NTPC LIMITED CENTRAL PAYROLL TEAM

Ref.: CC/Income Tax/FY 2013-2014 Dated: 22nd

January, 2014

Sub.: Income Tax calculation for the financial year 2013-2014 (Assessment Year 2014-2015)

1. TDS on Salary u/s 192 the Income Tax Act, 1961: Every person who is responsible for paying any income chargeable under the head "Salaries" shall

deduct income-tax on the estimated income of the assessee under the head "Salaries" for the financial

year 2013-14. The income-tax is required to be calculated on the basis of the rates given below, subject

to the provisions related to requirement to furnish PAN as per sec 206AA of the Act, and shall be

deducted at the time of each payment.

Rates of tax as per Finance Act, 2013

A. Normal Rates of tax:

Income Tax Rates Up to Rs. 2,00,000 NIL

Rs. 2,00,001 to Rs. 5,00,000 10 per cent of the amount by which the total income

exceeds Rs.2,00,000/-

Rs. 5,00,001 to Rs. 10,00,000 Rs. 30,000 plus 20% of the amount by which the total

income exceeds Rs. 5,00,000/-

Above Rs. 10,00,000 Rs.1,30,000 plus 30% of the amount by which the total

income exceeds Rs. 10,00,000/-

B. Rates of tax for an individual (Senior Citizen), resident in India and of the age of sixty years or more but less than 80 years at any time during the financial year:

Up to Rs. 2,50,000 NIL

Rs. 2,50,001 to Rs. 5,00,000 10% of the amount by which the total income exceeds

Rs.2,50,000

Rs. 5,00,001 to Rs. 10,00,000 Rs. 25,000 plus 20% of the amount by which the total

income exceeds Rs. 5,00,000

Above Rs. 10,00,000 Rs. 1,25,000 plus 30% of the amount by which the total

income exceeds Rs. 10,00,000

Note:-

(i) The amount of income-tax shall be increased by a surcharge @10% of the Income-tax, if the total income of the individual exceeds Rs.1 crore during FY 2013-14. However the amount of surcharge

shall not exceed the amount by which the individuals total income exceeds Rs.1crore and if surcharge so arrived at, exceeds such amount (assessees total income minus one crore) then it will be restricted to the amount of total income minus Rupees one crore.

(ii) The amount of income-tax including the surcharge if any, shall be increased by Education Cess @ 2% of the Income Tax and Secondary and Higher Education Cess @ 1% of the Income Tax;

2. COMPUTATION OF INCOME & TAX LIABLITY:

1) Gross Taxable Income includes the following incomes:

(i) Taxable income from Salary;

(ii) Income from House property;

(iii) Capital gains;

(iv) Income from other Sources;

2) Less: Deductions under Chapter VI-A

3) Find out Total income (1-2)

4) Calculate tax liability

3. SALARY INCOME:

(i) Salary includes wages, any annuity or pension, any gratuity, any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages, any advance of salary, any payment received

by an employee in respect of any period of leave not availed of by him, etc. (sec.17(1))

Salary paid in foreign currency: For the purpose of deduction of tax on salary payable in foreign

currency, the value in rupees of such salary shall be calculated at the Telegraphic Transfer buying

rate of such currency as on the date on which tax is required to be deducted at source.

(ii) Perquisite includes (i) The value of rent-free accommodation or accommodation at concessional rent provided

by the employer to its employees;

(ii) The value of any benefit or amenity granted or provided free of cost or at concessional rate by the employer to the employee;

(iii) Any sum paid by the employer in respect of any obligation which, but for such

payment, would have been payable by the assessee;

(iv) The value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer, free of cost or at concessional rate to assessee;

(v) Reimbursement of medical expenditure by the employer to the employee to the extent it exceeds Rs.15000/-;

(vi) The amount of any contribution to an approved superannuation fund by the employer in respect of the assessee, to the extent it exceeds one lakh rupees;

(vii)The value of any other fringe benefit or amenity as may be prescribed;

(Note: For detail, refer to Annexure-1)

(iii) Incomes not included under the head SALARY (EXEMPTIONS)

Any income falling within any of the following clauses shall not be included in computing the

Income from salaries for the purpose of section 192 of the Act:-

A. House Rent Allowance [Section 10(13A) & Rule 2A]: Employees in receipt of House Rent

Allowance and willing to claim this deduction are required to submit the rent receipts as proof of the

actual rent paid by them immediately and latest by 15th February, 2014. The exemption will be

regulated by least of the following:

i) House Rent Allowance received by the employee in respect of the period during which

rented accommodation is occupied by the employee during the previous year;

ii) Excess of rent paid over 10% of salary;

iii) Amount equal to 50% of salary where residential house is situated at Mumbai,

Kolkata, Delhi & Chennai and 40% of salary where the residential house is situated at any

other place.

Further, if annual rent paid by the employee exceeds Rs.1,00,000 per annum, it is mandatory for

the employee to report PAN of the landlord to the employer. In case the landlord does not have a

PAN, a declaration to this effect from the landlord along with the name and address of the landlord

should be filed by the employee. (CBDT CIRCULAR NO: 08 /2013, dated 10th Oct. 2013)

The word SALARY means basic Pay + Dearness Pay + DA + FPI + Special Pay + Personal Pay, and excludes all other allowances and perquisites. However, as per CBDTs circular no. 15/2001 dt. 12.12.2001, the salaried employees drawing HRA up to Rs. 3,000/- p.m. will be exempted from

production of rent receipt for TDS purpose and HRA rebate in such cases will be allowed on

submission of declaration in the prescribed format.

