Employee Taxation Guide

EMPLOYEE TAXATION

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HEADS OF INCOME

WHICH FALL

UNDER TAX

FOR SALARIED EMPLOYEES:

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1. Income from Salaries

2. Income from House Property

3. Capital Gains;

a) Income from Short Term Capital Gains (STCG);
b) Income from Long Term Capital Gains (LTCG)

4. Income from Other Sources

like Interest income, Dividends etc.,

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Salary

Perquisites
Basic + DA+ Taxable
Commission etc. To
Normal components employee
Allowances

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Income from Salaries
• Gross Salary [As per definition U/s 17(1)]
Basic Salary
+ Wages
+ Taxable portion of allowances
+ Taxable portion of perquisites
+ Taxable portion of gratuity, pension, etc.
+ Fees, Commission , Profit in lieu of or in addition to any salary or wages
+ Any Advance Salary
+ Leave Encashment
+ Contribution to RPF in excess of 12% of salary made by employer
+ Interest earned in excess of 8.5% on RPF
+ Contribution made by Central Government or any other employer to the
account of an employee under Pension Scheme u/s 80CCD

GROSS SALARY
Less: Deduction U/s 16:
16(ii) Entertainment Allowance
16(iii) Professional Tax

= INCOME FROM SALARY

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Basis of Charge
• Chargeability: Section 15 to 17 of the Income Tax Act, 1961
provides for calculation of Income under the head “Salaries”.
• For the purpose of chargeability of tax, salary consists of :
a. Any salary due from an employer (or a former employer) to an
assessee in the previous year, whether actually paid or not;

b. Any salary paid or allowed to him in the previous year by or on behalf
of an employer (or a former employer), though not due or before it
became due ; and

c. Any arrears of salary paid or allowed to him in the previous year by or
on behalf of an employer (or a former employer), if not charged to
income tax for any earlier previous year.

Remark: Salary income is chargeable to tax either on due basis or on
receipt basis, whichever is earlier.

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ALLOWANCES

• Allowance is a fixed monetary amount paid by the
employer to the employee for meeting some particular
expenses, whether personal or for the performance of
his duties.

• Certain allowances given by the employer to the employee are exempt
u/s 10(14). All these exempt allowances are detailed in Rule 2BB of
Income tax Rules and are briefly given hereinafter:

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HRA

Fully Taxable Special
Allowances Allowances

Type of
Allowances

Allowances
Exempt In
Entertainment
Case Of
Allowance
Certain
Persons

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House Rent Allowance (HRA)
[Section 10 (13A) & Rule 2A]

Least of the following is exempt :
i. Actual amount received
ii. Rent paid – 10 % of Salary
iii. 50 % of Salary if rented house is situated
in any one of the 4 metropolitan cities &
40 % of Salary in other cases.



Notes :
1. Salary means Basic salary + D.A. if terms of employment so
provide. + Commission based on fixed % of turnover.
2. Where employee has not actually incurred expenditure on payment
of rent or stays in his own accommodation, no exemption of HRA
available.
3. Salary is to be taken on due basis in respect of the period during
which the rented house is occupied by the employee. The salary of
any other period is not to be included even though it may be
received and taxed during the P.Y. (e.g. arrears of salary received
during the P.Y.).

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Note:

No Exemption where an employee lives in
his own house, or in a house
for which he does not pay
any rent (say in the house
owned by parents, in-laws or
spouse).
Rent paid up to Rs. 15,000/- Original Rent paid receipt is
PM Mandatory
Rent paid > Rs. 15,000/- PM a) PAN of the Landlord is
Circular No. 05/2001 dated mandatory.
16.08.2001 b) If no PAN a declaration to
this effect along with name
& address of the landlord
is to be furnished
c) Original Rent paid receipts
are mandatory.
d) Copy of rental agreement.



Special Allowances
[Section 10 (14) & Rule 2BB]

I. Some allowances are exempt to the extent of
least of the following :

1.Actual amount received from employer.

2.Amount spent for the purpose for which
allowance received.



Special allowances[10(14)] & Rule 2BB

For official duties (after Not directly relate to
Reaching office) Official duty
(General)

1.Official travel/transfer
Allowance to meet the cost
2.Conveyance allowance To be
to meet customers Spent
3.Daily allowance on official Fully
Tour/journey Other
4.Helper allowance to carry Wise,
amount See in
Official documents
not the
5. Research allowance
Spent Next
6. Uniform allowance to do
taxable slide
Official duty

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II. Some allowances are exempt to the extent
of least of the following :
1. Actual amount received from
employer
2. Limit Specified



These allowances are as follows :
Name Of Allowance Limit Specified
1. Children education allowance 1. Rs. 100 per month per child up
to a maximum of 2 children
2. Hostel expenditure allowance 2. Rs. 300 per month per child up
to a maximum of 2 children.
3. Transport allowance 3. To meet expenditure for the
purpose of commuting between
Note: Since these allowances place of his residence and the
are exempt to the extent amount place of his duty.
received or limit specified, Blind or orthopedically
which ever is less, hence actual handicapped with disability of
expenditure in this case have no lower extremities : Rs. 1,600
relevance per month
Other employees : Rs. 800
per month



III. Allowances where
exemption is allowed up to
certain % of amount received :
Allowance allowed to transport employees :
If any fixed allowance is given to meet
personal expenditure during duty then least of
the following shall be exempt :
1.70 % of the amount received
2.Rs. 10,000/- Per Month
Note : Exemption will be allowed to transport
employees only when they are not in receipt of
daily allowance.
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Deduction for any sum paid towards tax on employment (section 16 (iii)).

