Tax3 Complete 3

7/24/2019 Tax3 Complete 3

1/43

1

UNIVERSITY OF MUMBAI

A

PROJECT ON

DIRECT TAX

MASTER OF COMMERCE PART II

SEMESTER-III

2015 - 2016

SUBMITTED

BY

SATISH SINGH RAOROLLNO.28

PROJECT GUIDE

PROF. KIRAN S.TEMKAR

SHANKAR NARAYAN COLLEGE OF

ART&COMMERCE

BHAYANDAR (EAST), THANE 401105

DECLARATION DECLARATION


2/43

2

SATISH SINGH RAO student of M!COM-II "S#$#%#'-

III(!SHANKAR NARAYAN COLLEGE OF ART& COMMERCE hereby declare

that we have completed this project on DIRECT TA) in the academic year

2015-2016!

I declared that the project report is my original work and it has not been submitted by me

in part or full to any other university/institution/statutory body for the award of any

degree/diploma/certificate.

Name of Can!a"e# SATISH SIN$H RAO S!n%&

P'ae# BHAYANDAR& Da"e#

CERTIICATE CERTIICATE

We certify that the above declaration is true to the best of our knowledge and belief.

P*o+e" $!e Coo*!na"o*

P*of& A+!" Ja-a.

Da"e# Da"e#

SHAN/AR NARAYAN COLLE$EO ART COERCESHAN/AR NARAYAN COLLE$EO ART COERCE

B!"!#$!% &'!()* #!+,!% %-!$ )!#'0110B!"!#$!% &'!()* #!+,!% %-!$ )!#'0110

CERTIICATE CERTIICATE

)his is certifying that SATISH SIN$H RAO has completed the project titled

DIRECT2 TA3 under the guidance of 3PRO& /IRAN S& TE/ER4 in practical fulfillment

of the re5uirement for the award of 3a"e* of Comme*e 6a*"2II7studies degree for academic

period 3801528019&

PROJECT$:IDE PRINCIPAL


3/43

6

D*& ;&N& Yaa.

E3TERNAL $:IDE CO2

ORDINATOR

P*of& A+!" Ja-a.

Da"e#

PLACE# BHAYANDAR&

AC/NO


4/43

S&No& TOPICS PA$E No&

1 INTRODUCTION 6-10

2 BASIS OF CHARGES 10-11

3 RESIDENTIAL STATUS 11-12

4 COMPUTATION OF TOTAL INCOME 13-15

5 INCOME FROM HOUSE PROPERTY 16-19

6 INCOME FROM OTHER SOURCE 20-22

7 GROSS TOTAL INCOME 23-24

8 DEDUCTION UNDER SECTION 80 25-2!

9 COMPUTATION OF AD"ANCE TAX 28-36

10. INCOME TAX SLAB # DEDUCTION $FY 201%-15& 3!

11. COMPUTATION OF TOTAL ONCOME # THEIR FORMAT

38

12. REFERENCES 39

1 . INTRODUCTION

Basis of Charge-Income


5/43

)he 8ifth and residuary head of income is Income from -ther (ources;. 'very incomewhich does not specifically fall under any of the preceding 8our heads of income &vi covers anyincome which does not fall under any other head of income. owever9 (ubsection &2* ofsection > specifies ? Incomes which are always ta@able under the head Income from other(ources;.

$ene*a' P*o.!!on = Se& 59(1) #

)he following incomes are generally chargeable under the head Income from -ther(ources;A

a. income from subletting

b. interest on bank deposits and loans

c. income from royalty

d. director4s fee

e. ground rent

f. agricultural income from a place outside India

g. director4s commission for standing as a guarantor to bankers

h. director4s commission for underwriting shares of new company

i. e@amination fees received by a teacher from a person other than his employer

j. rent of plot of land

k. insurance commission

l. mining rent and royalty

m. casual income

n. annuity payable under a will9 contract9 trust deed

o. salaries payable to a Cember of :arliament


6/43

>

p. interest on securities issued by a foreign ,overnment

5. family pension received by family members of a deceased employee

r. in case of retirement 9 interest on employee4s contribution if provident fund isunrecogni


7/43

G

2. C4+'# /*$#- +7

(ection in the Income )a@ !ct9 1JJ

(1) Where any =entral !ct enacts that income ta@ shall be charged for any assessment year atany rate or rates9 income ta@ at that rate or those rates shall be charged for that year inaccordance with9 and2subject to the provisions &including provisions for the levy of additionalincome ta@* of9 this !ctK in respect of the total income of the previous yearK of every personA:rovided that where by virtue of any provision of this !ct income ta@ is to be charged in respectof the income of a period other than the previous year9 income ta@ shall be charged accordingly.

&2* In respect of income chargeable under sub section &1*9 income ta@ shall be deducted at thesource or paid in advance9 where it is so deductible or payable under any provision of this !ct.1. (ubstituted forL subject to the provisions of9 this !ctE by the $irect )a@ Faws &!mendment*L!ct9 1J?G9 w. e. f. 1 1J?J. )his amendment was conse5uent to the insertion of =hapter MI+B &comprising of section 1?B*9 but after the withdrawal of the chapter9 without even cominginto effect9 this amendment too needs to be undone.6. the wordsE or previous years9 as the case may be9E omitted by the $irect )a@ Faws&!mendment* !ct9 1J?G9 w. e. f. 1 1J?J.&6*Fiability arising from contracts as well as torts. it would be incorrect to assume that theshareof an assesses in a form consists only of income yielding assets. It e5ually comprises of riskand liability of paying debts on behalf of the firm. !n assesses cannot9 under the indu law makea declaration whereby the joint family would have to bear the risk and liability of the businessand such a declaration should be ignored altogether.