B. Transport allowance granted to an employee to meet his expenditure for the purpose of commuting

between the place of his residence and the place of his/her duty is exempt to the extent of Rs. 800

p.m. However, Transport allowance granted to an employee, who is blind or orthopedically

handicapped with disability of lower extremities to meet his expenditure for the purpose of

commuting between the place of his/her residence and the place of his/her duty would be exempt to

the extent of Rs. 1600 p.m. (Sec.10 (14) read with rule 2BB).

C. Rule 2BB (1)(a) of Income Tax Rules, 1962 provides exemption for any allowance granted to the

employees to meet the cost of travel on tour or on transfer. Such allowances include any sums

paid in connection with transfer, packing and transportation of personal effects on such transfer.

D. Other special allowances: Section 10(14) provides the exemption for any allowance granted to

employees either to meet his personal expenses at the place where the duties of his office or

employment of profit are ordinarily performed by him or at the place where the ordinarily resides, or

to compensate him for the increased cost of living as and to the extent prescribed in Rule 2BB(2) of

Income Tax Rules. Rule 2BB(2) provides exemption for various allowances like hill area

allowance, special compensatory allowance, special compensatory field area allowance,

underground allowance etc. dependent on the place of posting and to the extent as specified under

the Rules.

E. Transfer Grant Allowance: In this connection it is to be noted that as per section 10(14) read with

rule 2BB any allowance granted to meet the cost of travel on tour or on transfer includes any sum

paid in connection with transfer, packing and transportation of personal effects on such transfer shall

be exempt. Also any allowance, whether, granted for the period of journey in connection with

transfer, to meet the ordinary daily charges incurred by an employee on account of absence from his

normal place of duty shall be exempt.

F. Section 10(26) of Income Tax Act, 1961 provides exemption in the case of a member of a Schedule

Tribes as defined in clause (25) of article 366 of the Constitution, residing in any area specified in

Part 1 or part II of the Table appended to paragraph 20 of the Sixth Schedule of the constitution or in

the (States of Arunachal Pradesh, Manipur, Mizoram, Nagaland and Tripura) or in the areas covered

by notification no. TAD/R/35/50/109, dated the 23rd

Feb. 1951, issued by the Governor of Assam

under the proviso to sub-paragraph 930 of the said paragraph 20 (as it stood immediately before the

commencement of the North Eastern Areas (Reorganization) Act, 1971 (81 of 1971) (or in the

Ladakh Region of the State of Jammu and Kashmir) any income which accrues or arise to him

a) From any source in the area (or State aforesaid) or

b) By way of dividend or interest on securities.

G. Section 10(26AAA) of Income Tax Act provides the exemption in case of an individual, being a

Sikkimese, any income which accrues or arises to him

a) From any source in the State of Sikkim; or

b) By way of dividend or interest on securities.

This provision shall not apply to a Sikkimese woman who, on or after the 1st day of April, 2008

marries an individual who is not a Sikkimese.

(iv) Deduction u/s 16 of the Act against Tax on Employment:

The tax on employment (Professional Tax) within the meaning of clause (2) of Article 276 of the

Constitution of India, leviable by or under any law, shall also be allowed as a deduction in computing

the income under the head "Salaries".

4. INCOME FROM HOUSE PROPERTY:

(i) Section 192(2B) enables a taxpayer to furnish particulars of income under any head other than "Salaries" ( not being a loss under any such head other than the loss under the head

Income from house property) received by the taxpayer for the same financial year and of any tax deducted at source thereon.

(ii) Income from house property is determined as under:

Gross Annual Value xxxxxxx

Less: Municipal Taxes xx

Net Annual Value (NAV)* xxxxxxx

Less: Deductions under Section 24:-

Statutory Deduction - R&M (30% of NAV) * xxxxx

Interest on Borrowed Capital ** xxxxxxx

Income / Loss From House Property xxxxxxx

* In case of one Self Occupied Property, NAV/ R&M is NIL

**In case of one Self Occupied Property, Interest On borrowed capital is allowed as per table below:

S.No. Purpose of borrowing

capital

Date of borrowing

capital

Max. Ded.

allowable

1 Repair or renewal or

reconstruction of the house

Any time Rs. 30,000/-

2 Acquisition or construction Before 01.04.1999 Rs. 30,000/-

of the house

3 Acquisition or construction

of the house ***

On or after

01.04.1999

Rs. 1,50,000/-

*** The acquisition or constructing of the house should be completed within3 years from the end of

the FY in which the capital was borrowed. Any prior period interest for the FYs up to the FY in

which the property was acquired and constructed shall be deducted in equal instalments for

the FY in question and subsequent four FYs.

Employees who have availed house building advance from financial institution under variable

interest rates have to submit interest accrued certificate from the institution latest by processing

of payroll for the month of March, 2014, failing which income/loss from house property will

not be considered for the purpose of income tax calculation.

Accrued interest certificate should include certification from the institution that aforesaid

advance is for the purpose of acquisition or construction of the house property or for the

purpose of repayment of the principal amount outstanding under an earlier loan taken for the

purpose of acquiring or constructing the aforesaid house property.

5. Deductions under Chapter VI-A of the Act: The aggregate amount of deduction under

sections 80C, 80CCC and sub section (1) of Section 80CCD shall not exceed Rs.1,00,000/-

(Section 80CCE). Please refer to enclosed Annexure2 for detail.

6. Rebate of Rs.2000 for Individuals having Total Income up to Rs.5 Lakh [U/S 87A]:

Finance Act 2013 has provided relief in the form of rebate to individual taxpayers, resident in

India, who are in lower income bracket, i.e. having total income not exceeding Rs 5,00,000/-.

The amount of rebate is Rs 2000/- or the amount of tax payable, whichever is lower.

Consequently, any individual having total income up to Rs.220,000/- will not be required to

pay tax.

7. OTHERS:

Salary Income from Previous Employer: As per Section 192(2), details of any income chargeable under the head salary received by any employee from any other employer during

the financial year 2013-14 has to be furnished to the Local Finance office along with a

certificate from the previous employer for tax deducted at source in Form no. 12B of IT rules

1962.