Number of the Employees during the month in respect of whom the tax is
payable is as under (in the State of Andhra Pradesh):

Employees whose monthly salaries or wages or Rate of Tax per
both are Month Rs.
i) Up to Rs. 5,000/- Nil
ii) Range from Rs. 5,000/- to Rs. 6,000/- 60
iii) Range from Rs. 6,001/- to Rs.10,000/- 80
iv) Range from Rs.10,001/- to Rs. 15,000/- 100
v) Range from Rs.15,001/- to Rs. 20,000/- 150
vi) Range above Rs.20,000/- 200

If the professional tax is paid by the employer on behalf of the employee, it is
first included in the salary of the employee as a “perquisite” (since it is an
obligation of the employee discharged by the employer) and then the same
amount is allowed as deduction on account of “professional tax” from gross
salary.

If the professional tax is paid by the employer on behalf of the employee, it
becomes taxable whether the employee is a ‘specified employee’ or not.


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PERQUISITE [Sec. 17(2)]

• Perquisite may be defined as any casual
emolument or benefit attached to an office
or position in addition to salary or wages.
• Need not be in kind. It can be in cash.
• What are the conditions to be fulfilled to
become a perks?



Conditions
To become
Perquisites

1.Allowed by
Employer to 4.Personal
Employee advantage
To the
employee

3.Directly
Depend
upon service

5. Derived by
2.Allowed during Virtue of
Continuance Employer’s
Of employment authority

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Perquisites
Includes
1.Rent Free
Accommodation
Provided 4.Personal
by Employer obligations of
Employee
met by
Employer
Accommodation Related(1-3)
Including sweeper, gardener, watchman, gas,
electricity,

3.Value of
Benefits provided 6.Other
Like Furniture Benefits
in the accommodation Allowed
to Employees
5. Funds paid
2.Concessional By employer
Accommodation Other than
provided RPF/Insurance
by employer fund

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Valuation of Rent free unfurnished accommodation
(Private Sector employees or other employees)

Where accommodation is
Where accommodation is
taken on lease or rent by
owned by the Employer the employer

Lower of :
i. 15% of the salary – where population i. 15% of the salary
>25 lakhs. ii. Actual amount of rent payable by
ii.10% of the salary - where population the employer.
> 10 lakhs < 25 lakhs
iii.7.5% of the salary- in other cities. As reduced by the rent if any,
paid by the employee.

Salary= Basic salary +D.A +Bonus +Commission +Fees +all other taxable allowances
(excluding amount not taxable) and any monetary payment.



Valuation of Rent Free Furnished
accommodation Provided by the
employer
If rented

Actual hire
charges
payable

If owned

10% of original
Cost of furniture



Accommodation is provided in a Hotel

Stay is for transfer of Stay is for other than
location transfer of location

a. The hotel accommodation is provided for Perquisite (lower of the following)
a period not exceeding in aggregate 15 days;
And

b. Such accommodation is provided on an
employee’s transfer from one place to another.
a) 24% of Salary
b) Actual charges paid or
payable to such hotel

Not a perquisite



Motor Car benefits
Motor car Owned/hired by the employer :
Owner of Expenses Purpose Taxable value of perquisite
the Car met by
1(a) Employer Fully Not a perquisite, provided the documents
Employer official use specified in Rule 3(2)(B) * As per note
below
1(b) Employer Fully a. Actual expenditure on car
Employer personal use b. Remuneration to Chauffeur
c. 10% of the cost of the car
Aggregate of above
Less: Amount charged from employee
1(c )(i) Employer Partly for a. Cubic capacity of car engine upto 1.6
Employer official and litres: Rs.1800 p.m + Rs900 p.m for
partly for chauffeur
Personal use b. Above 1.6 litres : Rs.2400 p.m +
Rs900 p.m for chauffeur



Motor Car benefits …. contd
the Car met by
1(c )(ii) Employee Partly for a. Cubic capacity of car engine
Employer official and upto 1.6 liters: Rs.600 pm + Rs.
partly for 900 pm for chauffeur.
Personal use b. Above 1.6 liters: Rs.900 pm +
Rs.900 pm for chauffeur.

2(i) Employer Fully official Not a perquisite, provided the
Employee use documents specified in Rule
3(2)(B)* are maintained .

2(ii) Employer Partly for Subject to Rule 3(2)(B)*
Employee official and Actual expenditure incurred less
partly for i. Cubic capacity of car engine upto
Personal use 1.6 liters: Value as per 1(c )(i).
ii. Cubic capacity of car engine upto
1.6 liters: Value as per 1(c )(i).
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Motor Car benefits …. contd
the Car met by
3 (i) Employer Fully official Not a perquisite, provided the
Employee use documents specified in Rule
owns other 3(2)(B) *.
automotive
but not car
3 (ii) Employer Partly for Subject to Rule 3(2)(B)*
Employee official and Actual expenditure incurred by
owns other partly for employer
automotive Personal use Less: Rs.900 pm
but not car

* Note: Rule 3 (2)(B): Documents required for claiming ‘Not Taxable Perquisite’ or
higher deduction wherever applicable:
a. Employer should maintain complete details of journey undertaken for official
purpose, which includes date of journey, destination, mileage and amount of
expenditure incurred thereon.
b. Certificate of supervising authority of the Employee, wherever applicable, to the
effect that expenditure was incurred wholly and exclusively for performance of
official duties, should be provided.


