INCOME TAX ON SALARIES.

1.The levy of income tax in India is at

present governed by two acts.
a)The Income Tax Act,1961
b)The Finance Act passed each year by
the
Parliament.
2.Income Tax is leviable annually for each
Financial Year commencing on the 1st day
of April and ending on the 31st day March
following.
3.Income tax on salaries is computed on
annual basis and recovered as TDS on
monthly basis for the sake of our

INCOME TAX ON SALARIES

4.For the purpose of computing IT on salaries
the term salary includes following elements:
a)Pay as defined in FR 9(21),leave salary and
advance of pay.
b)Bonus
c) Dearness allowance
d)Compensatory allowance
e)House rent allowance-subject to exemption
f) Value of Rent Free quarters
g) Fees retainable by the employees.
h) Honoraria

INCOME TAX ON SALARIES

i)Reimbursement of tuition fees.
j) Subsistence allowance
k) Interim relief
l) Overtime allowance
m) Government Contribution to the NPS.
5.Following items are not to be taken in to
account for the purpose of computing IT on
salaries :
a)Sumptuary allowance and uniform
allowance
b) Reimbursement of cost of medical
treatment subject to limits

INCOME TAX ON SALARIES

c) Value of LTC
b) cash equivalent of leave salary received at the
time of retirement.
c) TA granted for tour on duty and for transfer
d) Composite hill compensatory allowance
e) Border area /remote area /tribal area
difficult area /disturbed area allowance.
f) Conveyance allowance
g) CEA and hostel subsidy subject to limits
h) Any allowance granted for encouraging the
academic, research and other professional
pursuit
i) Transport allowance up to Rs.1600/- for orthopedically
handicapped persons and Rs.800/- for others (pm)
j) Any payment from GPF

INCOME TAX ON SALARIES

6.The salary income of a person is calculated on the total
salary due to him(whether paid or not) as per the guidelines
provided above.
7.From the total income so arrived at(gross salary) the
following deductions to the extent permissible are to be
allowed to get taxable salary
a) HRA exemption to the extent admissible
b) Accrued interest/interest paid on HBA and
income from house property if it is a minus figure.
c) Donation to any recognized charitable trust/
fund such as Prime Ministers National relief fund
d) Professional tax paid to local bodies.
e) For handicapped employees an amount of Rs.50000 or
Rs.1,00,000/- as the case may be

INCOME TAX ON SALARIES

8. With this taxable salary if the person is having any
other income from other sources as informed by him
the same is to be added
9.From the taxable salary, following elements
of various forms of savings are to be
deducted to the extent admissible.
a)Subscription to PF,LIC,PLI policies
b) Subscription to any authorized pension
fund
c) Subscription to New pension Scheme
d) Subscri. to Long term infrastructure funds
e) Subscri. to any medical insurance/CGHS
10.The total amount of savings is limited to a
maximum of Rs.1,00,000/.

INCOME TAX ON SALARIES

11.Thus the amount of taxable income is to
arrived as follows.
a)Total salary income -________
b)less total of exempted
items( such as HRA exemption) -- ________(-)
c ) Gross Taxable income -_______
d) less savings(limited to maximum)
_________(-)

e) Net taxable salary

__________

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INCOME TAX ON SALARIES

12.After arriving the net taxable income IT has to
be calculated as follows. Education cess @3% of
IT is to levied in all cases.
NET TAXABLE
INCOME

RATE OF INCOME TAX

WOMENEMPLOYEE
S

OTHERS

Up to Rs.1,80,000

NIL

NIL

Rs1,80,001Rs.1,90,000

NIL

10% of income
exceeding
Rs.1,80,000

Rs1,90,001Rs.2,50,000

10% of income
exceeding
Rs.1,90,000

10% of income
exceeding
Rs.1,80,000

Rs2,50,001Rs.5,00,000

10% of income
exceeding
Rs.1,90,000

10% of income
exceeding
Rs.1,80,000

INCOME TAX ON SALARIES

13.The IT and education cess so
arrived at is to be dived by 12 and
the same is to be recovered on
monthly basis.