Beruflich Dokumente
Kultur Dokumente
What is assessment?? What is assessment year??? Period of 12 months Usually starting from 1st April to 31st March Also called as Tax Year or financial year The income of previous year is assessed in this year
Previous year
Accounting or income year E.g. What will be the previous year for assessment year 2010-11 Newly set up business Exceptions
Assessee
The person is liable to pay tax or any some of money under this is called an asseessee. Assessee is the person who is also responsible for the payment or the loss or the amount of refund due to him or to such other persons.(e.g.) The person who is deemed to be an asseessee(e.g) The person who is deemed to be an asseessee in default.(e.g.)
Person
"Person" includes an individual a Hindu Undivided Family (H.U.F.) a Company a Firm . an Association of Person (AOP) or Body of Individuals (BOI), whether incorporated or not; a Local Authority and Every Artificial Juridical Person not falling within any of the preceding categories.
Income
Section - 2(24) of the Income-Tax Act gives a statutory definition of income.The definition states various receipts which are included in income which is as under: (1) Profits and gains. (2) Voluntary contributions received by a trust. (3) Amounts under the head of salary,
Contd.
The value of perquisites or profits in lieu of salary. (5) The value of any benefit or perquisite obtained from a company by a director or a person having substantial interest in the company or by a relative of a director. (6) The value of any benefit or perquisite arising from the business or profession (whether received in cash or not). (7) Any capital gains.
Contd
(8) Dividend (9) Casual income e.g. winnings from lottery, prize of crossword competition, races including horse races, card games etc. (10) Annuity income received or receivable. (11) Any sum chargeable under Section: 28 (ii), (iii), 41(1): or 59.
Contd..
Any sum received by employer from his employees as contributions to any fund for the welfare of such employees. (13)Any sum received under a keyman insurance policy including bonus. In addition to the aforesaid receipts any other receipt is also taxable. (14)Amounts taxable which include salary, bonus, commission or other remuneration received or receivable.
Gross salary
According to Section-14 the income of an assessee is computed under the following five heads: (1) Salary (2) Income from house property. (3) Profits and gains of business or profession (4) Capital Gains. (5) Income from other sources
Contd.
The aggregate income under these heads is termed as gross total income. In other words, the gross total income means total income computed in accordance with the provisions of the Act before making any- deductions under Section : 80 CCC to 80 U. :
Agriculture income
2. Definition of Agricultural income: Section : 2 (1A) of income-tax Act defines Agricultural Income as : Any rent or revenue derived from land which is situated in India and is used for agricultural purpose. Any income derived from such land by agricultural operations. Income from building used for agricultural purpose.
Contd.
Rent or Revenue derived from land [Section-2(1A)(a)] : It is not necessary that landlord should be cultivating the land himself. If he has given the land to any other person for cultivation, the rent received by him is an agricultural income. The rent may be received in cash or in kind.
Contd.
Cultivation of the land would involve some basic operations on the land itself and not merely on the growths from the land. Examples of such basic operations are tilling of the land, sowing of seeds, planting etc. Subsequent operations include weeding, digging the soil around the growth, removal of undesirable undergrowths etc.
Contd.
Agricultural not only include the raising of food grains and food products for men and animals but also raising of commercial crops such as tea, coffee, tobacoo, cotton, sugarcane, betel, rubber etc.
Contd.
Income from processing of Agricultural Produce: If agricultural produce are not in a saleable sate, they have to be further processed, in order to make them marketable. Any income derived from such processing will also be treated as agricultural income.
Agricultural House Property: Income from agricultural house property will be treated as agricultural income if The house property is situated on or in immediate vicinity of an agricultural land. The occupier requires it as a dwelling house, or store house. The land is assessed to land revenue in India or is subjected to local rate.
Contd.
The land is neither assessed to land revenue nor subjected to local rate, (i) it is situated outside municipal area (Population of that city is not more than 10,000) or (ii) beyond the specified distance of 8 kms. from a notified municipal area.