Leave Travel Assistance

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Leave Travel Assistance
• Leave travel assistance may be provided by the employer to the employee and
his family:
a. In connection with proceeding on leave to any in India, while in service.
b. Proceeding to any place in India after retirement or termination from service
Conditions for benefit:
a. An individual can avail the benefit of LTA offered by his employer, twice in
block of four years.
b. The present block of four years applicable for Assessment year 2013-14 is
Calendar years 2011-14 (Present Block)
c. If an individual has not availed the benefit twice in a block of four years, the
first LTA availed in the next 4 years block can be taken for the previous block.
d. This exemption is available only for two children of an individual born after
1.10.1998. There is no restriction for children born before 1.10.1998 and also
in case of multiple births after one child.



• Computation of Exemption for LTA : The maximum amount of exemption is
the cost of travel on the shortest route. The exempt amount for various
travelling modes are calculated in the following manner:
Mode of travel Class of travel Amount exempt
Economy class Travel charges on shortest route collected
by National Airways
I Class AC Travel charges on the shortest route

Deluxe class Travel charges on the shortest route

- I class AC as per Railways, equivalent for
the distance for shortest route

When taxable:

a. LTC encashed without performing journey is fully taxable.
b. Expenses incurred other than the Fare (like boarding or lodging) is fully taxable.
c. Amount received from Employer in excess of the cost of travelling on the shortest route
is taxable.



Other Facilities and Perquisites
1.
Sweeper, Gardner, Amount of salary paid to such person
Watchman and personal incurred by the employer as reduced by
the amount, if any, recovered from the
attendant
employee.

2.

Using the resources Manufacturing cost per
owned by the unit incurred by the
employer as reduced by
employer without the amount, if any,
purchasing from the actually paid by the
Supply of gas, outside agency employee.
electric energy or
water for
employee’s
household
consumption Actual amount incurred
by the employer to the
agency supplying the
Any other case resources as reduced
by the amount, if any,
actually paid by the
employee.



3. Free or concessional
education facilities for any
member of household

Where educational institution is itself
maintained and owned by the employer Or In any other case
such facilities are allowed in other
educational institute by reason of his being
in employment of that employer

The cost of education in similar institution in
or near the locality. However, if the facilities Actual amount incurred
are provided to the children of the by the employer, as
employee, the value of benefit shall be NIL if reduced by amount, if
the cost of such education per child does not any, actually paid by the
exceed INR 1,000 pm. employee.



Other Facilities & Perquisites
4. Travelling, touring, accommodation and
any other facility provided by the
employer for the personal purposes,
other than leave travel concession.

Where such facility is
maintained by the Where any official tour is
employer, and is not In any other case
extended as a vacation
available uniformly to
all employees.

Value at which such Actual amount incurred by Actual amount
facilities are offered by the employer in relation to incurred by the
other agencies to the such extended period of employer as
public as reduced by stay or vacation as reduced by
amount, if any, reduced by amount, if any, amount, if any,
actually paid by the actually paid by the actually paid by
employee. employee. the employee.
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Nature of Perquisite Taxable value of Perquisite

5. Free food and non- i. Actual amount incurred by the employer as reduced by amount,
alcoholic beverages if any, actually paid by the employee.
ii. If food and non-alcoholic beverages are provided during working
hours at office or business premises or through non –
transferrable paid vouchers usable only at eating joints, to the
extent of INR 50 per meal is exempt from tax.
iii. Tea and snacks provided during working hours and free food or
non-alcoholic beverages during working hours exempt from tax.
6. Gift/Voucher/ Token Actual amount of gift shall be considered as a perquisite. However,
in lieu of gift the value perquisite is NIL in case the value of gift is below INR 5000
in aggregate during the previous year.
7. Credit card expenses Actual Expenditure to Employee
including membership Less: Amount recovered from employee
and annual fees
Note: If it is incurred for official purpose and supported by necessary
documents, then it is not a taxable perquisite

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Nature of Perquisite Taxable value of Perquisite
8. Club expenses Actual expenditure incurred by the Employer
Less: Amount recovered from employees

Note: i. If it is incurred for official purpose and supported
by necessary documents, then it is not a taxable perquisite
ii. Initial Fee of Corporate membership of a club is not a
taxable perquisite
9. Health club, If such facilities are provided uniformly by the employer to
sports and similar all the employees, the value of perquisite will be NIL.
facilities
10. Free use of 10% PA of Actual cost if owned by employer, or Actual
moveable property rental charge paid/ payable by employer
owned by the Less: Amount recovered from employee
Employer



Nature of Taxable value of Perquisite
Perquisite
11. Transfer Particulars Computer Car Other moveable
of any & assets
moveable Electronic
assets gadgets
Method of depreciation WDV WDV SLM
Rate of depreciation for 50% 20% 10%
every completed year
Actual Cost XX XX XX
Less: Depreciation for
completed years XX XX XX
Less: Sale value taken
from employee XX XX XX

Taxable value of XX XX XX
perquisite


Notes:
• Electronic gadgets include computer, digital
diaries and printers, but exclude Washing
machines, microwaves ovens, mixers, hot
plates, etc.
• Transfer of moveable assets which are 10
years old shall not attract taxability
• Completed year means actual completed
year from the date of acquisition of the asset
to the date of transfer of such asset to the
employees.
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Taxability of Medical Facility
Some instances of perquisites exempt from tax are given below:
Provision of medical facilities, etc. (Proviso to Sec. 17(2))
1) Value of any medical treatment provided to the employee or his family in;
a) Hospital maintained by the employer.
b) in any hospital maintained by the Government or any local authority or
approved by the Government.
c) Value of medical treatment for prescribed diseases or ailments in any
hospital approved by the Chief Commissioner of Income-tax.
Note: For claiming this benefit the employee needs to maintain a certificate from
the hospital specifying the disease or ailment and receipt for the amount paid.
2) Group Medical Insurance Paid U/s 36(1)(ib)
3) Medical Insurance paid U/s 80D
Note for 2 & 3 above: health insurance schemes to be approved by the
Government or the Insurance Regulatory and Development Authority.