> Where payment is made to compensate for the loss of the use of any goods in which theassesses does not carry on any business or the payment is a just e5uivalent of the cost incurred bythe assesses9 but e@cess accrues due to fortuitous circumstances or is a windfall9 then accrualmay be a receipt9 but it would not be income arising from business9 and9 therefore9 not ta@ableunder the !ct.

G In the hands of an assesses9 who maintains his accounts on the mercantile system9 sales ta@collected but not paid to the (ales )a@ $epartment pending adjudication of dispute over hisliability to pay sales ta@9 is a revenue receipt of the year in which it is collected.

? Where a company goes into li5uidation and the li5uidator distributes the assets of thecompany among the shareholders9 what each shareholder gets is in lieu of his shareholding. )hat

is the worth9 the value and the price of his shareholding. ! shareholder participates in thedistribution of the assets of a company on its li5uidation by virtue of and because of hisshareholding. It is true that a li5uidator does not sell the shares. It is e5ually true that there is notransfer of shares by the shareholder to the li5uidator or to any other person. )hat is not reallynecessary. (o long as money is received in lieu of shares9 there is a receipt and where an assessesis a dealer in shares9 any surplus amount received by him constitutes his income. )he moneyreceived by the assesses in lieu of its shareholding partakes of the same character in which heheld the shares. If he held the shares as stock in trade9 the money received by it represents his
http://indiankanoon.org/doc/768381/http://indiankanoon.org/doc/716328/http://indiankanoon.org/doc/716328/http://indiankanoon.org/doc/768381/


8/43

?

income i. e. a revenue receipt in its hands. If it held them by way of investment9 the money itreceives represents a capital receipt by it.

3.C$$8+/* /*$#

Circumstances can arise to consider transferring existing income stream/s toanother income stream provider. Alternatively a person may wish to combineaccumulated superannuation with an existing income stream. n both cases!it is necessary to commute an income stream.

"he tax and social security conse#uences must be evaluated beforecommuting an income stream. $articular care should be ta%en whencommuting a death bene&t income stream because the tax e'ciency of thebene&t may be lost.

(enerally! provided the original income stream allows for commutation! a

person will be able to change income stream providers )either transferringfrom one income stream to another or to another income stream with thesame provider* irrespective of their age or employment status.

A commutation refers to the conversion of an income stream to a lump sum.A commutation occurs where+

, a partial or full lump sum is withdrawn from an income stream

, a partial or full lump sum is rolled over from an existing income stream to anew income stream

, a partial or full lump sum is rolled over from an existing income stream toaccumulation phase.A commuted lump sum will consist of tax componentsthat are calculated using the proportioning rule. -or income streams! theproportioning rule means the proportions of tax free and taxable componentsat the commencement of the income stream apply to any commuted lumpsum )or income stream payments*."herefore a full or partial commutationwill consist of taxfree and/or taxable components in the same proportion asthese components ma%e up the purchase price at commencement.eforeconsidering a commutation it is wise to see% professional &nancial advice toensure that all considerations are ta%ing into account. 0e can help you with

all &nancial advice.At 1oney 0or%s -inancial $lanning 0e 1a%e 2our 1oney0or% -or 2ou. f you would li%e any more information on the blog aboveplease email us at assist3moneywor%spl.com.au.

4.R#%/9#*/+, %+8% %# 6 "1(

!nan!a' Yea* 1?214 (Aemen" Yea* 14215)


9/43

J

=ompiled by :rof. C.B. )hakoor %'(I$'#)I!F ()!)( :'%(-# Fegal (tatus%esidential (tatus %esident #on %esident Fegal (tatus1. Individual %esident 7 %esidentbut2. 8irm -rdinarily %esident not -rdinarily6. =ompanies %esident. Institution. Focal!uthorities>. ..8.G. !.-.:.?. B.-.I. :age #o. 1

=ompiled by :rof. C.B. )hakoor %'(I$'#)I!F ()!)(A ('=. > &1*!fter determiningthe legal status of an !ssesses u/s. 2 &61*the %esidential (tatus of an !ssesses is to bedetermined.1. $etermined of every :%'+I-( "'!%A %esidential (tatus is determinedfor every previous year. It depends on the number of days a person is in India during theconcerned previous year.2. $ifferent terms of =iti0 $!"( I#)' ('=-#$=-#$I)I-# !B-+'.1. If a citi0 days are replaced by 1?2 days.

'mployment A (elf 'mployment (alaried 'mployed :rofessional #onprofessional i.e.he becomes resident only if he stays in India for 1?2 days or more and not >0 days ormore.

2. ! citi0 days must be replaced by 1?2 days. i.e. he becomeresident only if he stays in India for 1?2 days and not >0 days.