Contd.
. Partly Agricultural Income: The following are partly agricultural income: Income derived from the sale of tea grown by the seller in India is treated as agricultural income to the extent of 60% and remaining 40% is taken as non-agricultural income and hence it is taxable.
The following incomes are not treated as Agricultural Income: (1) Royalty income of mines. (2) Income from stone quarries. (3) Income from fisheries. (4) Income from safe of earth for brick making. (5) Income of salt produced by flooding the land with seawater. (6) Remuneration received by a manager of an Agricultural Company. (7) Agricultural Income earned from a land situated outside India.
Contd.
(8) Income from dairy and cattle breeding. (9) Ground rent for permanent shops at bazars. (10) Income from supply of water for irrigation purposes. (11) Dividends received by shareholders from a company which is engaged in agricultural operations. (12) Income derived from land letout for storing crops. (13) Interest on arrears of rent payable in respect of agricultural land.
Contd.
(14) Commission earned by landlord for selling agricultural produce of his tenant. (15) Income from butter and cheese-making. (16) Income derived from land let-out for processing salt. (17) Income derived from T.V. Serial shooting in the farm.
What is amalgamation?
Condition (1): all the properties of the amalgamating company immediately before the amalgamation should become the property of the amalgamated company by virtue of amalgamation. (2) all the liabilities of the amalgamating company.
1 2 3 4 5
Taxable
Not Taxable
Not Taxable
Contd.
Tax paid on behalf of foreign companies / non resident Govt. agreement before 1-6-02
The taxpayer should be the foreign company It has the income by the way of royalty & technical services such royalty should received from the central govt.or stat govt. under agreement made after 31-3-76 & before 1-6-02
If the above conditions are satisfied, the tax liability of the foreign company born by the payer will not be taxable in the hands of the FC
Income of mutual fund set up by Financial institution / banks income of venture capital fund / venture capital company Income of Trade unions / political parties Income of minor child upto Rs. 1500 dividend from domestic companies.
Contd
Amount of deduction (Profit of the business of undertaking*export turn over)/total turn over of business carried over by undertaking. Period of deduction: 10 consecutive assessment years beginning with the AY in which the undertaking begin to manufacture articles or things or computer software.
Contd.
Salary & wages Salary from more than one sources Salary from the former, present or prospective employer. Salary income must be real & not fictitious. Foregoing of income Voluntary payments
Basis of income
Any income due from an employer or from former employer to an asseessee in PY whether paid or not. Any salary paid or allowed to him in previous by or on behalf of an employer. Any arrears of salary paid or allowed to him in the PY by or on behalf of an employer, if not charged to income tax for ant earlier PY.
Salary on receipt & due basis whichever is earlier Place of accrual of salary: under sec 9(1)(ii) salary in respect of the services rendered in India is deemed to accrue or arise in india even it is paid outside in india Pension paid abroad is deemed to accrue in india if it is paid for the services rendered in india
Leave salary paid in abroad in respect of leave earned in India is deemed to accrue or arise in India Different forms of salary: Advance salary Arrears of salary Leave salary
Leave salary
What is leave salary? Different leaves Earning of leaves Encashment of leave Availability of leaves
Contd
Nature of salary Status of employee Whether it is taxable or not
it is chargeable to tax
Govt non govt employees Leave encashment during the continuity of employment
At the time of retirement of the job Government employees
2 3 4
Period of earned leave (in no of months) to the credit of the employee at the time of his retirement or leaving the job*average monthly salary 10* average monthly salary 3,00,0000( specified by the govt Leave encashment actually received at the time of retirement
Contd..
How to find out leave standing of an employee at the time of retirement or leaving the job: Step (A):find out the duration of the service in no of years (ignore any fraction of years) Step (B): find out the rate of earned leave entitlement from the service rules-how many days the leave is credited for each year of service
Contd.