Taxability of Medical Facility
3)Any other Medical Expenditure reimbursed subject to a maximum of Rs. 15,000/-.
4) Premium of Accident Insurance policy.
5) Medical Treatment abroad: Expenditure incurred by the employer on medical treatment of
the employee or his family member for medical treatment outside India. This includes
travel and stay abroad of the employee or the family member plus one attendant who
accompanies the patient in connection with the medical treatment. This exemption is
subject to the condition that:
Gross Total Income, before Tax Treatment
including reimbursement of
Foreign Travel Expenditure

Upto Rs. 2,00,000/- Fully Exempt
Above Rs. 2,00,000/- Fully Taxable

Note: The expenditure excluded from the perquisite value shall be to the extent permitted
by the Reserve Bank of India; and



Taxation of Retirement Benefits

Gratuity
Leave Salary encashment
Pension
Retrenchment Compensation
Voluntary Retirement Compensation



GRATUITY Sec 10(10)

During Continuation Of On Termination Of
Service Service

Fully Taxable
If Non
Covered
Government
YES Under PGA YES
Employee

NO NO

Minimum of following exempted Minimum of following exempted
1) Actual Gratuity Received 1) Actual Gratuity Received
2) Rs. 10,00,000/- 2) Rs. 10,00,000/-
3) P.M. Salary X Completed Year of 3)1/2 month Avg. Salary X
Service X 15/26 Completed Year of Service Fully Exempt

Note: Note:
* PGA= PAYMENT OF GRATUITY ACT *AVG. SALARY= (10 MONTHS BASIC
*SALARY= BASIC+D.A, last drawn. SALARY+D.A.+TURNOVER BASED
*COMPLETED YEAR includes every COMMISSION) / 10
completed year & period in excess of 6 *COMPLETED YEAR ignores any fraction
months shall be treated as a year of year. 40

LEAVE SALARY ENCASHMENT Sec10(10AA)

During Continuation Of On Termination Of
Service Service

Fully Taxable

If Non
YES
Government
Employee

Minimum of following exempted
1) Actual leave encashment received NO
2) Rs. 3,00,000/-
3) 10 Months average salary
4) 30 days average salary for every
completed year of service, subject to leave
availed during the tenure of service. Fully Exempt

Note:
*AVG. SALARY= (10 MONTHS BASIC SALARY+D.A.+TURNOVER BASED COMMISSION) / 10
[LAST 10 MONTHS EXACT FROM THE DATE OF RETIREMENT.]
*COMPLETED YEAR ignores ANY FRACTION
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PENSION Sec10(10A)

Uncommuted Commuted
Pension Pension

Fully taxable

Assessee YES If Non
YES
received Government
gratuity Employee

NO NO

Fully Exempt

1/3 rd of total pension commuted ½ of total pension commuted shall be
shall be exempted. exempted.



RETRENCHMENT COMPENSATION Sec10(10B)

If Compensation Paid Under Any Scheme
Approved By The Central Government. In any other Case

Minimum of following shall be
exempted:
a) Actual amount received
b) Rs.5,00,000/-
c) Any amount calculated under
Industrial Disputes Act,1947 i.e
15 days average pay for every
completed year of continuous
Nothing Shall Be Taxable. service or any part thereof in
excess of 6 months.

43


VOLUNTARY RETIREMENT COMPENSATION Sec. 10(10C)

Received from specified employers In any other Case

Minimum of following shall be
exempted
a) Actual amount received as per Fully taxable
V.R.S guidelines* or
b)Rs.5,00,000/-

*GUIDELINES:-
a)COMPLETED AGE OF 40 YEARS OR COMPLETED 10 YEARS OF SERVICE (IT IS NOT APPLICABLE ON PUBLIC
SECTOR COMPANY)
b)THIS IS FRAMED TO REDUCE THE STRENGHT OF EMPLOYEES.
c)THE VACANCY CAUSED BY VRS IS NOT TO BE FILLED UP
d)THE RETIRING EMPLOYEE IS NOT EMPLOYED IN ANOTHER COMPANY BELONGING TO THE SAME
MANAGEMENT
e)* THE AMOUNT OF COMPENSATION DOES NOT EXCEED = 3 MONTHS SALARY FOR EACH
COMPLETED YEAR OF SERVICE or SALARY AT THE TIME OF RETIREMENT x BALANCE MONTHS OF
SERVICE LEFT

Note: Exemption once allowed under this section, it cannot be claimed by the employee in relation to any other
assessment year.
# SPECIFIED EMPLOYERS :-
a)COMPANY b)LOCAL AUTHORITY c)CO-OPERATIVE SOCIETY
d)ANY AUTHORITY ESTABLISHED UNDER CENTRAL/STATE/PROVINCIAL ACT
e)SPECIFIED UNIVERSITY f)INDIAN INSTITUTE OF TECHNOLOGY(IIT)
g)STATE GOVERNMENT h)CENTRAL GOVERNMENT i)NOTIFIED INSTITUTION
j)NOTIFIED INSTITUTION OF MANAGEMENT (IIM) 44