#oteA ! person is deemed to be of an Indian origin9 if he or his parents or any of hisgrandparents were born in ndivided India. &i.e. India9 :akistan9 Bangladesh*8or =urrent!(('((C'#) year!n Individual will become a resident in India in the :.".200>200Gi.e. for current assessment year 200G200? if he satisfies any one of the following 2 basicconditions.1. e is in India for 1?2 days or more in the previous year 200>200G. -%


10/43

10

:age #o. 6

=ompiled by :rof. C.B. )hakoor2. e is in India for 6> days or more during the period1.0.2002 to 61.06.200> !#$ e is in India for >0 days or more in the previous year200>200G.'M=':)I-#(1. If a citi200G for the purpose of employment will became a resident only ifhe stays in India for 1?2 days or more 7 not >0 days during 200>200G and he must be inIndia for 6> days or more during previous years preceding the :.". 200>200G i.e. emust be in India for 6> days or more from 01/0/2002 to 61/06/200>.2. ! citi200G becomes a resident only if he stays in India for 1?2 days or more &and not>0 days* during 200>200G and he must be in India for 6> days or more during previous year preceding the previous year 200>200G i.e. e must be in India for 6>days or more from 1.0.2002D 61.06.200>.#-#%'(I$'#) 8-% !# I#$I+I$!F#onresident is a person who is not a resident. !n Individual who does not satisfy the testlaid down in (ec &1* above is called a nonresident i.e. !n individual who do not satisfy

any of the basic conditions above is called a nonresident. :age #o.

=ompiled by :rof. C.B. )hakoor %'(I$'#) 7 -%$I#!%IF" %'(I$'#) (ec > &>*Ifan Individual satisfies the test of %esident then further 2tests are to be made i.e. If anIndividual is a %esident in India9 he may be either %esident and -rdinarily %esident or%esident but not ordinarily resident. !n Individual may be %esident and -rdinarily%esident if he satisfies following 2 conditions 1. e has been resident in India for at least2 out of 10 years immediately proceeding the previous year. !#$2. e has been presentin India for a period of G60 days or more during G years immediately proceeding theprevious year. =urrent !.". 200G200?)hus during the current !ssessment "ear 200G200? a %esident Individual is tested as an -rdinary resident. If1. e has been a resident

in India for at least 2 out of 10 years immediately preceding the :.". 200>200G. 1. 1JJ>1JJG 2. 1JJG1JJ? 6. 1JJ?1JJJ . 1JJJ2000 . 20002001 >. 20012002 G. 20022006?. 2006200 J. 200200 10. 200200>i.e. from 1st !pril 1JJ> to 61st Carch 200> forthese 10 year she must have been a resident for 2 years i.e. from1.0.1JJ>61.06.200>.:age #o.

=ompiled by :rof. C.B. )hakoor2. e has been physically present in India for a periodof G60 days or more during G years immediately proceeding the previous year 200>200G.1. 1JJJ2000 2. 20002001 6. 20012002 . 20022006 . 2006200 >. 200200 G.200200>i.e. e must have stayed in India physically for G60 days from1.0.1JJJ D61.06.200>.If both the above conditions are satisfied then the Individual is %esident and

-rdinarily %esident. But if the additional 2tests are not satisfied by an Individual then heis said to be %esident but not -rdinarily %esident. =ounting of $ays While counting ofnumber of days in all the above cases the following points are to be noted.1. )he stayneed not be at the same place.2. )he stay need not be continuous.6. Where the stay is forpart of the day9 physical presence should be calculated on timely basis. (tay of 2 rs.will be counted as stay for 1 day. Where such information is not available9 both the daysof entry and e@it will be counted as full days.. ! stay in a boat anchored in territorialarea of India9 is treated as stay in India. :age #o. >


11/43

11

=ompiled by :rof. C.B. )hakoor %'(I$'#)I!F ()!)( 8-% 8 ('= > &2*!indu ndivided 8amily &8*9 is said to be resident in India I8 I)( =-#)%-F !#$C!#!,'C'#) I((I)!)'$ I# I#$I! either W-FF" -% :!%)F" during that:%'+I-( "'!%.! %esident 8 is an -%$I#!%IF" %'(I$'#) if the H!%)! orC!#!,'% of the 8amily is a %esident and -rdinarily %esident. ! indu ndivided

8amily &8*9 is said to be 3#-#%'(I$'#)4 in India. I8 I)( =-#)%-F!#$C!#!,'C'#) I( (I)!)'$ W-FF" -)(I$'I#$I! during that:%'+I-( "'!%.=-#)%-F !#$ C!#!,'C'#) I( (I)!)'$ !) !:F!='W'%' )' '!$/B%!I#9 )' ('!) -8 )'$I%'=)I#, :-W'% I((I)!)'$.%'(I$'#) B) #-) -%$I#!%" %'(I$'#) (ec.&>* &g*! I#$#$I+I$'$ 8!CIF" I( (!I$ )- B' 3#-#-%$I#!%IF" %'(I$'#) I# I#$I! inany previous year if its Canager is treated as an 3#-) -%$I#!%IF"%'(I$'#)4 inIndia during that previous year. :age #o. G

=ompiled by :rof. C.B. )hakoor %'(I$'#)I!F ()!)( 8-% ! =-C:!#" (ec. >&6*! =-C:!#" (!I$ to be 3%esident in India4 in any previous year if D1* It is an

I#$I!# =-C:!#" -%2* $%I#, )!) "'!% )' =-#)%-F !#$C!#!,'C'#) -8 I)( !88!I%( I( (I)!)'$ W-FF" I# I#$I!.)( !#I#$I! =-C:!#" I( !FW!"( %'(I$'#) I8=-#)%-F 7 C!#!,'C'#) I( I#I#$I! -% -)(I$'I#$I!.8-%'I,# =-C:!#" I( !FW!"( %'(I$'#)I8=-#)%-F 7 C!#!,'C'#) -8 I)( !88!I%( I((I)!)'$ W-FF" I#I#$I!9 $%I#, )!) "'!%.=-#)%-F 7 C!#!,'C'#) indicates )' '!$!#$B%!I# WI= $I%'=) )' !88!I% -8 )'=-C:!#" I# %'(:'=) -8I)( :-FI="9 8I#!#='9$I(:-(!F -8 :%-8I)9 C!#!,'C'#) ')=. i.e.:F!='W'%' )' C'')I#, -8 I)( B-!%$ -8 $I%'=)-%!%' 'F$. :age#o. ?

