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Tax was introduced for the first time in 1860 by sir James Wilson in order to meet the losses sustained by the Govt on account of Milatry Munity of 1857.
Gross Total Income ___________ Less Ded u/s 80c to 80u Total Income ___________ Gross amount of tax payable to be calculated on this income according to rates prescribed.Tax rebate u/s 88e is to be deducted.
of 12 months commencing on the first day of April every year & ending 31st march next year. Assesse liable to pay tax on previous income during following assessment year. Previous Year Financial year immediately preceding assessment year.
Assesse Sec2(7)
An
assesse is a person by whom any tax or any sum is payable under this and include: Every person in respect of whom any proceeding under the act has been taken for assessment of his income, Every person who is deemed to be an assesse under any provision of the act. Every person who is deemed to be an assesse in default under any provision of the act.
Person- Sec2(31)
Individual
,HUF, Company, Association of persons ,BOI, Local Authority, Artificial Judicial person not falling within prescribed clauses.
Types of tax
Proportional
tax Flat tax rate system.% of tax remains same . Progressive tax-Higher Income higher tax rate. Regressive tax-Rate of taxation decreases as the base increases. AD-Volerm and specific duty- Lieved on imports.Ad-Volerm as a %of price &specific as amount fixed per unit.
Heads of Income
Salaries
(sec15 to sec17) Income from house property(sec22 to 27) PGBP ( sec28 to 44D) Capital Gain (sec45to55) Income from other sources (sec56 -59)
Salary
Salary include: Wages Annuity or pension Gratuity Perquisite or profit in lieu of salary Any advance of salary but not loan for purchasing a car, cycle or scooter Any payment received by an employee in respect of any period of leave not availed for Employers contribution in excess of 12% of employee salary and int on PF in excess of 9.5% Taxable portion of transferred balance Contribution made by Central govt in previous year to accpunt of employee under pension scheme.
Allowance
Payment
in Cash made by employer other than Salary is called allowance. Taxable Taxable upto specified limit Fully exempted allowance
Taxable Allowance
Dearness Allowance Fixed Medical Allowance Tiffin Allowance Servant Allowance Non Practicing Allowance Govt Doctors Hill Allowance less than 1000 m height
from sea
Allowance : E.g Overseas Allowance, Car allowance, Education Govt Employees Sumptuary Allowance : Allowance from UNO : Per- Diem Allowance :
for Govt Employees 1/5 of basic salary 5000 Actual entertainment allowance Whichever is less
GOVT
Allowance Daily allowance Conveyance Allowance Helper allowance Academic allowance Uniform allowance
Compensatory Allowance (Tribal area,Scheduled area ) :Rs 200 p.m in MP,Tamil Nadu,U.P,Karnatak,Tripura,Assam, West Bengal. Any allowance working in Transport system: 70% of such allowance, Rs 10000p.m(whichever is less) Children Education Allowance: Rs 100 p.m maximum of 2 children. Children Hostel allowance: Rs 300 p.c maximum 2 child Transport/ Underground Allowance: Rs 800 p.m
Special allowance
To
the members of armed forces Special hill compensatory allowance High Altitude Allowance CategoryI Uncogenial Climate Allowance Snowbound Area Allowance Avalanche allowance Border Area allownce Remote Allowance Category II Disturbed or difficult area Allowance (TABLE..)
Ques
Compute
taxable allowance: Climate Allowance : Rs 700 p.m Snow bound Allowance : Rs 300 p.m Disturbed Area Allowance : Rs 800 p.m Border Area Allowance : Rs 600 p.m Hostel allowance for 2 children : Rs 800 p.m Education Allowance for 3 children : Rs 300 p.m
Perquisite
Any benefit attached to an office or position in addition to wages or salary. It may be in cash and in kind.
Perquisite taxable in case of specified employees
Rent free accommodation [Sec 17(2)(i)] Concessional Rent [Sec 17(2)(ii)] Any sum paid by employer on part of employee e.g [Sec 17(2)(iv)] Any sum payable by the employer other than RPF, Deposit Linkedetc to effect insurance. [Sec 17(2)(v)] Sweat Equity[Sec 17(2)(vi)] Superannuation fund exceeding Rs 100000. [Sec 17(2)(vii)] Other fringe benefit as described [sec17(2)(viii)]
Employee having substantial interest A Director Employee Any other Employee- Rs 50000
SpecificTaxable Perquisites
Sweeper,Watchman,Gardener and Personal Attended. Gas ,Electric Enenrgy and water Education facility to the members of employee household Transport facility Facility of car
Medical benefits Tea or snacks provided in the factory Residential accommodation provided at site Exp on telephone Employees contribution to staff Group insurance scheme Scholarship to employees to employees or their children paid by employer Conveyance Refresher course Tax paid by the employer on fringe benefit Perquisite to Govt. employee posted abroad Rent free house and conveyance facility provided to Supreme court and high court judge,Parliament leader. Laptop for personal use Int free loan upto 20000 Transfer of a moveable asset after using 10 yrs Periodicals and Journals Leave travel concession
Actual amount in running and maintence ADD: Remunaration to chauffer ADD:Dep @10% p.a of actual cost Less: Amount charged
car (cc<1.6lt) Rs 600pm Large Car (cc>1.6lt) Rs 900 pm If chaffler add Rs.900 pm
Other Employees
A) Accommodation owned by employer Unfurnished House i) Cities having population exceeding 25 lac -15% of salary for the period during which accommodation occupied by the employee ii) Cities having population exceeding 10lac but not more than 25 lac-10% of salary for the period during which accommodation occupied by the employee Iii) other places: 7.5%of salary for the period during which accommodation occupied by the employee