Sec10(11,12,13) Any sum received from PF,RPF,SAF
Type of Employer Employer’s Employee's Employees Amount withdrawn
fund Contribution contribution Contribution Contribution on retirement
principal) interest) principal) interest)

SPF Exempt Exempt Deduction U/s Exempt Exempt u/s 10(11)
80C
RPF Exempt up to Exempt up to Deduction U/s Exempt up to Exempt subject to
12% of salary 9.5% 80C 9.5% condition. If not then
RPF treated as
URPF
URPF Exempt Exempt No Deduction us Exempt Employees
80 C contribution exempt.
Interest on employee
taxable under IOS.
Employer contri
taxable as salary
PPF NA NA Deduction us 80C Exempt Exempt
u/s 10(11)
Approved Exempt Exempt Deduction us 80C Exempt Exempt
Super u/s 10(3)
Annuation
fund
Approved Exempt Exempt NA NA Exempt
gratuity u/s 10(10)
fund 45


Deductions U/c VIA of the
Income Tax Act:
I.T.
S. No. Nature of Deduction Amount of deduction
Sec.
1. 80 C Life Insurance Premia, PF, PPF, NSC, ELSS, Units of Mutual
Fund referred to U/s. 10(23D), Tuition Fees (max. 2 Maximum overall
Children), Repayment of Principal of Housing loan, Bank Deductions
Fixed Deposit of 5 yrs period, notified Bonds of NABARD, allowed u/s. 80C,
Deposit in an account under Senior Citizens Savings 80CCC & 80CCD
Scheme rules, 5 year time deposit in an account under is Rs. 1,00,000
Post Office Time Deposit Rules, 1981 etc. (Employer
Premium paid towards approved Pension Fund (like LIC’s contribution to NPS is
Jeevan Suraksha) max. 1 lakh. deductible without
Contribution to Central Government Pension Schemes. any limit from FY
Upto 10% of salary with matching contribution from 2011‐12)
Government.
2 80 Amount paid/deposited as subscription to long‐term Rs. 20,000
CCF infrastructure bonds being notified by the Central
Government. (Available only for the AY: 2011‐12 & 2012‐
13 only).


Deductions U/c VIA of
the Income Tax Act
S. No. I.T. Sec. Nature of Deduction Amount of deduction
3 80 D (a) Medical Insurance Premium paid by an individual/HUF
by any mode of payment other than cash to effect or keep
in force an insurance on the health of the assessee (self) or
his family(spouse & dependent children) for policies taken Upto Rs.15,000 (Rs.
from General Insurance Corporation /other approved 20,000 in case of senior
Insurance Regulatory and Development Authority or any citizen)
contribution made to the Central Government Health
Scheme.
(b) Medical Insurance Premium paid by an individual/HUF
by any mode of payment other than cash to effect or keep Upto Rs.15,000 (Rs.
in force an insurance on the health of his/her parent or 20,000 in case of senior
parents for policies taken from General Insurance citizen)
Corporation /other approved Insurance Regulatory and
Development Authority or any contribution made to the
Central Government Health Scheme.
4. 80D Preventive Medical Check-up (AY: 2013-14) (sub Rs. 5,000/‐
limit under Sec 80D)


Deductions U/c VIA of the Income Tax Act:
S. Amount of
I.T. Sec. Nature of Deduction
No. deduction
5. 80 DD (a) Any expenditure for Medical, Nursing & Rehabilitation
incurred on dependant suffering from permanent Rs.50,000
disability including blindness, mental retardation, autism, (Rs.1,00,000 if the
cerebral palsy or multiple disabilities disability is severe
(b) Deposits under LIC, UTI’s Scheme & other IRDA ie., > 80%)
approved insurers for the benefit of physically
handicapped dependent
Note: Suffering from permanent physical disability or metal
retardation including blindness, loss of voice, autism,
cerebral palsy & multiple disabilities as per Rule 11D
6. 80 DDB (a) Actual expenditure incurred on Medical treatment of Self Upto Rs.40,000
or dependant or a member of HUF suffering from terminal Upto Rs.60,000
diseases like Cancer, AIDS, Renal failure etc.
(b) For Senior Citizens(self or dependent on whom
expenditure on medical treated is taken).
Note: Neurological diseases, cancer, AIDS, Chronic Renal
Failure, Hemophilia, Thalassaemia.
7. 80 E Interest on loan taken from Financial/Charitable Institutions Actual Interest
for Self/Spouse/Children for pursuing Higher Education (for a repaid
max. period of 8 yrs) 48



I.T.
S. No. Nature of Deduction Amount of deduction
Sec.
80 G (a) Donations made to National Defense Fund, Prime100% of Donation
Minister’s Relief Fund, approved Funds of reputed50% of Donation
8. Educational Institutions, National Trust for Welfare ofrestricted to 10% of
persons with Autism, Cerebral Palsy etc. Adjusted Gross Total
(b) Donations made to Jawaharlal Memorial Fund, PM’sIncome
Drought Relief fund, Any approved Charitable
Institution/Trust, Religious Institutions, a corporation
established by the Government for promoting interest
of the members of a Minority Community. Prohibition
of cash donations in excess of ten thousand rupees.
(W.E.F 01.04.2013 i. e. A.Y. 2013‐14 onwards
9. 80 GG Deduction in respect of rents paid, provided the25% of income
assessee is not in receipt of HRA and no house is ownedor rent paid in excess
by self, spouse, minor child or HUF in the place of workof 10% of income
subject to filing of declaration in Form No.10BA or ceiling of Rs.24,000
p.a whichever is less