Step (C): find out earned leave actually taken or encashed (in no of days) during the service time. The computation shall be made as follows:
[Step (A)*step (B) minus step (C)]/30
Average monthly salary is calculated on the basis of average salary for the ten months immediately preceding the month in which the employee has taken retirement
e.g.
X was employed by PQR LTD up to march 15 1988. at the time of leaving he was paid 3,50,000 as leave salary out of which 57,000 was exempt from the tax .thereafter he joined ABC p ltd.& received 4,14,000 as leave salary at the time of is retirement on December 31,2008.determine the amount of taxable leave salary from the following information:
Contd.
Salary at the time of retirement..23,000 Average salary received during 10 months
From march 1, 2008 to July 31,2008.22,600 From august 1to December 31,2008.22,900
Contd..
Salary to the partners Fees & commission Bonus
Gratuity
It is the retirement benefit payable at the time of retirement of the employee Exemption in respect of gratuity is available when it is paid to an employee (i) on his retirement; or (ii) on his becoming incapacitated prior to retirement or on termination of his employment; or (iii) to legal heir if the employee dies.
Contd
Status of an employee Government employees Whether gratuity is taxable Fully exempt from the tax u/sec 10(10)(i) It is fully or partly exempt from the tax u/sec 10(10)(ii)
Non government employees covered by the payment of gratuity act,1972 Non government employees It is fully or partly exempt not covered by the payment of from the tax u/sec 10(10)(iii) gratuity act,1972
Salary in this way means salary last drawn by the employees & includes DA but does not includes any bonus, commission HRA overtime wages or any other allowances How to determine the 15 day's salary: Maximum no of working are taken into consideration (monthly salary at the time of retirement 2500 so, 15 days salary would be (2500*15) /26 = 1442.31
e.g.
X an employee of PQ LTD receives 78,000 as gratuity. He is covered by the payment of gratuity act,1972.he retires on December 12,2008 after rendering service for 38 years & 8 months at the time of retirement his monthly salary & DA was 2400 & 800 resp. is the entire amount of gratuity exempt from tax?
Contd
Average monthly salary is calculated on the basis of average salary for the ten months immediately preceding the month in which the employee has taken retirement. Salary in this mean basic salary it includes DA & also commission payable @ fixed % of turnover
Contd.
When gratuity received by an employee from more than one employer in the same previous year ,the aggregate amt of gratuity cannot exceeds 3,50,000.if the employee has received gratuity from former employee in any earlier year & from another employee in later year than this 3,50,000 reduced by amounts of gratuity exempt from tax under 10(10)(iii)
Contd.
X who is not covered by the payment of gratuity act 1972,retires on November 20, 2008. from abc ltd.and receives 186000 as gratuity after service of 38 years and 10 months. his salary is 8000 p.m upto july 31 2008 and 9000 p.m from august 1,2008.besides he gets Rs.500 p.m as D.A. (69% of which is part of salary for computing retirement benefits) what amount of gratuity will be exempt from tax?
Pension
pension Uncommuted pension Commuted pension Commuted pension
Status of employees It is chargeable to tax or not
It is chargeable to tax It is fully exempt from the tax It is fully or partially exempt from tax
Contd
Uncommuted pension: it is periodical payment of pension for e.g. x gets monthly pension of 2000 it is taxable as salary under section 15 in the hands of a government employee as well as non government.
Contd.
Commuted pension: it is a lump sum payment in lieu of salary. For instance after his retirement x, gets 2000 p.m.as monthly payment of pension as per service rules he gets 25% of his pension commuted for Rs 60,000 (after commutation he will get the remaining pension (75%)1500 by the way of monthly pension which x has received in lieu of 25 % of his monthly pension
Contd
Commuted pension is taxable as under:
Status of employee Gratuity received /not received Exemption in respect of commuted pension u/sec10(10A)
Government employees
Non government employees
Contd..
X retires from ABC ltd. On June 30,2008. he gets Rs.20,000 PM up to January 31,2009.with effect from February 1,2009, he gets 60% of pension commuted for Rs.10,71,000.does it make any difference if he also gets gratuity of 40,000 at the time of retirement?
