financial year. Expenditure will be disallowed if TDS is not deducted.
If deductee does not furnish his PAN then TDS rate will be 20% w.e.f. 1-4-201 0.
Note: E-Filing of TDS returns is quarterly. TDS Certificate form 16/16A is revised incorporating additional
details.
Payee to furnish his PAN for TDS / TCS purposes
Any person receiving any sum or income on which tax is to be deducted at source, shll furnish his PAN to
the person responsible for deducting TDS.
SL.No. Particulars Threshold Limit TDS Rate
1. Int. on Debentures & Bonds 2500 10%
2. Int. on FD¶s in Banks/Hsg. Finance Cos. & 8% taxable bonds 10000 10%
3. Int. other than Int. on securities 5000 10%
4. Insurance Commission to Agents (Individuals) 20000 10%
5. Insurance Commission to Agents (Domestic Cos.) 5000 20%
6. Winnings from Lotteries/Cross-word/Game Shows 10000 30%
7. Commission earned on sale of Lottery Tickets 1000 10%
8. Winnings from Horse Races 5000 30%
9. Payments to Advertising Agency 20000 1%
10. Payments to Contractors (per contract) 30000 1%
11. Payments to Sub-contractors 30000 1%
12. Commission & Brokerage (other than transactions relating to 5000 10%
Shares & Securities
13. Payment of fees to Professionals / Technical Services p.a. 30000 10%
14. Payment of Rent to Individuals/HUF 180000 10%
15. Payment of Rent on Plant & Machinery or Equipments 180000 2%

Calculation of Tax Liabilty

( Easy way to calculate your Income Tax)
A. CALCULATE TOTAL INCOME
Your total income is the sum of all money inflows in your name. The Tax rules classify individual income
under Five Heads such as «

½ Income form Salary

½ Income from House Property
½ Income from Business or Professions
½ Income from Capital Gains
½ Income from Others Sources

B. DEDUCT EXEMPT INCOMES

There are some incomes that are exempt from Tax, like«

½ Agricultural Income
½ Capital Receipts ( lump sum payments like Life Insurance or Gratuity up to certain limit),
½ Interest on EPF and PPF,
½ Interest on Tax-Free Govt. of India Savings Bonds (now discontinued),
½ Dividend on Equity Funds, and
 ½ Commuted Pension

In addition, under each of the 5 above listed Income Heads, some Deductions and Exemption are allowed«
1. Salary Income :
House Rent Allowance : ( least of the following) Is deductible from your Total Income.:

i Actual Allowance
i 50% of Salary if house is in a Metro, otherwise 40% of salary or
i Excess of Rent paid over 10% of salary

2. House Property Income:

(a) Deduction :
30% of the net annual value of the house property ( annual rent minus municipal taxes paid in the previous
year) is allowed as Deduction.

(b) Interest on Borrowed Capital :

For Self Occupied Property , Upto Rs. 1.5 lakh interest on money borrowed to buy a house is allowed as a
Deduction if you live in that house. If you let it out, entire interest is allowed.
3. Income from Business:

½ Business-related ( like Rent, Travel & Repairs ) are allowed as a Deduction.

½ Depreciation.

4. Income from Capital Gains:

½ Long-Term Capital Gains (LTCG) from House Property is Exempt from Capital Gain Tax if
Investment is made by way of Purchase of another Residential Property within 2 years or by way of
construction of Residential Property within 3 years or by Purchase of 54EC Bonds within 6 months.
½ LTCG form Shares and Equity Mutual Funds held for minimum of 1 Year ( where Security
Transaction Tax-STT has been paid ) are Tax Exempt.

5. Income from Other Sources :

Each head under this Income Source has its own exemptions. For example, dividend income is at present
exempt in the hands of recipient.

After exemptions what is left is called Gross Income or your Assessable Income

C. SUBSTRACT DEDUCTIONS

A deduction enables you to reduce your income on which tax will be levied. Before, computing your tax, you
are allowed to reduce the amount of assessable income under certain conditions listed below :

½ Medical Reimbursement upto Rs. 15,000 a year can be claimed back from the employer and are not
part of the taxable income.
½ Conveyance Allowance of Rs. 800 per month if given by the employer can be deducted.
½ U/s 80D, Premium paid on a Medical Insurance Policy, upto Rs. 15,000 ( Rs.20,000 if one of the
beneficiary is Senior Citizen).
½ A maximum of Rs. 1 lakh invested towards various savings schemes ( including pension plans) u/s
80C.

D. CALCULATE TAX LIABILITY

The Income left after these Deductions is the Taxable Income, on which Tax will be levied...

½ The First Rs. 1.6 Lakh is Exempt from tax.

½ Income between Rs.1,60,001 and Rs.5,00,000 is taxed at 10%
½ Income between Rs.5,00,001 and Rs.8,00,000 is taxed at 20%
 ½ More than Rs.8,00,000 is taxed at 30%

There is also a Education Cess ± 3% on the liability at each slab.