S. No. I.T. Sec. Nature of Deduction Amount of deduction
10. 80 U Persons suffering from Permanent Physical Disability asRs.50,000 (Rs.1,00,000
specified in Rule 11D in case of severe
disability)
11. 80TTA Interest on Savings Bank Account (AY: 2013‐14) Rs. 10,000/‐
12. 80CCG Investment made under any Equity Saving SchemeRs. 25,000/‐
(subject to a maximum investment of Rs. 50,000) ‐
Applicable from AY: 2013‐14: Deduction under this
section is available to a resident individual, if his gross
total income does not exceed Rs. 10 Lakhs. Eligible
Investment to claim:
a) If the assessee is a new retail investor as
specified in the notified scheme.
b) The investment should be locked in for 3 years
c) The amount of Deduction is 50% of amount
invested in equity shares.



RATES OF INCOME TAX:-

• Income Tax Rates/Slab for Assessment
Year 2012-13 (F Y 2011-12):
Particulars Rate (%)

Up to Rs. 1,80,000/‐
Up to Rs. 1,90,000/‐ (for women assessee)
NIL
Up to Rs. 2,50,000/‐ (for resident individual attaining of 60 years till 80 years)
Up to 5,00,000/‐ (for resident individual of 80 years and above)

Rs. 1,80,001/‐ to Rs. 5,00,000/‐ (except for resident individual of 80 years and
10
above)
Rs. 5,00,001/‐ to Rs. 8,00,000/‐ 20

Rs. 8,00,001/‐ upwards 30

Note: Education Cess and Secondary Higher Education Cess @ 3% on the above will be added.



RATES OF INCOME
TAX:-
• Income Tax Rates/Slab for Assessment Year
2013-14 (F Y 2012-13):
Particulars Rate (%)
Up to Rs. 2,00,000/‐
Up to Rs. 2,00,000/‐ (for women assessee)
Up to Rs. 2,50,000/‐ (for resident individual attaining of 60 years till of 80 NIL
years)
Up to 5,00,000/‐ (for resident individual of 80 years and above)
Rs. 2,00,001/‐ to Rs. 5,00,000 (except for resident individual of 80 years
10
and above)
Rs. 5,00,001/‐ to Rs.10,00,000/‐ 20

Rs. 10,00,001/‐ upwards 30
Note: Education Cess and Secondary Higher Education Cess @ 3% on the above will be added.



Tax Deducted At
Source (TDS)
• Any person responsible for paying any income chargeable under the head
‘salaries’ shall at the time of payment deduct the income-tax on the estimated
income of the employee under the head “salaries” for that financial year. The
tax has to be deducted at the average rate of income tax computed on the basis
of the rates applicable for that particular financial year.

• Where employee also has any other income (not loss) for the same financial
year, chargeable under any other head, he may furnish the statement of such
other income and tax deducted thereon to his employer to take them into
consideration while deducting the tax from the salary.

• But the loss under the head income from house property can be taken into
consideration for the purpose of determining the amount of tax to be deducted
from the income of the employee.



Tax Deducted At
Source (TDS) …
contd
• The person responsible for making the payment under the ‘salary’ at the time
of making any deduction of tax, increase or decrease the amount to be
deducted under the this section for the purpose of adjusting any excess or
deficiency arising out of any previous deduction or failure to deduct during the
financial year. (section192 (3))

• Where during the financial year an assessee is employed simultaneously under
more than one employer or has changed the employment during the previous
year he may furnish to the employer of his choice or subsequent employer
such details of the salary received by him from other employer(s) and other
particulars in form 12B.The present employer or the employer so chosen by
the employee will then deduct tax at source on aggregate amount of salary.



Relief When Salary Paid in
Arrear or Advance:
• Under sub-section (2A)of section 192 where the assessee,
being a Government servant or an employee in a company,
co-operative society, local authority, university, institution,
association or body is entitled to the relief under Sub-
section (1) of Section 89, he may furnish to the person
responsible for making the payment such particulars in
Form No. 10E duly verified by him, and thereupon the
person responsible as aforesaid shall compute the relief on
the basis of such particulars and take the same into account
in making the deduction.



Section 206AA:
• Finance Act (No. 2) 2009, w.e.f. 01/04/2010 has inserted sec. 206AA in the
Income-tax Act which makes furnishing of PAN by the employee compulsory
in case of payments liable to TDS. If employee (deductee) fails to furnish
his/her PAN to the deductor , the deductor shall make TDS at a higher of the
following rates:
• i. at the rate specified in the relevant provision of this Act; or
• ii. at the rate or rates in force; or
• iii. at the rate of twenty per cent.
• The deductor has to determine the tax amount in all the three conditions and
apply the higher rate of TDS . This section applies to any person entitled to
receive any sum or income or amount, on which tax is deductible under
Chapter XVII-B of Income Tax Act. As chapter XVII-B covers all Payments
including Salaries, Salaries are also covered by Section 206AA.



• According to the provisions of section 203, every person responsible for
deducting tax at source is required to furnish a certificate in Form 16 to the
payee to the effect that tax has been deducted and to specify therein the
amount deducted and certain other particulars. The certificates in Forms 16
specified above shall be furnished to the employee by 31st day of May of
the financial year immediately following the financial year in which the
income was paid and tax deducted.
• The certificate in Form 16 shall specify:

a) PAN of deductee c) Challan
Identification No.
b) TAN of the Deductor d) Receipt No.