=ompiled by :rof. C.B. )hakoor %'(I$'#)I!F ()!)( -8 ! 8I%C -% !#!((-=I!)I-#-8 :'%(-# '+'%" -)'% :'%(-# ( >&* ! :!%)#'%(I:8I%C -% !# !((-=I!)I-# -8:'%(-#( &!-:* -% '+'%" -)'% :'%(-# I((!I$)- B' ! %'(I$'#) I# I#$I! I8 )' =-#)%-F !#$C!#!,'C'#) -8I)( !88!I%( !%' (I)!)'$ I#I#$I! 'I)'% W-FF" -% :!%)F" during thatprevious year. ! :!%)#'%(I: 8I%C -% !# !((-=I!)I-# -8:'%(-#( &!-:* orevery other person is (!I$ )- B'#-# %'(I$'#) I# I#$I! I8 I)( =-#)%-F!#$C!#!,'C'#) I( (I)!)'$ W-FF" -)(I$'I#$I! during )!):%'+I-( "'!%.=-#)%-F !#$ C!#!,'C'#) I( (I)!)'$ !) !:F!='W'%' )' '!$/B%!I# )' ('!) -8 )'$I%'=)I#, :-W'% I((I)!)'$;. :age #o. J

5!S# 5 S:# T+, I*$#!nan!a' Yea* 1?214 (Aemen" Yea* 14215)

S:# +, /*$#

5.(4* 5ubject to the provisions of this Act! the total income of any previousyear of a person who is a resident includes all income from whatever source


12/43

12

derived which6

)a* is received or is deemed to be received in ndia in such year by or onbehalf of such person 7 or

)b* Accrues or arises or is deemed to accrue or arise to him in ndia duringsuch year7 or

)c* Accrues or arises to him outside ndia during such year+

P'./9#9 that! in the case of a person not ordinarily resident in ndia withinthe meaning of subsection )8* of section 8! the income which accrues orarises to him outside ndia shall not be so included unless it is derived from abusiness controlled in or a profession set up in ndia.

)9* 5ubject to the provisions of this Act! the total income of any previous year

of a person who is a nonresident includes all income from whatever sourcederived which6

)a* s received or is deemed to be received in ndia in such year by or onbehalf of such person7 or

)b* Accrues or arises or is deemed to accrue or arise to him in ndia duringsuch year.

Explanation 1.6ncome accruing or arising outside ndia shall not be deemedto be received in ndia within the meaning of this section by reason only of

the fact that it is ta%en into account in a balance sheet prepared in ndia.

Explanation 2.6-or the removal of doubts! it is hereby declared that incomewhich has been included in the total income of a person on the basis that ithas accrued or arisen or is deemed to have accrued or arisen to him shall notagain be so included on the basis that it is received or deemed to bereceived by him in ndia.

6. B+%/% C4+'# ' S+,+'; I*$#

F/*+*/+, Y#+' 1


13/43

16

@)


14/43

1

=! I*$# 8*9#' 4# H#+9 S+,+'/#%

F/*+*/+, Y#+' 1>-1< "A%%#%%$#* Y#+' 1


15/43

1

2 E7#:/*% %+,+'; /*$#:

)he e@istence of an LemployeremployeeL relationship is a must for a payment to be

ta@ed under the head salaries. !ccordingly9 the following class of payments do not fall under thepurview of the head LsalariesL.

(!) Sa'a* *ee!.e F a 6a*"ne* f*om -! 6a*"ne*-!6 f!*m a**!n% onF!ne# )his income is ta@able under the head profits and gains ofbusiness and professions.

(!!) Sa'a* *ee!.e F a 6e*on a P o* LA# )his income is ta@ableunder the head Eincome from other sources.E owever9 the salaryreceived by a person as a Cinister of =entral government/(tate,overnment is chargeable under the head salaries.

(!!!)

am!' 6en!on "-a" ! 6en!on *ee!.e F "-e memFe* of "-efam!' of an em6'oee FeGen" "o -! ea"-# )his is a ta@ableunder the head Eincome from other sources.E owever9 the pensionreceived by an employee from his former employer is ta@able under thehead salaries.

3 VALUATION OF PERUISITES3

)he ta@able value of per5uisites in the hands of the employee is normally taken to be its cost tothe employer. owever9 there are specific rules for valuation of certain per5uisites laid down in%ule 6 of the I.). %ules9 which have been revised by =B$) notification dated 2.J.2001. )heseare briefly given below. It may be noted that while the revised rule 6 relating to valuation ofper5uisites shall be deemed to have come into force on 1..2001. )he employer may at theoption of employee compute the value of all per5uisites made available to him for the periodfrom 1..2001 to 60.J.20019 in accordance with the rule 6 as it stood before this amendment.owever this option of the ta@ payer of using old or new rules for the period specified aboveshall be applied uniformly in respect of all per5uisites in case of a particular ta@ payer.

