What is Taxable

Under the Income Tax Act,1961 the employer is required to deduct tax on average monthly basis from the salary paid to the employees and deposit the same in to the Government treasury with in specified time. All components of payroll are generally taxable unless specific exemption is available. The taxability of various components of payroll is as under: Basic HRA Special Allowance Variable Allowance Performance Award Bonus Referrals Meal Allowance Meal Coupon Conveyance Allowance Fully taxable Partly taxable - Note 1 Fully taxable Fully taxable Fully taxable Fully taxable Fully taxable Fully taxable Non taxable Transport allowance to meet expenditure for the purpose of commuting between residence and place of duty is exempt up Rs 800 per month Non taxable for reimbursement of expenditure actually incurred for treatment for self and any member of the family subject to maximum of Rs 15000 per annum Exempted for reimbursements for the amount spent for self and any member of the family on fare by economy class air or air-conditioned class rail by the shortest route. (two journeys are allowed in a block of four calendar year commencing from 1986, current block is 2006-2009)

Medical Reimbursement

Leave Travel Concession

Note 1: Lowest of the following are exempt from HRA under section 10(13A): Actual HRA received Rent paid over 10% of salary [Basic] 50% of salary [40% in case of Non-Metros]

Deductions chapter VIA :The employer can allow the following deductions from salary income while calculating taxable salary:Section 80C Particulars Major items covered includes: Provident Fund contribution [deduction by employer] Life Insurance premiums [LIC or other insurance companies] PPF [SBI or some nationalized banks, Post office] NSC [Post office] ULIP [UTI] Payment towards children education [Tuition fee only up to two children] Repayment of Principal amount on Housing Loan to any Financial Institution (House should be complete) Infrastructure Bonds like ICICI or IDBI or specific public issues. Pension Fund [LIC or other insurance companies] Mutual Fund [Approved] Fixed deposits for a period over 5 years under specified scheme. The aggregate of investments in any or all items up to Rs 100,000 is allowed as a deduction. Mediclaim- for self, spouse, dependant parents, dependant children up to Rs 15,000 ( Rs 20,000 in case the coverage is for parents who are senior citizen)- can be done through different Insurance companies Deduction against medical treatment, training or rehabilitation of handicap dependant or deposit of any amount under any approved scheme up to Rs 50000 (Rs 75000 in case of severe disability). Certificate from physician, surgeon, occultist or psychiatrist working in a government hospital should be obtained. Deduction against medical treatment of certain specified decease or ailment for self and dependant relative (a relative who is not dependant for his support or maintenance on any person other than the assessee) up to Rs 40000 (Rs 60000 in case the dependant relative is a senior citizen)-

80D

80DD

80DDB

80E

80G

80 GG

Certificate in Form 10 I from specified authority to be obtained. This deduction shall be reduced to the extent of claim received from any insurer in respect of the medical treatment. Amount repaid as Interest paid on loan taken from financial institution or charitable institution for Higher studies of self, spouse or children. There is no maximum limit for availing deduction under this section. Certificate for interest repaid from the financial institution should be produced 50%(100%) of the donation to certain specified bodies are allowed. Employer can give credit under this clause only in a very selected cases ( PM National Relief Fund etc). Deduction is available in case no HRA is received and self or spouse or minor child should not own any residential accommodation at the place where he is ordinarily residing or performing duties. Least of the following is deductible: Rent paid over 10% of total income 25% of total income Rs 2000 per month A deduction of Rs 50000 ( Rs 75000 in case of severe disability) is available in case of person suffering from permanent physical disability including blindness Certificate from the doctors of government hospital required.

80U

Salaried employee and the New Rates of Income-Tax for F. Y. 2007-08 [A. Y. 2008-09]
As per the Finance Bill, 2006 the new Income-Tax for individuals Rate are as under :On Income 1,10,000 On Income 1,10,000 but 1,50,000 On Income in 1,50,001 but 2,50,000 On Income in 2,50,001 up to Rs. NIL 10% 20% 30%

over Rs. up to Rs. excess of Rs. up to Rs. excess of Rs.

Notes:I. II. III. IV. For female tax payers, initial income of Rs. 1,45,000 is exempt. For Senior citizen tax payers, initial income of Rs. 1,95,000 is exempt. Surcharge @ 10% is payable in case the income is in excess of Rs. 10,00,000. Education Cess of 3% payable.

Note on setting off the loss under the head " Income from house property " against salary income under section 24(b)
Under the Income Tax Act, loss under the head Income from house property may be incurred under the following circumstances. (A) Where the employee owns and occupies the house property for the purpose of his residence. Or (B) Where the property could not be occupied by the employee owing to his employment and Such property is not let out and. The employee resides in a property not owned by him at the place where he exercises his employment. In case the employee fall under any of the above situations and have taken a loan for the purposes of acquiring, constructing, repairing, renewing or reconstructing a house property, the interest so paid/payable during the financial year will qualify as a loss under the head " Income from House property". Interest for the pre Construction/ Acquisition period may be apportioned in 5 equal yearly installments starting from the year of acquisition or completion of construction of the House property. The maximum possible deduction on account of the aggregate interest is Rs.30,000 per annum. However a higher deduction of Rs.150,000 is allowable provided all the following conditions are fulfilled: Interest is payable on a loan taken by the employee. The loan is taken for the acquisition or construction of a property. The loan has been taken on or after 1st April 1999.