Section 80QQB: Deduction in respect of royalty Income of Authors.
Person: Individual resident in India.
He is an author or joint author.
Book authored by him is work of literary, artistic or scientific nature. Books shall
not include brochures, commentaries, dairies, guides, journals, magazines,
newspapers, pamphlets, textbooks for schools. Etc.
Need to furnish a certificate in Form No. 10CCD from the person responsible for
paying the income.
Deduction not available unless it is claimed in the ROI.
Amount of Deduction:
Rs. 3,00,000 or,
Amount of Consideration received on account of such ROYALTIES or
COPYRIGHT fees including advance received, which is not returnable.
Other Conditions:
Royalty income not received in lump sum, than 15% of value of such
books sold during the PY shall be ignored.
Income earned outside India;
i) It should remitted within six months from the end of the relevant
PY or within such time as extended by RBI
ii) A certificate from prescribed authority in FORM 10H should be
submitted with the ROI
iii) A Certificate from payer in FORM 10CCD should also be obtained.
No deduction shall be allowed under any other provision of this Act in respect of
such Income.


58


Mode of Submission of the
Return of Income:
Particulars Paper Form e-filing without e-filing with
(Manual) DSC) DSC
Taxable Income Optional Optional Optional
</= Rs. 10L
Taxable Income > N A (e-filing is Optional Optional
Rs. 10L mandatory)
Submission of Concerned IT ITR – V Not Necessary
Physical Forms Department Acknowledgement to
be sent to CPC
Bangalore
Time Period Within due date Within 120 days from N A
of filing ROI the date of filing
Address to Concerned IT CPC, Post Bag No.1, Concerned IT
file/Send Department Electronic City Post Department
Office, Bangalore – through online
560 100 by
ORDINARY/
SPEED POST


No enclosures to the return:- Rule 12(2) of the I.T Rules provides that the return
of income required to be furnished in prescribed Form shall not be accompanied by a
statement showing the computation of tax payable on the basis of return, or proof of
tax, if any, claimed deducted or collected at source or the advance tax or tax on self-
assessment, if any, claimed to have been paid or any document or copy of any
account or form or report of audit required to be attached with the return of income
or return of fringe benefits under any provisions of the Act.

For timely delivery of refunds; ensure correct address and Bank account number
on your Return of Income – From 1.10.07 onwards, all income tax refunds to the
Assessee's residing in specified places will be delivered by the Refund Banker directly
at the communication address mentioned on the Return of Income. Taxpayers are
requested to fill in the correct address (available during working hours for delivery) to
ensure speedy delivery of refunds. In the case of taxpayers who opt for refunds
through ECS, it will be credited directly to the bank account for which correct MICR
code/ Bank Account Number has to be furnished on the Return



DUE DATES FOR PAYMENT OF ADVANCE TAX
& FILING OF RETURN:
Normally the employer shall deduct TDS from the salaries on monthly basis. If any
employee is having other incomes like Income from House Property, Capital Gains and
Income from Other Sources then the advance tax is to be calculated by him and pay
the same to the government account. If total tax payable is more than Rs. 10,000/-,
then liability for payment of advance tax arises.

The due dates for payment of advance tax in Installments:

S. Advance Tax % of Tax
No.
1st On or before 15th September >= 30%

2nd On or before 15th December >= 60%

3rd On or before 15th March Entire Balance

Note: If any amount is paid before 31st March, such payment is also considered as
Advance Tax for the period.

61


ITR Forms and other related matters
FORMS TO BE USED: - The forms to be used for filing the return of income on
wards are mentioned below:-

ITR 1(SAHAJ) – Income from salary/pension: or Income from one house
property (excluding where loss brought forward from previous year): or Income
from other sources (excluding winnings from lottery and income from races
horses).

ITR 2 – Individual who cannot file SAHAJ (ITR 1) above and where the total
income does not include any income chargeable to income-tax under the head
“Profits or gains of business or profession”.

Challan to be used for making Tax payment:

Challan Number: 280 for Advance Tax and Self-Assessment Tax.
Challan Number: 281 for payment of TDS by the employer.

DUE DATE FOR FILING OF INCOME TAX RETURN:
a) On or before 31/07/2012 for the assessment year 2012-13;
b) On or before 31/07/2013 for the assessment year 2013-14.


62


Exemption from filing of ITR

Person having total taxable income up to Rs 5 lakh Salary income from one employer
including saving bank interest up to Rs 10,000/- is exempted from Income tax return
for Assessment Year 2012-13 & 2013-14.

Who can Claim Exemption?
a) This exemption is available to Individual assessee only (resident or not).
b) Total Income (after deduction 80C to 80U) of Individual must be up to Rs.5L.
c) Income must be earned from Salary and/or Saving Bank Interest up to Rs. 10K
d) Pension is also covered under salary head.
e) Individual must have reported his PAN to his employer.
f) He has earned salary only from one employer during the year.
g) He has reported his income from saving Bank Interest to his employer for TDS
deduction purposes.
h) Employer has deducted the tax on his Full income, salary plus interest {taxable if
any}, and TDS has been deposited in Govt account by the employer.
i) No refund is Due to an Assessee.
j) Individual has received Form 16 Form the employer, which mentions PAN, Income
detail and Tax deducted and deposit detail.
k) The above notification for exemption is optional for Assessee and he may or may
not avail this exemption.


63


Form 26AS and other related matters

FORM No.26AS: Assessee’s can view their Annual Tax Statement (Form No.26AS)
online by logging on to www.incometaxindiaefiling.gov.in or www.tin-nsdl.com or
through their bank account login mode.