>!1 V+,8+/* '#%/9#*/+, +$$9+/* :'./9#9 ;4# #$:,;#'3

(a) :n!on o* S"a"e $o.e*nmen" Em6'oee# )he value of per5uisite is the license fee as


16/43

1>

determined by the ,ovt. as reduced by the rent actually paid by the employee.

(F) Non $o."& Em6'oee# )he value of per5uisite is an amount e5ual to 10N of the salary&G.N of salary in cities where population as per 1JJ1 census9 is below lacs*. In case the

accommodation provided is not owned by the employer9 but is taken on lease or rent9 then thevalue of the per5uisite would be the actual amount of lease rented paid/payable by the employeror 10N of the salary9 whichever is lower. In both of above cases9 the value of the per5uisitewould be reduced by the rent9 if any9 actually paid by the employee.

>!2 V+,8# F8'*/%4#9 A$$9+/* 3

The value would be the value of unfurnished accommodation as computed aboveincreased by 10% per annum of the cost of furniture (including

T.V./radio/refrigerator/A../other gadgets!. "n case such furniture is hired from a thirdparty# the value of unfurnished accommodation would be increased by the hire charges

paid/payable by the employer. $owever# any payment recovered from the employee towards

the above would be reduced from this amount.

>!> V+,8# 4#, +$$9+/* :'./9#9 ; 4##$:,;#'+

The value of peruisite arising out of the above would be &'% of salary or the actualcharges paid or payable to the hotel# whichever is lower. The above would be reduced by

any rent actually paid by the employee. "tmay be noted that no peruisite would arise if the employee is provided such

accommodation on transfer from one place to another for a period of 1 days or less.

>!< P#'8/%/# $' +' :'./9#9 ; 4# #$:,;#'3

a. If it is used wholly and e@clusively for the official purpose9 the value of theper5uisite would be nil. %ule 6&2 *&B* provides that the value would be taken asnil provided the following documents are maintained by the employer A

&i* =omplete details of journey undertaken &including date of journey9destination9 mileage etc.*

&ii* =ertificate by the employee that the e@penses were wholly ande@clusively for official purposes.

&iii*

=ertificate by the supervising authority that the e@penses were whollyand e@clusively for official purposes.

b. If it is used e@clusively for private purposes of the employee or any member ofhis household9 the value of the per5uisite would be the actual e@pensesincurred by the employer on the running/maintenance of the car9 remunerationpaid to the chauffeur and normal wear and tear of the car. 8or the purpose of thissubrule9 the normal wear 7 tear of a car shall be taken as 10N per annum of the


17/43

1G

actual cost.

c. If it is used for both personal and official purposes9 the value of the per5uisitewould %s. 1200 &%s. 1>00 if the car has .:. greater than 1>* plus %s. >00 for

chauffeur9 if any. In case9 the e@penses on running/ maintenance relating topersonal use are met by the employee9 the value of the per5uisite would be%s. 00 &%s. >00 if car has .:. greater than 1>* plus %s. >00 for chauffeur.

d. In case the motor car is owned by the employee but the running/maintenancecharges and chauffeurLs salary9 if any9 are met by the employer9 then the valueof the per5uisite would be A

&i* #il if the vehicle is used only for official purposes and the documentslisted at &a* above are maintained.

&ii* If used for both personal and official purposes9 the value would be the

actual e@penses incurred by the employer as reduced by an amount of%s. 1200 &%s. 1>00 if car has .:. greater than

e. :lus %s. >00 in case any driver has been engaged.

>!5 P#'8/%/# +'/%/* 8 %8::,; +% #,#'/#*#'; ' +#'3

This shall be determined as the amount paid by the employer to the agency

supplying the same. "f the supply is from the employer)s own resources# the value of theperuisite would be the manufacturing cost per unit incurred by the employer.

>!6 F'##C*#%%/*+, E98+/* F+/,/;3

+alue of the per5uisite would be e@penditure incurred by the employer. If theeducational institution is maintained 7 owned by the employer9 the value would be nil if thevalue of the benefit per child is below %s. 1000/ p.m. or else the reasonable cost of sucheducation in a similar institution in or near the locality.

>!= F'##C*#%%/*+, 8'*#;% :'./9#9 ; +* 8*9#'+/* #*+#9/* +''/+# ' :+%%#*#'% ' 9%3

Value of per5uisite would be the value at which such amenity is offered to general public asreduced by any amount9 if recovered from the employee.

>! V+,8# #'+/* 4#' #*#%3


18/43

1?

&a* Interest free/concessional loansO)he value of the per5uisite shall be the sum e5ual tothe simple interest computed P 10N per annum in respect of house or conveyance loans and P16N per annum for other loans as reduced by any interest actually paid by the employee.

&b* +alue of free mealsO(hall be the e@penditure incurred by the employer. owever9 free mealsprovided during office hours or through nontransferable paid vouchers usable only at eatingjoints shall be e@empt upto %s. 0/ per meal.

&c* +alue of gift or voucher or tokenOreceived by the employee from the employer would be thesum e5ual to the amount of such gift. owever9 if the aggregate value of such gifts during theyear is below %s. 000/ the per5uisite shall be taken as nil.

&d* =redit card provided by employerO)he value of the per5uisite shall be the amount ofe@penses including membership fees and annual fees incurred by the employee. owever9 if thesame is used e@clusively for official purposes9 the value of the perk shall be nil.