Return of Income: As per Section 139(1) of Income Tax Act, 1961, Return of Income is required to be filed by every individual whose Gross Total Income, i.e. Total Income before

giving effect to the deduction specified under Chapter VIA (80C to 80U) of the Income Tax

Act during the financial year exceeds the maximum amount which is not chargeable to Income

Tax on or before the due date (31st July of Assessment year).

Note:

i. ESS may be referred to know TAN wise detail of TDS deducted and deposited during the financial year while filing Income tax return.

ii. View Tax Credit: Income Tax Department facilitates a PAN holder to view its Tax Credit Statement (Form 26AS) online. Tax Credits Statement (Form 26AS) can be viewed/accessed

through 3 ways :

View Tax Credit from https://incometaxindiaefiling.gov.in;

View Tax Credit (Form 26AS) from your bank site through net banking facility;

View Tax Credit (Form 26AS) from TIN website; The difference in deduction of TDS and Tax credit (Form 26AS) may be due to non

furnishing of PAN/ INVALID PAN / any change in PAN. In case PAN card is lost, get issue

a duplicate PAN card with your old PAN from Income tax Department and do not apply for

a fresh PAN by deactivating your old PAN to avoid any mismatch. Please contact local

finance/CPT for any discrepancy before filing the return.

Compulsory PAN: 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:

a) at the rate specified in the relevant provision of this Act; or b) at the rate or rates in force; or c) at the rate of twenty per cent.

As per CBDT circular no.08/2012 dated 05.10.2012; there can be following two

situations: 1. Where the income of the employee computed for TDS u/s 192 is below

taxable limit. 2. Where the income of the employee computed for TDS u/s 192 is above

taxable limit. In first situation, as the income is below the taxable limit, no tax will be deducted. In the second case, if PAN is not furnished by the employee, the deductor will calculate the average rate of income-tax based on rates in force as provided in sec 192. If the tax so calculated is below 20%, deduction of tax will be made at the rate of 20% and in case the average rate exceeds 20%, tax is to be deducted at the average rate.

(G NOVAHU)

AGM (FIN-CPT)

ANNEXURE 1: VALUATION OF PERKS

Perquisites includes -

1 Accommodation Perks: Value of rent-free accommodation or accommodation at concessional rent

by the employer to its employees is to be calculated as under:

A. Where the accommodation is owned by the employer(Illustration No.1 below):-

i) 15% of salary in cities having population exceeding 25 lakh as per 2001 census, or

ii) 10% of salary in cities having population exceeding 10 lakhs but not exceeding 25 lakhs as

per 2001 census, or

iii) 7.5% of salary in other cases; and

as reduced by any amount of rent payable by the employee.

B. Where the accommodation so provided is taken on lease / rent by the employer (Illustration No.2

below):-

the prescribed rate is 15% of the salary or the actual amount of lease rental payable by the

employer, whichever is lower

as reduced by any amount of rent payable by the employee.

C. For furnished accommodation, the value of perquisite shall be increased by

i) 10% p.a. of the cost of furniture, appliances and equipments (if owned by the employer) or

ii) Where the furniture, appliances and equipments have been taken on hire, the amount of actual

hire charges payable

as reduced by any charges paid by the employee himself during the previous year

Explanation: For the purpose of this rule, where the accommodation is provided by the Central

Government or any State Government to an employee who is serving on deputation with any body

or undertaking under the control of such Government, [CBDT Circular no. 08/2012 dated

05.10.2012]

(i). the employer of such an employee shall be deemed to be that body or undertaking where

the employee is serving on deputation; and

(ii). the value of perquisite of such an accommodation shall be the amount calculated as if

the accommodation is owned by the employer.

"Accommodation" includes a house, flat, farm house, hotel accommodation, motel, service

apartment, guest house, a caravan, mobile home, ship etc.

D. The value of any accommodation provided to an employee working at a mining site or an on-shore oil exploration site or a project execution site or a dam site or a power generation site or an off-shore

site will not be treated as a perquisite. However, for not being treated as perquisite,

such accommodation should either be located in a remote area or

where it is not located in a remote area, the accommodation should be of a temporary nature having plinth area of not more than 800 square feet and should not be located within

8 kilometers of the local limits of any municipality or cantonment board.

A project execution site for the purposes of this sub-rule means a site of project up to the stage of its

commissioning. A "remote area" means an area located at least 40 kilometers away from a town

having a population not exceeding 20,000 as per the latest published all-India census.

E. If an accommodation is provided by an employer in a hotel the value of the benefit in such a case shall be

24% of the annual salary or

the actual charges paid or payable to such hotel, whichever is lower, for the period during which such accommodation is provided as reduced by any rent actually

paid or payable by the employee.

However, where in cases the employee is provided such accommodation for a period not exceeding

in aggregate fifteen days on transfer from one place to another, no perquisite value for such

accommodation provided in a hotel shall be charged. It may be clarified that while services provided

as an integral part of the accommodation, need not be valued separately as perquisite, any other

services over and above that for which the employer makes payment or reimburses the employee

shall be valued as a perquisite as per the residual clause. In other words, composite tariff for

accommodation will be valued as per these Rules and any other charges for other facilities provided

by the hotel will be separately valued under the residual clause.

Also, if on account of an employee's transfer from one place to another, the employee is provided

with accommodation at the new place of posting while retaining the accommodation at the other

place, the value of perquisite shall be determined with reference to only one such accommodation

which has the lower value as per the table prescribed in Rule 3 of the Income Tax Rules, for a

period up to 90 days. However, after that the value of perquisite shall be charged for both

accommodations as prescribed.

