28433839 Income Exempt From Tax Salaries

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    Incomes Exempt from TaxIncomes Exempt from Tax

    SalariesSalaries [[Sections 10(5) toSections 10(5) to10(10A)]10(10A)]

    Prepared By:Prepared By:ReenaReena AhujaAhuja (08061)(08061)

    SulabhSulabh MahetaMaheta (08084)(08084)

    AminAmin PattaniPattani (08100)(08100)

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    Value of Leave Travel

    Concession in India [Sec. 10(5)] LTC received by employees from their employers

    for preceding to any place in India.

    The benefit is available to individuals - citizens as

    well as non citizens.

    Limit of exemptions

    Monetary limits

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    Example:

    Mr. X went on holiday on 25.12.2006 to Delhi with

    his wife and three children (one son age 5 years;

    twin daughters - age 2 years). They went by flight

    (economy class) and the total cost of tickets

    reimbursed by his employer was Rs60,000 (Rs45,000

    for adults and 15,000 for the three minor children).

    And

    If among his three children the twins were 5 yearsold and the son 3 years old.

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    Exemption in the case of

    individuals, who are not citizens of

    India [Section 10(6)]

    (i) Section 10(6)(ii) grants exemption to a person in

    respect of the remuneration received by him forservices as high commission, legation, consulate

    or the trade representation of a foreign State or

    as a member of the staff of any of these officials.

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    Cont..Cont..

    Conditions:

    (a) The remuneration received by our

    corresponding Government officers resident in

    such foreign countries should be exempt.

    (b) The above mentioned officers should be the

    subjects of the respective countries and should

    not be engaged in any other business orprofession or employment in India.

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    (ii)(ii) SectionSection 1010((66)(vi))(vi) providesprovides thatthat remunerationremuneration

    receivedreceived byby aa foreignforeign nationalnational asas anan employeeemployee ofof aa

    foreignforeign enterpriseenterprise forfor serviceservice renderedrendered byby himhim duringduringhishis staystay inin IndiaIndia isis alsoalso exemptexempt fromfrom taxtax..

    (1) the foreign enterprise is not engaged in a

    business activity in India.

    (2) The employees stay in India does not exceed

    a total of 90 days in the previous year;

    (3) the remuneration is not liable to be deducted

    from the employers income chargeable to tax

    under the Act.

    Condition:

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    (iii) section 10(6)(viii) provides that employee who is also

    non-resident for services rendered in

    connection with his employment on aforeign ship where his total stay in

    India does not exceed a total of 90

    days in the previous year.

    (iv) Section 10(6)(xi) provides that any remunerationreceived by employees of foreign

    Government from their respective

    Government during their stay in India

    in connection with their training in

    any establishment or office of the

    Government or any public sector

    undertaking is exempt from tax.

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    Allowances payable outside India

    [Sec. 10(7)]

    AllowancesAllowances oror perquisitesperquisites paidpaid oror allowedallowed asas

    suchsuch outsideoutside IndiaIndia byby thethe GovernmentGovernment toto aa

    citizencitizen ofof IndiaIndia forfor servicesservices renderedrendered outsideoutside

    IndiaIndia areare exemptexempt fromfrom taxtax..

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    Co-operative technical assistance

    programmers [Section 10(8) and 10(9)]

    Individuals who are assigned duties in India in connection with

    any co-operative technical assistance programs and projects

    would be exempt from tax on their receipts by way of:

    (a) Remuneration received directly or indirectly from theGovernment of a foreign State for rendering such

    services;

    (b) Any other income accruing or arising outside India in

    respect of which the individual is required to pay incometax or other social security tax to the Government of that

    foreign State.

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    Consultant remuneration

    [sec. 10(8A) and (8B)]

    Under clause (8A), any remuneration or fee received by a

    consultant, directly or indirectly, out of the funds made

    available to an international organization (agency) under a

    technical assistance grant agreement with the agency and

    Government of the foreign state is exempted from incometax.

    Under clause (8B), the remuneration received by an employee

    of the consultant is exempted from income tax provided suchemployee is either not a citizen of India or, being a citizen of

    India, is resident but not ordinarily resident and the contract

    of his service is approved by the prescribed authority before

    the commencement of his service.

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    Gratuity [Sec. 10(10)]

    1) Retirement gratuity received under the PensionCode Regulations applicable to members of theDefence Service is fully exempt from tax.

    2) Central / State Government Employees

    3) Non government employees covered by thePayment of Gratuity Act, 1972

    4) Non government employees not covered by thePayment of Gratuity Act, 1972

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    Example:Example:

    Mr. X retired on 15.06.2006 after completion of

    26 years 8 months of service and received gratuityof Rs. 6 lakh. At the time of retirement his salary

    was;

    Basic salary: Rs. 5000 p.m.

    D.A. : Rs.3000 p.m.

    Find his taxable gratuity assuming;

    1. He is non-government employee and covered bythe payment of gratuity act 1972

    2. He is non-government employee and no covered

    by the payment of gratuity act 1972

    3. He is a government employee

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    Payment of commutation of

    pension [Sec. 10(10A)]

    Pension is of 2 types

    1. Commuted Pension

    2. Un-commuted Pension

    A) Employees of the central government/local

    authorities/statutory corporation/members of

    the defence services

    B) Non government employee

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    ExampleExample

    Mr. X retired on 01.10.06 receiving Rs. 5000 p.m. as

    pension. On 01.02.07, he commuted 60% of his

    pension and received Rs. 3 lakh as commuted

    pension. Required to compute his taxable pension

    assuming:1) He is government employee

    2) He is non government employee, receiving

    gratuity of Rs. 5 lakh at the time of retirement

    3) He is non government employee and is in

    receipt of no gratuity at the time of retirement

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