&e* =lub Cembership provided by employerO)he value of the per5uisite shall be the amount ofall e@penses incurred by the employer or reimbursed to the employee including theannual fees. owever9 if the same is incurred e@clusively for official purposes9 the value of theper5uisite shall be nil.

&f* :rovision of sweeper9 gardener9 watchman or attendantO)he value of per5uisiteresulting from provision of a sweeper9 a gardener9 a watchman pr a personal attendant shall bethe actual cost to the employer as reduced by the amount paid by the employee in respect ofsuch services. &=ost to the employer in respect of the above will be the salary paid/payable*.

The value of any other benefit or amenity provided by the employer shall be determined onthe basis of cost to the employer under an arms) length transaction as reduced by the

employee)s contribution.

>!< E)EMPTIONS FROM SALARY INCOME3

(ection 10 of the I.). !ct provides for certain categories of payments to be e@empt fromta@ation9 either wholly or partly. (uch payment is not to be included under the head LsalaryL forcomputing the ta@ deductible. (ome of these are listed below and are discussed in detail in=hapter of this booklet.

ii* D#+4-8$-'#/'#$#* '+8/; ' +*; 4#''+8/;# '@empt to the e@tent specified u/s 10&10*.

iii* C$$8+/* :#*%/*A '@empt to the e@tent as provided insec 10&10!*.

iv* L#+.# #*+%4$#*A '@empt to the e@tent provided in sec10&10!*.


19/43

1J

v* R#/'#$#* C$:#*%+/*#'@empt to the e@tent provided bysection 10&10B*.

vi* C$:#*%+/* * .,8*+'; '#/'#$#*+'@empt to thee@tent provided by sec l0&10=*.

vii* P+;$#* '$ :'./9#* 8*9# '@empt to the e@tentprovided in sec. 10&11* 7 sec 10&12*.

viii*

P+;$#* '$ +::'.#9 %8:#'+**8+/* 8*9#'@empt under section 10&16*.

iM* In"e*e" !nome !n.e"men"# !s provided u/s 10&1*.

M* Eem6"!on of 6en!onfam!' 6en!on "o aa*ee of P;C, ;Can ;C# =lause &1?* of section 10 provides for e@emption of anyincome by way of pension received by an individual or family pensionreceived by any member of the family of an individual who has been inthe service of the =entral ,overnment or (tate ,overnment and hasbeen awarded E:aram +ir =hakraE or ECaha +ir =hakraE or E+ir=hakraE or such other gallantry award as may be specifically notified bythe =entral ,overnment.

E7#$:/* A,,+*#%3

)here are various other receipts besides the above given regularly in addition to salary formeeting specific re5uirements of the employee. )hese are referred to as allowances9 in commonparlance and ta@ability of some of these are discussed here.

"/( L#+.# T'+.#, C*#%%/* +

)he value of any travel concession or assistance accrued by or due to an employeefrom his employer or former employer in connection of his proceeding on leave &a* toany place in India &b* to any place in India or retirement or after termination ofservice. )he amount e@empt as prescribed in %ule 2B is the amount actually incurredon performance of travel on leave in India by the shortest route to that place9 subjectto economy air fare of !.=. 1st class fare. )his e@emption is available only in respect

of two journeys in a block of calender years.

"//( H8%# R#* A,,+*#3

ouse rent allowance granted to the employee is e@empt u/s 10&16!* to thefollowing e@tent.

:rovided e@penditure on rent is actually incurred9 the amount of e@emption granted is the least


20/43

20

ofA

&1* %! received

&2* %ent paid Fess 10N of salary

&6*0N of salary &0N in case of Cumbai9 =hennai9 Holkata 7$elhi* salary means bonus Q $earness allowance9 where providedby terms of employment.

It has to be noted that only the e@penditure actually incurred on payment of rent in respect ofresidential accommodation occupied by the assesses subject to the limits laid down in rule 2!95ualifies for e@emption from incometa@. )hus9 house rent allowance granted to an employeewho is residing in a house/flat owned by him is not e@empt from incometa@. )he disbursingauthorities should satisfy themselves in this regard by insisting on production of evidence ofactual payment of rent before e@cluding the house rent allowance or any portion thereof from the

total income of the employee. )hough incurring actual e@penditure on payment of rent is aprere5uisite for claiming deduction under section 10&16!*9 it has been decided as anadministrative measure that salaried employees drawing house rent allowance up to %s 6000 permonth will be e@empted from production of rent receipt9 it may9 however9 be noted that thisconcession is only for the purpose of ta@ deduction at source9 and9 in the regular assessment ofthe employee9 the assessing officer will be free to make such en5uiry as he deems fit for thepurpose of satisfying himself that the employee has incurred actual e@penditure on payment ofrent.

"///( A,,+*#% #7#$: 8% 10"1


21/43

21

* (ection 10&1*&ii*.

P#'8/%/#% #7#$: '$ I*$# T+7:

(ome instances of per5uisites e@empt from ta@ are given below A

&i* :rovision of medical facilities &proviso to (ec. 1G&2**A +alue of medicaltreatment in any hospital maintained by the ,overnment or any localauthority or by the employer or approved by the employer or approvedby the =hief =ommissioner of. Income )a@. Besides9 any sum paid bythe employer towards medical reimbursement other than as discussedabove is e@empt upto %s. 19000/.