Salary for this purpose includes the pay, allowances, bonus or commission payable monthly or

otherwise or any monetary payment, by whatever name called, does not include the following:

a. DA or Dearness Pay, which is not considered for computation of retirement benefits,

b. Employers Contribution to PF,

c. Allowances exempt from payment of tax,

d. Value of perquisites specified in clause(2) of section 17 of I.T. Act

e. Lump sum payments received at the time of Separation from the Employer like Gratuity, Leave

Encashment, voluntary retrenchment benefits, Commutation of pension and similar payments.

Illustration on accommodation perks:

01. Mr. Rajan is a Senior Manager in ABC Ltd. The company has provided him an accommodation in its

township in a city having population less than 10lakhs for a concessional rent of Rs.24000/-(Rs.2000 p

m.). He receives the following payments during the financial year 2013-14:

S. No. Particulars Annual Amounts

1 Basic salary@50,000 p.m. 600000/-

2 DA@60% (forming part of retirement benefits) 360000/-

3 Pay Allowances @47%* 282000/-

4 Bonus 250000/-

5 Leave encashment (excluding terminal benefit) 100000/-

6 Other Perks(excluding housing perks) 20000/-

7 Medical expenditure Reimb. 7000/-

*An amount of Rs9600/-(Rs.800p.m) is exempted against Transport allowance.

Calculate the value of housing perks for Assessment year 2014-15.

Solution: Taxable Salary for Housing perks = 600000+360000+282000-9600+250000+100000

= Rs.1582400/-

Value of Housing perks (Township accommodation) = 7.5%of 1582400- 24000(HRR) = Rs.94680/-

Note: Other perks and taxable Medical expenditure reimbursement subject to a maximum of

Rs.15,000/- are not considered in taxable salary for the purpose of calculation of Housing perks.

02. Using the data given in above illustration, Compute the value of housing perks if ABC Ltd. has taken the

accommodation on a lease rent of Rs.216000/-(Rs.18000 p.m.)

Solution: Value of Housing perks (lease accommodation) = 15%of 1582400 i.e. 237360/- or

Lease rent of Rs.216000/- whichever is low = Rs.216000/-

Less: HRR charged from employee = Rs.24000/- Housing perks = Rs. 192000/-

2 Valuation of perquisite in respect of motor car: The table below gives the basis of valuation

of perquisite in respect of motor car and other modes of conveyance provided to the employees:

Sl.No.

Circumstances Where cubic capacity

of engine does not

exceed 1.6 litres

Where cubic capacity

of engine exceeds 1.6

litres

(1) (2) (3) (4)

(1) Where the motor car is owned or hired

by the employer and

a) Is used wholly and exclusively in the performance of his

official duties;

b) Is used exclusively for the private or personal purposes of

the employee or any member of

his household and the running

and maintenance expenses are

met or reimbursed by the

employer;

No value: Provided

that the documents

specified in clause (B)

of this sub-rule are

maintained by the

employer.

Actual amount of

expenditure incurred

by the employer on the

running and

maintenance of motor

car during the relevant

previous year including

remuneration, if any,

No Value: Provided

that the documents

specified in clause (B)

of this sub-rule are

maintained by the

employer.

Actual amount of

expenditure incurred

by the employer on the

running and

maintenance of motor

car during the relevant

previous year including

remuneration, if any,

c) Is used partly in the performance of duties and

partly for private or personal

purposes of his own or any

member of his household and (i) The expenses on

maintenance and

running are met or

reimbursed by the

employer;

(ii) The expenses on running and

maintenance for private

or personal use are fully

met by the assessee.

paid by the employer to

chauffeur as increased

by the amount

representing normal

wear and tear of the

motor car and as

reduces by any amount

charges from the

employee for such use.

Rs. 1,800 (plus Rs.

900, if chauffeur is also

provided to run the

motor car)

Rs. 600 (plus Rs. 900,

if chauffeur is also

provided by the

employer to run the

motor car)

paid by the employer to

the chauffeur as

increased by the

amount representing

normal wear and tear

of the motor car and as

reduced by any amount

charged from the

employee for such use.

Rs. 2,400 (plus Rs.

900, if chauffeur is also

provided to run the

motor car)

Rs. 900 (plus Rs. 900,

if chauffeur is also

provided to run the

motor car)

(2) Where the employee owns a motor car

but the actual running and maintenance

charges (including remuneration of the

chauffeur, if any) are met or reimbursed

to him by the employer and

i) Such reimbursement is for the use of the vehicle wholly and

exclusively for official

purposes.

ii) Such reimbursement is for the use of the vehicle partly for

official purpose and partly for

personal or private purposes of

the employee or any member of

his household.

No value: Provided

that the documents

specified in clause (B)

of this sub-rule are

maintained by the

employer.

Subject to the

provisions of clause

(B) of this sub-rule,

the actual amount of

expenditure incurred

by the employer as

reduced by the amount

specified in sl. No.

(1)(c)(i) above.

No value: Provided

that the documents

specified in clause (B)

of this sub-rule are

maintained by the

employer.

Subject to the

provisions of clause

(B) of this sub-rule, the

actual amount of

expenditure incurred

by the employer as

reduced by the amount

specified in sl. No.

(1)(c)(i) above.

(3) Where the employee owns any other

automotive conveyance(other than car)

but the actual running and maintenance

charges are met or reimbursed to him by

the employer and

i) Such reimbursement is for the use of the vehicle wholly and

exclusively for official

purposes:

ii) Such reimbursement is for the use of vehicle partly for official

purposes and partly for personal

or private purposes of the

employee.

No value: Provided

that the documents

specified in clause (B)

of this sub-rule are

maintained by the

employer.

Subject to the

provisions of clause

(B) of this sub-rule, the

actual amount of

expenditure incurred

by the employer as

reduced by the amount

of Rs. 900.

Not applicable.