Belated Return: Section 139(4) provides that a return which has not been furnished
by the due date may still be furnished as a belated return before the expiry of one year
from the end of the assessment year or before the completion of assessment, whichever
is earlier. However, on any return of income that has not been filed by the end of the
relevant assessment year, penalty of Rs.5,000/- U/s 271F may be levied.

Revised Return: If a person having filed his return within the due date; discovers any
omission or wrong statement therein, he may file a revised return before the expiry of
one year from the end of the assessment year or completion of assessment whichever is
earlier.


64


Payment of Interest
(i) INTEREST U/S 234A:
Delay in filing of income tax return within due date (31st July) shall attract a simple
interest @ 1% for every month or part thereof on the tax payable. If the TDS
covered fully/ Taxes paid fully then Interest under this section will not attract.

(ii) INTEREST U/S 234B:
If the advance tax is not paid/ TDS is not covered, Interest on the tax payable @
1% for every month or part thereof from 1st April to till the date of payment. If the
TDS covered fully/ Taxes paid fully then Interest under this section will not attract.

(iii) INTEREST U/S 234C:
For deferment of advance tax payment; If advance tax paid is less than specified
percentage and/or not paid within due date, simple interest @ 1% per month or
part thereof is payable on tax determined on returned income as reduced by
TDS/TCS/Amount of advance tax already paid or tax relief, if any, under Double Tax
Avoidance Agreement with forgoing contribution.

(iv) INTEREST U/S 234D:
Interest @ 0.5% is levied under this Section when any refund is granted to the
assessee u/s 143(1) and/or on regular assessment if it is found that either no
refund is due or the amount already refunded exceeds the refund determined on
regular assessment. The said interest is levied @ 0.5% on the whole or excess
amount so refunded for every month or part thereof from the date.

65


Communication with IT Dept.
Intimation U/s 143(1): The Finance Act 2008 has reintroduced provisions in respect of
correcting arithmetical mistakes or internal inconsistencies at the stage of processing of
returns. It has, thus been provided that, during the stage of processing, the total income
shall be computed after making adjustments in respect of any arithmetical error in the
return or any incorrect claim apparent from information in the return and if on such
computation, any tax or interest or refund is found due on adjustment of TDS or advance
tax or self-assessment tax, then an intimation specifying the amount payable shall be
prepared/generated or issued to the assessee. If any refund is found due, it is to be sent
along with the intimation to such effect. If no demand or no refund arises, the
acknowledgement of the return is deemed to be treated as intimation. Such intimation is
to be sent within one year from the end of the financial year in which the return is filed.

Assessment u/s 143(3): If the Assessing Officer, on the basis of the return filed by the
assessee, considers that it is necessary to ensure that the assessee has not understated
his income, he shall serve on the assessee a notice u/s 143(2) and, after obtaining such
information as he may require, complete the assessment (commonly referred as scrutiny
assessment) u/s 143(3).

Rectification of mistake u/s 154: If any order passed by an income tax authority
suffers from a mistake apparent from record, the assessee may make an application for
rectifying the same before the expiry of four years from the end of the financial year in
which the above order was passed. The Finance Act 2001 has provided that where an
application for rectification under this Section is made by the assessee on or after
1.6.2001, the same shall have to be acted upon by the income tax authority within a
period of six months from the end of the month in which the application is received.


SALARY CASES - JURISDICTION OF HYDERABAD INCOME
TAX OFFICES

Name of the I T Income declared Income declared
Particulars
Building > Rs. 20L < Rs. 20L

Pensioners & Salaries Employees of Banks,
AAYAKAR BHAVAN

Insurance Corporations Including LIC, All
Organizations/ Establishments/ Institutions/
Circle ‐ 12(1) Range ‐ 12
Hospitals & Medicals Institutions in Private Sectors
Including Companies, Missionary Bodies & Private
Educational Institutions.

Pensioners & Salaries Employees of Central &
AAYAKAR BHAVAN

State Government Departments including Central
& State Govt Undertakings and Local Authorities/
Circle ‐ 13(1) Range ‐ 13
Autonomous Bodies, All Agencies/ Bodies/
Organization like ICRISAT, etc., Income Tax Dept in
AP State, Cantonment Board & Municipalities.


67


Residential status

Residential status

Resident

Resident and Resident but Not
Ordinarily Ordinarily Non Resident
Resident Resident (NR)
(ROR) (NOR)

Residency is determined by number of days stay in India



Residential status …..Cont’d

Basic conditions:

• 182 days or more in a financial year
• 60 days* or more in a financial year plus 365 days or more in four
financial years preceding the relevant financial year

Any one of None of
the two the
conditions conditions
satisfied satisfied

ROR / NOR NR

* 60 days gets substituted for 182 days only in the year of departure for an
Indian citizen proceeding abroad for the purposes of employment. In the year
of arrival to India for resuming employment, the threshold limit is 60 days.
69


Residential status …..Cont’d
Additional conditions:
• “Resident” in India in atleast two out of ten financial years
preceding the relevant financial year; and
• Present in India for 730 days or more during the 7 financial year
preceding the relevant financial year

One or
Both the
none of
conditions
the
satisfied
condition
s
satisfied

ROR NOR
Generally, an expatriate coming to India for the first time will qualify as ROR in the 3rd or 4th year.

70


Thank You

SBS AND COMPANY - Chartered Accountants
www.sbsandco.com; info@sbsandco.com

M/s VELOX Corporate Services (P) Ltd., www.veloxcs.com;
info@veloxcs.com

71


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