&ii* :er5uisites allowed outside India by the ,overnment to a citi of the I) !ct and arebeing given below A

1 S+*9+'9 D#98/**

8or assessment year 2002069 the standard deduction is to be allowed at the following rates A

a. where the gross income under the headsalaries is less than %s 1. Fakes %s. 609000/ or l/6rd of

salary whichever is less.

b. where gross income under the head salaries ismore than %s. 1. lakhs but less than %s. 6 %s. 29000/


22/43

22

lakhs

c.where gross income under the head salaries ismore than %s. 6 lakhs but less than %s. lakhs

%s. 209000/

d.

where gross income under the head salaries ismore than %s. lakhs.

#il

2 P'#%%/*+,#$:,;$#* +7: !s Fevied by the (tate ,overnment.

> E*#'+/*$#* +,,+*#: With effect from !" 2002069 this deduction is admiscible only to government employees to the e@tent of %s. 9000 or 20N of salary whicheverless is.

8!P#'8/%/# N T+7+,#

F/*+*/+, Y#+' 1


23/43

26

)he receipt for the amount paid to the hospital.

* :remium paid by an employer to keep in effect an insurance on the health of a employeeunder a scheme approved by the =entral !uthority for the purpose of section 6>&1* &ib*

* Cedical insurance premium paid by an employer for the health of an employee or his familymember under a scheme approved by the =entral !uthority u/s ?0$ &i.e. C'$I=F!IC*

>* %eimbursement of e@penditure incurred on medical treatment of an employee or his familymember Sother than referred to in clause &i*9 &ii* and &iii* aboveK9 not e@ceeding %s. 19 000 in aprevious year

G* '@penditure incurred by the employer or reimbursement of e@penditure incurred9 on medicaltreatment of an employee or his family member outside India9 including e@penditure on traveland stay aboard of the employee or family member9 as the case may be9 and one attended subjectto the conditions and limits prescribed by the Board.

J* )he e@penditure on medical treatment and stay abroad shall be e@cluded from per5uisites onlyto the e@tent permitted by the %eserve Bank of India.

10* )he e@penditure on foreign travel shall not constitute per5uisite in case the gross totalincome not including the said e@penditure9 of the employee does not e@ceed %s. 29 009 000.S(ection 1G&2* :rovisoK

#oteA 38amily4 for his purpose means D )he spouse and children of the individual &employee*9and )he parents brothers and sisters of the individual or any of them9 wholly or mainlydependent on the individual.

:er5uisites9 however9 are e@empted for the employees whose salary does not e@ceed one lakh andfor all others9 paying Income ta@ is mandatory. )he government employees can enjoy travelconcession even outside the country.

(ee more atA httpA//[email protected]/per5uisitesta@ableta@able/Tsthash.U-Fk"2


24/43

2

8! A*; F'#/* A,,+*# ' :#'% If given by ,ovt. to its employees postedabroad are fully e@empted.

3. G'+8/;# ! ,ovt. 'mployee or semi,ovt. employee where ,ovt. rules are applicable 8ully '@empted.

A&For employees covered under Payment of Gratuity Act.--

'@empt up to least of followingA

&a* #otified limit V %s. 109 009000

&b* 1 days !verage (alary for every one completed year ofservice &period e@ceeding > months V1 year*

1/2 month4s salary V &!verage monthly salary or wages @ 1/2>

&c* !ctual amount received.

B. Other Employees --'@empted up to least of following provided service is more than years or employee has not left service of his ownA

&a* #otified limit V %s. 109 009000

&b* 1/2 month4s average salary for every one year of completed service &months to beignored.*

&c* !ctual amount received

Average Salary = Salary for 1 months preceding the month of retirement divided !y 1.

,ratuity!nan!a' Yea* 14215 (Aemen" Yea* 15219)

G'+8/; /% + :+' %+,+'; 4+ /% '##/.#9 ; +* #$:,;## '$4/%4#' #$:,;#' /* '+/89# ' 4# %#'./#% #'#9 ; 4##$:,;## /* 4# $:+*;