Retrenchment compensation
(A): an amount calculated in accordance with the provision of sec 25F(b) of industrial dispute act , 1947 (B):amt notified by the govt( 5,00,000) Amt actually received Whichever is low is exempt from tax
Different allowances
Allowances is generally define as fixed amount of money given regularly in addition to salary for the purpose of meeting some particular recuirenement connected with the service rendered by employee or as compensation for unusual conditions of that service it is taxable u\s 15 on due or receipt basis whichever is earlier.
Contd..
allowances.docx
Contd..
Deduction for Entertainment Allowance being minimum of the following: Actual Entertainment Allowance Rs. 5000/ 20% of Basic Salary Salary exclude any allowances & benefits or other benefits.
Contd..
Note: Amount actually expended towards entertainment ( out of the amount received as allowances )is not taxable No deduction is available under this section to a non government employee.
Contd..
Exempted House Rent Allowance if the house is situated in other cities.
Sr. Particulars No. 1 Actual HRA Received Actual Rent Paid 2 (-) 10% of Salary 3 40% of Salary Rs Rs
Contd..
Exemption is not available if employee lives in his own house, or in a house for which he does not pay any rent. For criteria of 50% or 40% of salary as deduction, place of employment is not significant but place where the house is situated is important. Deduction from HRA depends on salary of the employee, Amount of HRA, Place of residence (not place of employment), rent paid by the employee.
Example
X who is posted in Delhi but reside @ Noida gets Rs 60,000 p.a. as basic salary he gets Rs 9,000 p.a. as HRA ,though he paid 12,000 p.a. as rent during the PY 2008-09 he received Rs. 5000 as advance salary of April 2009
Perquisites
Any casual benefit that is attached to the to an office or positions in addition to salary or wages It may be provided in cash or kind It is taxable under the head salary when
Allowed by employer to his employee Allowed during continuity of service Provided for the personal advantage of the employee Derived in terms of keeping in mind the authority of employees
Contd..
Perquisite subject to fringe benefit tax & taxable to the employer not to employee. Perquisite taxable in the hands of employee whether or not employer is liable to pay fringe benefit tax. Perquisite taxable in the hand of employee when employer is not liable to pay tax
Perquisite taxable in the hands of employee whether or not employer is liable to pay fringe benefit tax.(A) Valuation of rent free accommodation: Valuation of unfurnished accommodation Valuation of furnished accommodation
Government employees Non government employees
Contd..
Employees of local authority or foreign govt are not covered by this group & treated as private employees For govt employees the license fees decided by or determined under the govt rules is the taxable value.
Contd..
Where such accommodation is owned by employer:
Value of unfurnished House in case Accommodation is owned by the Employer and the house is situated in city where the population is 10 lakhs or less Sr. Particulars No. 1 7.5% of Salary Rs Rs
Contd...
Value of Furnished House in case Accommodation is owned by the Employer and the house is situated in city where the population is more than 10 lakhs but less than 25 Lakhs
Sr. No. 1 Particulars 10% of Salary Rs Rs
Value of Furnished House in case Accommodation is owned by the Employer and the house is situated in city where the population is 25 lakhs or more
Sr. No. 1 Particulars 15% of Salary Rs Rs
Contd..
Salary:
Sr. No. Particulars 1 Basic Salary + DA (considered for Retirement Benefits) + All taxable allowances + Bonus + Commission Total Salary Rs
Contd..
Value of Furnished House in case Accommodation is owned by the Employer and the house is situated in city where the population is more than 10 lakhs but less than 25 Lakhs
Sr. No. 1 + + Particulars 10% of Salary 10% of the original Cost of Furniture Hire Charges Paid in respect of Furniture Token Taken From the Employees Rs Rs
Contd..
Value of Furnished House in case Accommodation is owned by the Employer and the house is situated in city where the population is 25 lakhs or more
Sr. No. 1 + + Particulars 15% of Salary 10% of the original Cost of Furniture Hire Charges Paid in respect of Furniture Token Taken From the Employees Rs Rs
Contd..