Not applicable

Provided that where one or more motor-cars are owned or hired by the employer and the employee or any

member of his household are allowed the use of such motor-car or all of any of such motor-cars (otherwise

than wholly and exclusively in the performance of his duties), the value of perquisite shall be the amount

calculated in respect of one car in accordance with Sl. No. (1)(i) of Table as if the employee had been

provided one motor-car for use partly in the performance of his duties and partly for his private or personal

purposes and the amount calculated in respect of the other car or cars in accordance with Sl. No. (1)(b) of

Table as if he had been provided with such car or cars exclusively for his private or personal purposes.

Where the employer or the employee claims that the motor-car is used wholly and exclusively in the

performance of official duty or that the actual expenses on the running and maintenance of the motor-car

owned by the employee for official purposes is more than the amounts deductible in Sl. No. 2(ii) or 3(ii) of

Table, he may claim a higher amount attributable to such official use and the value of perquisite in such a

case shall be the actual amount attributable to official use of the vehicle provided that the following

conditions are fulfilled :-

(a) The employer has maintained complete details of journey undertaken for official purpose which may

include date of journey, destination, mileage, and the amount of expenditure incurred thereon;

(b) The employer gives a certificate to the effect that the expenditure was incurred wholly and

exclusively for the performance of official duties.

Explanation: For the purpose of this sub-rule, the normal wear and tear of a motor-car shall be taken

at 10% per annum of the actual cost of the motor-car or cars.

3 Medical Reimbursement by the employer

As per section 17(2) of the IT Act, the medical reimbursement to an employee in excess of Rs.

15,000/- is taxable as perquisite in the hands of employee. However, the treatment taken in hospitals

maintained by the Government or any local authority or any other hospital approved by the Govt.

for medical treatment of its employees and hospitals maintained by the employer would not be

covered in the limit of Rs. 15,000/-. Moreover, the payments made to hospitals approved by the

Chief Commissioner of Income Tax for this purpose for prescribed diseases or ailments would also

not be considered in the limit of Rs. 15,000/-. The term Hospital also includes dispensaries or

clinics or nursing homes. The exemption of the payment made to hospital approved by the Chief

Commissioner of Income Tax is subject to the condition that the employee produces a certificate

from such approved hospital specifying the prescribed disease for which hospitalization was

required as well as receipt for the amount paid, to the medical Section of Establishment Finance.

In case of Female employees whose dependants include her Parents-In-Law, reimbursement of

expenditure on medical treatment of Parents-In-Law is taxable in full without any basic exemption.

4 Other Perquisites:

A. Interest free or concessional loans: The value of the benefit to the assessee resulting from the

provision of interest-free or concessional loan made available to the employee or any member of his

household during the relevant previous year by the employer or any person on his behalf shall be

determined as the sum equal to the simple interest computed at the rate charged per annum by the

State Bank of India as on the 1st day of the financial year 2013-14 in respect of loans of same type

and for the same purpose advances by it to the general public. The rates of interest are given as

under :-

TYPE Period in years/ Amt. of Loan *SBI interest Rate

(p.a.)

Housing Loan Loan up to Rs.30 Lakhs 9.95%

Above Rs.30 Lakhs 10.10%

Car Loan 10.45%

Education Loan

Loan up to Rs. 4 Lakhs 13.20%#

Above Rs.4 Lakhs but up to 7.5 Lakhs 13.45% #

Above Rs. 7.5 Lakhs 11.45% #

Two Wheeler loan 17.95%

Personal Loans 18.20%

*SBI Lending rates as on 1st April, 2013, source: DT Ready Reckoner by Dr.V.K. Singhania;

# 0.5% concession for girl student.

The interest is to be calculated on the maximum outstanding monthly balance. The interest so

calculated shall be reduced by the interest, if any actually recovered from the employee for

calculation of the perquisite.

However, small loans up to Rs. 20,000/- in the aggregate are exempt. Loans for medical treatment

for diseases specified in Rule-3A are also exempt, provided the amount of loan for medical

reimbursement is not reimbursed under any medical insurance scheme.

B. Gas, electricity & water: For free supply of gas, electricity and water for household consumption,

the rules provide that the amount paid by the employer to the agency supplying the amenity shall be

the value of perquisite. Where the supply is made from the employer's own resources, the

manufacturing cost per unit incurred by the employer would be taken for the valuation of perquisite.

Any amount paid by the employee for such facilities or services shall be reduced from the above

amount.

C. Free or concessional education: Perquisite on account of free or concessional education for any

member of the employees household shall be determined as the sum equal to the amount of

expenditure incurred by the employer. Any amount paid by the employee for such facilities or

services shall be reduced from the above amount. However, where such educational institution itself

is maintained and owned by the employer or where such free educational facilities are provided in

any institution by reason of his being in employment of that employer, the value of the perquisite to

the employee shall be determined with reference to the cost of such education in a similar institution

in or near the locality if the cost of such education or such benefit per child exceeds Rs.1000/- p.m.

Fixed education allowance given in cash by the employer to the employee to meet the cost of

education of the family members of the employee is not taxable to the extent of Rs. 100 per month

per child (for a maximum of 2 children). An additional exemption is available in respect of

allowance granted to meet hostel expenditure at the rate of Rs. 300 per month per child for a

maximum of two children. The remaining amount is taxable.

D. Personal attendants etc.: The value of free service of all personal attendants including a sweeper,

gardener and a watchman is to be taken at actual cost to the employer. Where the attendant is

provided at the residence of the employee, full cost will be taxed as perquisite in the hands of the

employee irrespective of the degree of personal service rendered to him. Any amount paid by the

employee for such facilities or services shall be reduced from the above amount. However, if an

employer provides a rent-free house (owned by employer) to his employee, expenses (inclusive

of salary of a gardener) incurred by the employer on maintenance of garden and ground

attached to the house, is not taxable.