lease rental or 15% of salary for the period during which accommodation occupied by the employee whichever is less Furnished house Value of unfurnished house Add: 10% cost of furniture
on his transfer & aggregate does not exceed 15 days- NIL In any other case 24 % of salary or actual charges payable whichever is less
being of temporary nature having plinth area not exceeding 800square feet located not less than 8km away from the local limits of any municipality or cantonment board Located in a remote area value taken as Nil Remote area: located at least 40 km away from a town having popn not exceeding 20000
Transfer having two houses valuation of house would be taken as which has less value and for 90 days else it is charged for both the houses. Salary include pay/DA/Bonus/Commission does not include Employer contribution to PF Conveyance allowance Travellling allowance for tour Lumpsum payment for VRS,gratuityetc. Value of perquisite specified u/s 17(2)
Ques
Fair
rental value 70000, salary600000 A) House is situated in a city whose population more than 25 lac B) House is situated in a city whose population more than 10 lac
Ques
House
on Rent Rent 60000 Salary 500000 Cost of furniture60000 Rent charged from employee per month1000
Ques
X
apponted in Kolkatta ,stayed in a hotel for 25 days Room rent 1000 per day Salary Rs365000 Employer recovered rs 100per day
Ques
Ram
borrowed Rs 100000 on 1/5/2010 from his employer to purchase a car. He started repayment of loan w.e.f 1/6/2010 Rs 1000 p.m. In the following circumstances Determine taxable amount of int for A.Y 2011-12 assuming rate of int on car loan charged by SBI is 10% p.ab i) Employer does not charge any int on loan ii) Employer charges int @5% on max outstanding monthly balance.
and snacks during working hrs NIL Free Food and non alcoholic beverage at offshore area NIL Free Food and non alcoholic beverage: At working hrs or through vouchers non transferable- Amount incurred reduced by recovered from empolyee and Rs 50 per meal.
GIFT(Rule 3(7)(iv)
If
gift on ceremonial occasionsum equal to such gift. If gifts on religious occasion 5000 exempt. However, Gift Cheque shall not be exempt
incurred (membership fee,annual fee less employee recovered. If wholly for official purpose NIL
other asset : 10% on fixed Method Less: Amount recovered from employee.
Provident Fund
Fund
is credited by the amount deducted from salary of employee every month at certain rate & employer also make contribution to this fund. Four Kinds: Statutory PF Recognised PF Unrecognised PF Public Providend Fund
Statutory
PF - Indian PF Act 1925 applies. . Recognized PF PF Act 1952 applies. Recognized by Chief Commissioner or Commissioner of Income Tax Unrecognized PF PF Commissioner Public Provident Fund Subscribe between 500 -70000. Sec 80 C deduction Full withdrawl after 15 yrs Amount exempted from Income Tax
SPF
RPF
UPF
100000 Employee Cont 100000 Employee Cont Employee own con not included
LUMPSUM PAYMENT
SPF Neither included in employee income nor taxable RPF Neither included in employee income nor taxable U.RPF Employer share and int thereon included in salaries Amount of employee subscription exempt
Employer
contributes for retirement purpose 15 % contribution 25% at the age retirement 75% annuity Int like PF taxable Retirement benefit tax free. Exemption at the death, commutation of annuity Aggregate 1lac tax free for employees Taxable at the rate on an average for last
Superannuation fund
Gratuity
Non Govt Employee Gratuity Act 1972 Least of the following is exempt: i) 15 days salary for every completed year of service ( 7 in establishment)
Least of the following is exempt: i) One half months salary for each year of completed service ii) Rs 350000 iii) Gratuity actually received
aggregate amount of exemption shall not exceed the maximum absolute limit :350000.If gratuity received in any earlier year and then from another in later year the maximum limit is to be reduced by the amount of gratuity which has been exempted earlier,
PENSION
under head Salaries whether Govt or Non Govt, whether accrued outside INDIA. Commuted Pension : Lumpsum payment forgoing pension.
Chargeble
Ques
Mr.
X got a pension of Rs 2000 per month from a company .During his previous year he got 2/3 pension commuted and received Rs 123000. Compute exempted amountif gratuity is their and if not
Sh. Amarnath was employed in a company. He took VRs after completing 25 yrs of service. On 1st Jan 2007 his salary was Rs.6000 p.m.. In this company two months leave accrued every year. Compute exempted.Total leave availed during service: A-10 , Actual Recevd- Rs240000 B-NIL, Actual Recevd- Rs300000 C-30 months, Actual Recevd-
Ques
of the following is exempted: A) An amount calculated in accordance with Sec25F (b) of Industrial Dispute act 1947 B) Rs 500000 C) Actual Compensation Received - Compensation will be calculated at 15 days average pay for each year of completed service and any part in excess of 6 months.
If workman is getting monthly salary then on the basis of salary of last three months. b) Daily wages on the basis of wages of last 12 working days c) Weekly wages on the basis of wages of last 4 weeks BS include DA .Allowances, House accommodation or amenity, any travel concession but exclude any bonus,gratuity
a)
Average Pay
Ques
Mr. X .getting Rs 3000 pm as salary and Rs 600 as DA since 1st Jan 2004. His service terminated on 1st July 2007and was paid Rs 48000 as compensation. Compute exempted amount
Amount equal to three months salary for each completed year. Of service. ii) Salary at the time of Retirement multiplied by the balance months of service left before , the date of his retirement on superannuation. iii) Amount received iv) Rs. 500000. v) Salary means Basic salary+ DA + Commission on fix % of turnover.
i)