Value of Furnished House in case Accommodation is taken on Lease or Rental Basis
Sr. Particulars No. 1 Actual Rent paid or 15% of Salary (whichever is Less) + 10% of the original Cost of Furniture + Hire Charges Paid in respect of Furniture Token Taken From the Employees Rs Rs
Contd..
Shri malaya Das Gupta is the general manager of the company @ kanpur Basic salary: 30,000 pm up to 30-09-2008 40,000 pm from 1-10-2008 DA: 37.5% of basic salary (50% of which is for PF) 9000 pm which increased 12000 pm from 1-1-2009 Bonus: 1/5th of basic salary Perquisite: the house was actually used by employee for residential purpose from 1-4-2008 to 30-11-2008.the annul fair rent of this house owned is 1,80,000 the company provided furniture for that it pays rent of 36,000 pa
Contd..
Free Domestic Servants: Actual expenditure of the employer is the salary paid by the employer any token amount paid by the employee remaining is taxable Gardners salary paid by employer will not be considered taxable in case of house provided to employee owned by an employer Gas, Electricity or water supplied: the taxable amt is the manufacturing cost provided by the employer if it is provided from the own resources & if purchased from the outside than amount paid to outside agency will be taxable any token taken from employee will be reduced from that amount.
Contd..
Free Education Facility to the Family Members of the Employee: School fees of the children of employee directly paid to school will be taxable in all cases Reasonable cost of education in a similar institute in or near the locality is taxable (up to Rs. 1,000 per month per child is not taxable if education facility is provided to the children of an employee in an educational institution owned/maintained by the employer). Scholarship granted by employer is not assessed as perquisites
Contd..
Health insurance policy & if the premium is paid by the employer amount is not chargeable to tax If the hospital is maintained by any other person for eg private clinic for taking any service if the expenses incurred by employer the amount will not chargeable to tax up to 15,000 in aggregate per assessment year
Contd..
Gift voucher or token: gift received by the employee in cash or convertible form of money are not exempt from tax. other gifts value of that gifts if aggregated comes to 5000 is not chargeable to tax beyond that it is chargeable
Where place of origin of journey & destination connected by rail & journey is performed by any other mode of transport
Contd..
Carry over concession: if leave travel concession is not availed by the employee in the four year block for one occasion or for two occasion for that the exemption can be available for in the next year for the first calendar year but in respect of only one journey
Fare of more than 2 children: exemption not available to more than 2 children in case of children born after October 1, 1998 Exemption will be admissible to all surviving children born before October 1, 1998
Step 3: find out the interest for each month of PY on outstanding amt Step 4: from that calculated interest reduce amt if interest paid by employee Remaining amt is taxable perquisite
Nil
Balance amt
Balance amt
Actual cost to employer (-) 50% of cost for each completed year during which such asset was put to use by the employer, by WDV method
Actual cost to employer (-) 20% of cost for each completed year during which such asset was put to use by the employer, by WDV method Actual cost to employer (-) 10% of cost for each completed year during which such asset was put to use by the employer, by SLM method
nil
Less: amount recovered nil from employee Taxable value: balance nil
Balance if positive
Permissible deduction from salary income: Entertainment allowances deduction Professional tax: professional tax or tax on employment , levied by state is allowed as deduction Deduction is available only in the year in which the professional paid
Provident fund
Provident fund scheme is retirement benefit. Under this scheme a stipulated sum is deducted from the salary of the employee as his contribution towards the fund Employers also generally contribute towards the fund The contribution of both is invested & interested thereon is also credit to the account of employee
Certain conditions should satisfied for accumulated balance to be tax free in RPF
Employee should have worked with employer for continuous 5 years If he has not rendered 5 years continuous service the service must be terminated because of some unusual conditions
Deduction u/s 80 C
Under Section 80C deduction is available from total gross income of an individual assessee or Hindu Undivided Family. The following items qualify for deduction under this Section : Premium paid by the assessee for insurance on his own life or on the life of his wife or any child or premium paid on the life of any member of Hindu Undivided Family. Premium paid upto 20% of policy value is qualified for deduction and excess (if any) is not to be considered. Contribution to Statutory Provident Fund, Recognised Provident Fund and Public Provident Fund. Contribution towards Unit-linked Insurance Plan (ULIP) or contribution towards LIC Mutual Fund of Life Insurance Corporation (as notified under Sec. 10(23D).