E. Perquisite in respect to lunch/refreshment, etc.: The value of free food and non-alcoholic

beverages provided by the employer to an employee shall be the amount of expenditure incurred by

such employer. The amount as determined shall be reduced by the amount, if any, paid or recovered

from the employee for such benefit or amenity.

The rule shall not apply in case of free food and non-alcoholic beverages provided by such employer

during working hours in or office or business premises or thorough paid vouchers which are not

transferable and useable only at eating joints, to the extent the value thereof either case does not

exceed Rs. 50 per meal or to tea or snacks provided during working hours or free food and non-

alcoholic beverages during working hours provided in a remote area or an off shore installation.

F. Valuation of Leave Travel Concession in India: As per sec 10(5) of the IT Act read with Rule 2B,

Leave Travel Concession paid for proceeding on LTC to any place in India, amount over and above

the amount exempted as given below is taxable as perquisites in the hands of employee.

Different situations Amount exempted

A Where the journey is performed by air Amount of economy class fare by the

national Carrier by the shortest route or the

amount spent, whichever is less.

B Where the journey is performed by rail Amount of air-conditioned first class rail

fare by the shortest route or the amount

spent, whichever is less

C Where the places of origin of journey and

destination are connected by rail and

journey is performed by any other mode

of transport

Amount of air-conditioned first class rail

fare by the shortest route or the amount

spent, whichever is less.

D

i)

ii)

Where the places of origin of journey and

destination (or part thereof) are not

connected by rail:

Where a recognized public transport

exists

Where no recognized public transport

exits

First class or deluxe class fare by the

shortest route or the amount spent,

whichever is less

Air-conditioned First class rail fare by the

shortest route (as if the journey has been

performed by rail) or the amount spent,

whichever is less.

Provided that the amount exempt under this clause shall in no case exceed the amount of expenses

actually incurred for the purpose of such travel. To claim the exemption of LTC, the documentary proof

of expenses is to be furnished by the employee. As per Income Tax rule 1962, LTC for a block of 4

years can be availed maximum by the first calendar year of immediately succeeding block of four years.

The current Block of 4 years under the Income Tax Act is Calendar Years 2010-2013. The exemption

for Block Year 2010-2013 can be claimed in the first calendar year of the next block but in respect of

only one journey.

The above exemption in respect of LTC is available for two children only. In case LTC has been paid

for third and subsequent child born after 01-10-1998, such amount is fully taxable.

ANNEXURE 2 : DEDUCTION UNDER CHAPTER VI-A

In computing the taxable income of the employee, the following deductions are allowed under Chapter

VI-A of the Act from gross total income:

A. As per section 80C, an employee will be entitled to deductions for the whole of amounts paid or deposited in the current financial year in the following schemes, subject to a limit of Rs.1,00,000/-:

(1) Payment of insurance premium to effect or to keep in force insurance on the life of the individual, the spouse or any child of the individual restricted to 20% of the sum assured. If the policy is issued on or after 01.04.2012, the restriction of 10% of sum assured would be

applicable. If policy is issued on or after April 1, 2013 on the life of a person with disability or

severe disability as per section 80U or a person suffering from disease as given in Section

80DDB the restriction of 15% of sum assured would be applicable.

(2) Any payment made to effect or to keep in force a contract for a deferred annuity, not being an annuity plan as is referred to in item (7) herein below on the life of the individual, the

spouse or any child of the individual, provided that such contract does not contain a provision

for the exercise by the insured of an option to receive a cash payment in lieu of the payment

of the annuity;

(3) Any sum deducted from the salary payable by, or, on behalf of the Government to any individual, being a sum deducted in accordance with the conditions of his service for the

purpose of securing to him a deferred annuity or making provision for his spouse or

children, in so far as the sum deducted does not exceed 1/5th of the salary;

(4) Any contribution made: (i) by an individual to any Provident Fund to which the Provident Fund Act, 1925

applies;

(ii) to any provident fund set up by the Central Government, and notified by it in this behalf in the Official Gazette, where such contribution is to an account standing in

the name of an individual, or spouse or children ;

(iii) by an employee to a Recognized Provident Fund; (iv) by an employee to an approved superannuation fund;

It may be noted that "contribution" to any Fund shall not include any sums in repayment of

loan;

(5) Any subscription :- (a) to any such security of the Central Government or any such deposit scheme as the

Central Government may, by notification in the Official Gazette, specify in this behalf;

(b) to any such saving certificates as defined under section 2(c) of the Government

Saving Certificate Act, 1959 as the Government may, by notification in the Official

Gazette, specify in this behalf. [The Central Government has since notified National Saving Certificate (VIII th -Issue) vide Notification

S.O. No. 1560(E) dated 3.11.05 and NSC (IXth-Issue) vide notification G.S.R.848 (E) dated 29th

November, 2011]

Interest on NSCs, which is a deemed investment as given below:-

No. When NSC was purchased Interest Per Rs. 100/-

1 First year 8.68

2 Second year 9.43

3 Third year 10.25

4 Fourth year 11.14

5 Fifth year 12.11

(source: DT Ready Reckoner by Dr.V.K. Singhania)

(6) Any sum paid as contribution in the case of an individual, for himself, spouse or any child,

a. for participation in the Unit Linked Insurance Plan, 1971 of the Unit Trust of India;

b. for participation in any unit-linked insurance plan of the LIC Mutual Fund referred to

in clause (23D) of section 10 and as notified by the Central Government.

