Basis of charge [sec 15]]
Salary is taxable due or receipt whichever is earlier
Gratuity [sec 10(10)]
A) Government employee – fully exempt
B) Employee covered under gratuity act-
· Actual receive
· 15/26 X last drawn salary X No. of completed year in excess of 6 month
· 1000000 Rs.
C) Other employee
· Actual receive
· 15/30 X Average salary of 10 month X No. of completed year
· 1000000 Rs.
Pension [sec 10(10A)]
Uncommuted pension – fully taxable
Commuted pension-
A) Government employee/employee of local authority/statutory corporation-fully exempt
B) Non govt. employee (receive gratuity ) – 1/3 of full value of pension
C) Non govt. employee (Not receive gratuity ) – 1/2 of full value of pension
Leave salary [sec (10AA)]
A) Government employee-fully exempt
B) Non govt. employee –
· Maximum 30 days p.a X completed year of service X average 10 month salary
· 10 month average salary
· Rs. 300000
· Actual receive
Retrenchment compensation [sec 10(10B)]
· 15 days average pay for every completed year in excess of 6 month
· Actual receive
· Rs. 500000
Compensation receive on voluntary retirement sec 10(10C)
Actual compensation receive or 500000 Rs. Whichever is lower
Provident fund
1. RPF – employer’s contribution –excess of 12% of salary (taxable)
Interest on provident fund – excess of 8.5% (taxable)
2. Unrecognized provident fund– employers contribution –taxable (salary)
Interest on employer’s contribution – taxable (salary)
Interest on employee’s contribution- taxable (other sources)
Allowances which are fully taxable
Dearness allowance, city compensatory allowance, Tiffin allowance, overtime allowance, servant allowance, warden allowance, on practicing allowance, Family allowance
Allowance which are exempt to the extent of actual amount rec. or amount spend whichever is less
Travelling allowance, Daily allowance, conveyance allowance, Helper allowance, Academic allowance, Uniform allowance
Allowance exempt to the extent of Amount received or limit specified whichever is less
1. Children education allowance-100 PM maximum of 2 children
2. Hostel expenditure allowance-300 PM maximum of 2 children
3. Tribunal area, schedule area/Agency area-200 PM
4. Special compensatory hilly area allowance- 300 Rs. To 7000 Rs. PM
5. Border area / Remote area – 200 Rs. To 1300 Rs. PM
6. Compensatory field area allowance – 2600 Rs. PM
7. Transport allowance – 800 Rs. PM
8. Underground allowance – – 800 Rs. PM
9. Allowance allowed to transport employee- 70% of such allowance or 6000 Rs. Whichever is less
Fully exempted allowance
1. Foreign-govt. employee
2. HC or SC –judge
3. U.N.O
House rent allowance [sec 10 (13A)]
1. Actual amount rec.
2. Rent paid – 10% of salary
3. 50% of salary [ Calcutta , Chennai , Delhi and Mumbai ]
4. 40% of salary [ other city]
Perquisites—Taxable in the hands of all employees
Rent free accommodation
1. Govt. employee – license fee [unfurnished]
License fee – actual rent paid by the employee [concessional rate]
2. Non govt. employee
· Owned by employer – 15% , 10% , 7.5% as the case may be [depending upon population]
· Not owned by employer – 15% of salary or actual rent whichever is lower
· Where accommodation is provided by the employer in a hotel – 24% of salary paid 0r actual charges paid [condition-1.not exceed 15 days and 2. one place to another ]
Perquisites—Taxable in the hands specified employees
1. Sweeper, Gardner, or Watchman –Actual cost
2. Gas, Electricity, or water – Actual cost
3. Education facility- Free or concessional education facilities
4. Use of motor car
5. Personal or private journey – Free or concessional education rate
Note specified employee – 1.Director of a company, 2.substantial interest-20%voting power, 3. Income exceeds 50000 Rs. With all allowance but exclude all perquisite
Perquisites—Tax free in the hands of all employees
1. Medical facilities- Medical treatment in India
Employer hospital, Govt. hospital, notified hospital, Group medical insurance, medical insurance u/s 80D [fully exempt]
Medical reimbursement – actual or 15000 Rs. whichever is lower
Recreational facility– to a group of employee
Training of employee – any fresher courses
Use of health club, telephone bill
Employer contribution – upto 100000 Rs.
Amount given to employee – for child as scholarship
Food and beverage – upto 50 Rs. Per meal
Loan to employee – upto 20000 Rs.
2. Medical treatment in abroad- exempt if permitted by R.B.I]
Travel expenditure – GTI upto 200000 Rs. Before including this perquisite [fully exempt]
GTI above 200000 Rs. [fully taxable]
Meaning of salary for different purposes | |||
1. for entertainment allowances | Basic salary only | ||
2. Gratuity for employee [covered under gratuity act] | Basic salary +D.A [ RB] | ||
3. Gratuity for employee [Not covered under gratuity act] | Basic salary +D.A [ RB]+commission as a fixed % | ||
4. Leave salary | |||
5. voluntary retirement compensation | |||
6. contribution to RPF | |||
7. house rent allowance | |||
8. rent free accommodation | Basic+ D.A[RB]+commission+Taxable allowance | ||
Leave travel concession [ sec 10(5)]
Maximum of 2 journeys in the block of 4 years
· Where journey is performed by air –shortest route of air economic fare
· Where journey is performed by rail or other then air – air condition first class shortest route fare
In other case – 1st class or deluxe class fare[where public transport system exist]