Contribution towards Approved Superannuation Fund. Payment to government or an employer who makes payment of salary on behalf of the government in respect of non-commutable deferred annuity on his own life, life of the spouse or any child. (Subject to a maximum amount of 20% of salary). Subscription to any notified Central Government Security, e.g., Post National Savings Certificates VIII Issue. Re-investments of accrued interest on NSC VIII issue purchased in earlier years.
Payment towards the cost of purchase or construction of a residential house. Such payment will include any installment or part payment made by the assessee to Housing Board, Co-op. Housing Society, Bank, L.I.C. , Central or State Government, University or to any authorised institution established for the purpose of promotion of house construction activity. Subscription (including reinvestment of accrued interest) towardsHome Loan Account Scheme, Approved Pension Fund Scheme of National Housing Bank
Contribution towards units of notified mutual fund or U.T.I. Contribution to any approved mutual fund or notified pension fund of U.T.I., e.g., Retirement Benefit Scheme of UTT and Kothari Pioneer Pension Plan. Contribution in the notified annuity scheme of L.I.C, e.g., New Jeevan Dhara, New Jeevan Akshay, New Jeevan Dhara-1, New Jeevan Akshay-1, New Jeevan Akshay-II and New Jeevan Akshay-III.
If the assessee has paid an amount as tuition fees (excluding any payment towards any development fees or donation or payment of similar nature) to any university, college, school or other educational institution in India for the purpose of full time education. Any sum invested in equity shares and debentures of a public company, engaged in infrastructure including power sector. Such shares or debentures must be a part of public issue, which is approved by the Board.
Any sum paid as subscription to any scheme of a public company engaged in providing long term finance for residential houses in India and any scheme of Housing Board engaged in the planning, development or improvement of towns / cities. A term deposit-placed with a 'schedule bank' also qualifies for deduction provided it is for a fixed period of not less than 5 years and the scheme has been notified by the Central Government. Investment in 'Rural Development Bonds' of NABARD Amount deposited under senior citizens savings scheme Amount deposited in 5 yrs. Time Deposit Scheme in post office.
Note : If the total of above qualifying items exceeds Rs. 1,00,000, a maximum deduction of Rs. 1,00,000 is to be allowed from the total gross income of an assessee.
E.G
X is employed with the firm. the detail of the salary & another benefits received from her employer for the year 31st march 2009: (A): annual salary: 1,25,910 allowances : 9065 (B): she contributes Rs. 1,000 pa to RPF & employer contributes Rs.16,100 pa (C): interest credited to his fund @ 10% pa amounted to Rs. 2160. she has paid 10,400 as premium on her insurance policy of Rs 50,000
Practice
X (age 30 years) is in teaching staff of well known private college at pune owned by B LTD.during PY 2008-09 he gets salary: 4,86,000, DA: 92,300, city compensatory allowances: 33,100, childrens education allowances 2340 (65 pm for 3 children)HRA 46,200 (rent paid 58,000)remuneration from delhi university for paper setting etc. 36,400( expenditure incurred 3400)he gets reimbursement for medical facility for the family members 18,890, besides he gets reimbursement from the employer in respect of expenditure incurred for books purchased by him 12,600. the employer provides 1200 cc car for ofiice & private purpose
He contributes 11%of his salary to RPF. Which matching contribution made by the employer . Besides he makes an expenditure of 16,000 on LIP of rs 50,000 Determine his taxable income. Does it make any difference if employer is state gvt?