(7) Any subscription made to effect or keep in force a contract for such annuity plan of the Life Insurance Corporation or any other insurer as the Central Government may, by

notification in the Official Gazette, specify;

(8) Any subscription made to any units of any Mutual Fund, referred to in clause (23D) of

section 10, or from the Administrator or the specified company referred to in Unit Trust of

India (Transfer of Undertaking & Repeal) Act, 2002 under any plan formulated in

accordance with any scheme as the Central Government, may, by notification in the Official

Gazette, specify in this behalf; [The Central Government has since notified the Equity Linked Saving Scheme, 2005 for this purpose vide Notification S.O. No. 1563(E) dated 3.11.2005]

The investments made after 1.4.2006 in plans formulated in accordance with Equity linked

Saving Scheme, 1992 or Equity Linked Saving Scheme, 1998 shall also qualify for

deduction under section 80C.

(9) Any contribution made by an individual to any pension fund set up by any Mutual Fund referred to in clause (23D) of section 10, or, by the Administrator or the specified company

referred to in Unit Trust of India (Transfer of Undertaking & Repeal) Act, 2002, as the

Central Government may, by notification in the Official Gazette, specify in this behalf;

(10) Any subscription made to any such deposit scheme of, or, any contribution made to any

such pension fund set up by, the National Housing Bank, as the Central Government may,

by notification in the Official Gazette, specify in this behalf;

(11) Any subscription made to any such deposit scheme, as the Central Government may, by notification in the Official Gazette, specify for the purpose of being floated by (a) public

sector companies engaged in providing long-term finance for construction or purchase of

houses in India for residential purposes, or, (b) any authority constituted in India by, or,

under any law, enacted either for the purpose of dealing with and satisfying the need for

housing accommodation or for the purpose of planning, development or improvement of

cities, towns and villages, or for both. (The Central Government has since notified the Public Deposit Scheme of HUDCO vide Notification S.O. No.37(E), dated 11.01.2007)

(12) Any sums paid by an assessee for the purpose of purchase or construction of a residential house property, the income from which is chargeable to tax under the head "Income from

house property" (or which would, if it has not been used for assessee's own residence, have

been chargeable to tax under that head) where such payments are made towards or by way of

any installment or part payment of the amount due under any self-financing or other scheme

of any Development Authority, Housing Board etc. The deduction will also be allowable in

respect of re-payment of loans borrowed by an assessee from the Government, or any bank or

Life Insurance Corporation, or National Housing Bank, or certain other categories of

institutions engaged in the business of providing long term finance for construction or

purchase of houses in India. Any repayment of loan borrowed from the employer will also be

covered, if the employer happens to be a public company, or a public sector company, or a

university established by law, or a college affiliated to such university, or a local authority, or

a cooperative society, or an authority, or a board, or a corporation, or any other body

established under a Central or State Act.

Where the house property in respect of which deduction has been allowed under these

provisions is transferred by the tax-payer at any time before the expiry of five years from the

end of the financial year in which possession of such property is obtained by him or he

receives back, by way of refund or otherwise, any sum specified in section 80C(2)(xviii), no

deduction under these provisions shall be allowed in respect of such sums paid in such

previous year in which the transfer is made and the aggregate amount of deductions of

income so allowed in the earlier years shall be added to the total income of the assessee of

such previous year and shall be liable to tax accordingly.

(13) Tuition fees, whether at the time of admission or thereafter, paid to any university, college, school or other educational institution situated in India, for the purpose of full-time education

of any two children of the employee.

Full-time education includes any educational course offered by any university, college,

school or other educational institution to a student who is enrolled full-time for the said

course. It is also clarified that full-time education includes play-school activities, pre-

nursery and nursery classes. It is clarified that the amount allowable as tuition fees shall include any payment of fee to

any university, college, school or other educational institution in India except the amount

representing payment in the nature of development fees or donation or capitation fees or

payment of similar nature.

(14) Subscription to equity shares or debentures forming part of any eligible issue of capital

made by a public company, which is approved by the Board or by any public finance

institution.

(15) Subscription to any units of any mutual fund referred to in clause (23D) of Section 10 and

approved by the Board, if the amount of subscription to such units is subscribed only in

eligible issue of capital of any company.

(16) Investment as a term deposit for a fixed period of not less than five years with a scheduled bank, which is in accordance with a scheme framed and notified by the Central Government,

in the Official Gazette for these purposes.

(17) Subscription to such bonds issued by the National Bank for Agriculture and Rural Development, as the Central Government may, by such notification in the Official Gazette,

specify in this behalf.

(18) Any investment in an account under the Senior Citizens Savings Scheme Rules, 2004.

(19) Any investment as five year time deposit in an account under the Post Office Time Deposit

Rules, 1981.

B. Deduction u/s 80CCC is allowed for the amount paid or deposited by the assessee during the

previous year out of his taxable income to the annuity plan of the LIC or any other insurer for

receiving pension from a fund referred to in section 10(23AAB).

C. U/s 80CCG: Deduction under this section is available to retail investor for acquiring listed shares in

accordance with the notified scheme if the Gross Total income does not exceed Rs.12 Lakhs. The

investment is locked in for a period of 3 years from the date of acquisition. The amount of

deduction is 50 per cent of amount invested in equity shares under the scheme subject to a maximum

amount of Rs.25000/-.

If the assessee, after claiming the aforesaid deduction, fails to satisfy the notified conditions, the

deduction originally allowed shall be deemed to be the income of the assessee of the year in which

default is committed.

Deduction under this section is available only if the assessee is a new retail investor as specified in

the notified scheme and has acquired listed shares in accordance with the notified scheme.

D. Section 80D provides for deduction available for health premia paid etc. In computing the total income of an assessee, being an individual or a Hindu undivided family, there shall be deducted such

sum, as specified below payment of which is made by any mode, other than cash, in the previous

year out of his income chargeable to tax.

Where the assessee is an individual, the sum referred to shall be the aggregate of the following,

namely:

(a) the whole of the amount paid to effect or to keep in force an insurance on the health of the

assessee or his family or any contribution made to the CGHS or such other scheme as may be

notified by Central Government or on account of preventive health check up as does not

exceed in the aggregate fifteen thousand rupees; and

(b) the whole of the amount paid to effect or to keep in force an insurance on the health of the

parent or parents of the assessee as does not exceed in the aggregate fifteen thousand rupees.

Explanation.For the purposes of clause (a), family means the spouse and dependent children of the assessee.

Where the assessee is a Hindu undivided family, the sum referred to shall be the whole of the

amount paid to effect or to keep in force an insurance on the health of any member of that Hindu

undivided family as does not exceed in the aggregate fifteen thousand rupees.

Where the sum specified above is paid to effect or keep in force insurance on the health of any

person specified therein, and who is a senior citizen, the deduction available is twenty thousand rupees rather than fifteen thousand as specified above. Explanation.For the above senior citizen means an individual resident in India who is of the age of sixty years or more at any time during the relevant previous year. The payment for preventive health check up can be made by any

mode including cash and the deduction on this account is restricted to Rs 5000 (within overall

ceiling of Rs.15,000) each for family & parents.

E. Deduction u/s 80DD:

Sections 80DD allows deduction on account of (a) & (b) below on production of certificate issued

by hospital or institution specified by notification by the government for the purpose of the Persons

With Disabilities (Equal opportunities, Protection of Rights and Full Participation) Act 1995 (which

has to be attached with the return) along with a certificate for expenditure incurred or on producing

evidence of amount paid or deposited in a scheme specified under this section.

(a)Expenditure incurred on medical treatment (including nursing), training and rehabilitation of a

handicapped dependent (being a person with disability) or

(b) Amount paid or deposited under any scheme framed by LIC/UTI/any other insurer and approved

by CBDT in this behalf for the maintenance of handicapped dependents (being a person with

disability).

Persons with disability mean a person having disability (as per Person With Disability Act 1995) of

not less than 40%. Moreover, the disabled person must be wholly or mainly dependent upon the

individual claiming the deduction. Dependent means the spouse, children, parents, brothers and

sisters of the individual.

Deduction of Rs. 50000/- is allowed if all the conditions are satisfied. Higher deduction of Rs.

1,00,000/- is allowed where such dependent is a person with severe disability having disability over

80%.This deduction will not be admissible in case handicapped dependent has claimed deduction

under 80U. Income Tax Act allows the deduction under this section as a Fixed amount irrespective

of the number of dependant handicapped relatives.

F. Deduction u/s 80DDB:

Section 80DDB provides for a separate deduction to a resident assessee being an individual or a

HUF for expenditure actually incurred for the medical treatment for an individual himself or his

dependent or a member of the HUF in respect of diseases or ailments which may be specified by

the board, the deduction shall be limited to Rs. 40,000/-. The assessee has to submit a certificate in

the prescribed form (Form-10-I from a neurologist, an oncologist, urologist, a hematologist, an

immunologist or such specialist, as may be prescribed, working in a Government hospital. Where

the expenditure is in respect of the assessee or his dependent or any member of HUF of the assessee

and who is senior citizen (i.e. resident in India and at least 60 years of age at any time during the

previous year), then a deduction of Rs. 60,000/- or actual expenditure, whichever is lower will be

available.

If any amount is received from an insurer/employer for the treatment for the person mentioned

above, then the amount so received shall be deducted from the deduction otherwise available.

G. Deduction in respect of repayment of loan taken for higher education (Sec. 80E):

Deduction for any amount paid during the year by way of repayment of interest on Loan taken for

higher education from any financial institution or an approved charitable institution for the

purpose of pursuing higher education or for the purpose of higher education of his spouse or children

or for any student for whom the tax payer is the legal guardian.

The deduction under the section is available in the year in which the assessee starts paying interest

on the loan and is allowed for the any amount of interest paid on the loan availed. The deduction is

available for a maximum period of 8 years or till the interest is paid, whichever is earlier. Higher

education includes all fields of studies including vocational studies, pursued after the completion of

schooling. The amount must be repaid out of the income chargeable to Tax.

Note: Interest on NTPC Education Loan does not qualify for benefit u/s 80E.

H. Deduction in respect of interest on loan taken for residential house property (Section 80EE): Vide Finance Act 2013, an individual is allowed a deduction up to a limit of Rs 1,00,000 being paid

as interest on a loan taken from a Financial Institution, sanctioned during the period 01-04-2013 to

31-03-2014 (loan not to exceed Rs 25 lakhs) for acquisition of a residential house whose value does

not exceed Rs 40 lakhs. However the deduction is available if the assessee does not own any

residential house property on the date of sanction of the loan.

I. Deduction u/s 80G

Deduction u/s 80G is available to any taxpayer for Donation made to any of the institution/fund

recognised by Income Tax authority for this purpose. Donation to PM relief fund is eligible for

deduction @ 100% of net qualifying amount. For calculation of Income Tax on Salary, deduction

shall be allowed for amounts recovered by NTPC only. All other contributions made, if any should

be claimed from the tax authorities at the time of filing of return.

J. Deduction u/s 80U

Section 80U allows a fixed deduction of Rs. 50,000/- to a person suffering from not less than 40% of

any disability given (blindness, low vision, leprosy cured, hearing impairment, locomotor disability,

mental retardation, mental illness) on submission of a certificate issued by a hospital or institution

specified by the appropriate Government for the purpose of the Person with Disabilities (Equal

Opportunities, Protections of Rights and Full participation) Act 1995. A higher deduction of

Rs.1,00,000/- is allowed in respect of a person with severe disability (i.e. having any disability of

more than 80%).

K. Deduction U/s 80TTA:

Interest earned on Savings Bank Account from a Bank/ Post office, Co-operative society engaged

in carrying on the business of banking is not chargeable to tax subject to a maximum of Rs.10,000/-.

Interest earned on FDs / TDs is not eligible for this deduction.