Ads by Google

Ads by Google

(ratuity is one of the least understood components of salary. nvestment 2ogi
https://www.google.com/url?ct=abg&q=https://www.google.com/adsense/support/bin/request.py%3Fcontact%3Dabg_afc%26url%3Dhttp://www.business-standard.com/article/pf/what-is-gratuity-113050900105_1.html%26gl%3DIN%26hl%3Den%26client%3Dca-pub-1723933259695999%26ai0%3DChloBi2ERVOeOEMmruASHn4GoB7m9x7sE4d6Zk58BwI23ARABIKm8zBFQxqWQvwdg5YKAgLwOoAGv1PPlA8gBAakCoTY5VzmhUT6oAwGqBLQBT9A2sIWE06LnMpt7ZIWkgViZ-9FAYqvEm9PyfMjWwNhxZ45hvJ0WQki_m6J6DsNkAVwYyB0t6_EVzrYRNcteYMhUGKj3RSqQWx8KewnWLITiR6t8nQRTUGCcI8g_NhPH-iU76agSPO5S0odKURzrPLKPJEZwj7GRW5flmSmrhb2-tjPnGCHFIhp8uUvURnEkKIi6_JAI95su7ldSOYZQ-weXjIcNcjNJo7JtWiMb_HvhMb8yiAYBgAe5q4wa&usg=AFQjCNHwYZTTknoRlhunBnz0C8NFyY8nDAhttps://www.google.com/url?ct=abg&q=https://www.google.com/adsense/support/bin/request.py%3Fcontact%3Dabg_afc%26url%3Dhttp://www.business-standard.com/article/pf/what-is-gratuity-113050900105_1.html%26gl%3DIN%26hl%3Den%26client%3Dca-pub-1723933259695999%26ai0%3DCpVtci2ERVMD6LdSpuASsqoGoC4mWpowGuavJmZUBw6Gj9QUQASCpvMwRKAJQy7OcxgVg5YKAgLwOoAH_7KTkA8gBAakCsP9C2xygUT6oAwGqBLgBT9AwGeD3imzGDGZzEfDeKCG66dIJ0_iJVjn6pNBMyEqB0wN4-8Ro9FbEbYpsZ7t6UINe2-Sp1ZK30DEkH-U6SBCeUpZI_mjq4GekSHO0DCDeXKMPSDWO4230DxGT7IH_Ic-vzZZ9Xlri5Av3SRBO1WxroN4dDWWF-_gLFvhj08v4e2TP_XzeIJkugmlz6hoJwbhQM7rzhZpkU3Xuy1BYKcluUPdyyCAinfizuq7_cVL1Rbi3L5QiE4gGAYAH6ZLbGw%26ai1%3DCjsSRi2ERVMD6LdSpuASsqoGoC522jNEHvea0uV7AjbcBEAIgqbzMESgCUOGAvv_______wFg5YKAgLwOoAGb-cPEA8gBAakCsP9C2xygUT6oAwGqBLsBT9BwGtjzim_GDGZzEfDeKCG66dIJ0_iJVjn6pNBMyEqB0wN4-8Ro9FbEbYpsZ7t6UINe2-Sp1ZK30DEkH-U6SBCeUpZI_mjq4GekSHO0DCDeXKMPSDWO4230DxGT7IH_Ic-vzZZ9Xlri5Av3SRBO1WxroN4dDWWF-_gLFvhj08v4e2TP_XzeIJlmgpF3IbVoeway2Dr-hZr-uoNwyKVbbzxtlAJxSNUhnQ2wulv8cafwRVi3_p6b8r7nMIgGAYAHzYa8Ow&usg=AFQjCNHzp5czBoUrjH_b8lyxPZ4RtHA6nAhttps://www.google.com/url?ct=abg&q=https://www.google.com/adsense/support/bin/request.py%3Fcontact%3Dabg_afc%26url%3Dhttp://www.business-standard.com/article/pf/what-is-gratuity-113050900105_1.html%26gl%3DIN%26hl%3Den%26client%3Dca-pub-1723933259695999%26ai0%3DChloBi2ERVOeOEMmruASHn4GoB7m9x7sE4d6Zk58BwI23ARABIKm8zBFQxqWQvwdg5YKAgLwOoAGv1PPlA8gBAakCoTY5VzmhUT6oAwGqBLQBT9A2sIWE06LnMpt7ZIWkgViZ-9FAYqvEm9PyfMjWwNhxZ45hvJ0WQki_m6J6DsNkAVwYyB0t6_EVzrYRNcteYMhUGKj3RSqQWx8KewnWLITiR6t8nQRTUGCcI8g_NhPH-iU76agSPO5S0odKURzrPLKPJEZwj7GRW5flmSmrhb2-tjPnGCHFIhp8uUvURnEkKIi6_JAI95su7ldSOYZQ-weXjIcNcjNJo7JtWiMb_HvhMb8yiAYBgAe5q4wa&usg=AFQjCNHwYZTTknoRlhunBnz0C8NFyY8nDAhttps://www.google.com/url?ct=abg&q=https://www.google.com/adsense/support/bin/request.py%3Fcontact%3Dabg_afc%26url%3Dhttp://www.business-standard.com/article/pf/what-is-gratuity-113050900105_1.html%26gl%3DIN%26hl%3Den%26client%3Dca-pub-1723933259695999%26ai0%3DCpVtci2ERVMD6LdSpuASsqoGoC4mWpowGuavJmZUBw6Gj9QUQASCpvMwRKAJQy7OcxgVg5YKAgLwOoAH_7KTkA8gBAakCsP9C2xygUT6oAwGqBLgBT9AwGeD3imzGDGZzEfDeKCG66dIJ0_iJVjn6pNBMyEqB0wN4-8Ro9FbEbYpsZ7t6UINe2-Sp1ZK30DEkH-U6SBCeUpZI_mjq4GekSHO0DCDeXKMPSDWO4230DxGT7IH_Ic-vzZZ9Xlri5Av3SRBO1WxroN4dDWWF-_gLFvhj08v4e2TP_XzeIJkugmlz6hoJwbhQM7rzhZpkU3Xuy1BYKcluUPdyyCAinfizuq7_cVL1Rbi3L5QiE4gGAYAH6ZLbGw%26ai1%3DCjsSRi2ERVMD6LdSpuASsqoGoC522jNEHvea0uV7AjbcBEAIgqbzMESgCUOGAvv_______wFg5YKAgLwOoAGb-cPEA8gBAakCsP9C2xygUT6oAwGqBLsBT9BwGtjzim_GDGZzEfDeKCG66dIJ0_iJVjn6pNBMyEqB0wN4-8Ro9FbEbYpsZ7t6UINe2-Sp1ZK30DEkH-U6SBCeUpZI_mjq4GekSHO0DCDeXKMPSDWO4230DxGT7IH_Ic-vzZZ9Xlri5Av3SRBO1WxroN4dDWWF-_gLFvhj08v4e2TP_XzeIJlmgpF3IbVoeway2Dr-hZr-uoNwyKVbbzxtlAJxSNUhnQ2wulv8cafwRVi3_p6b8r7nMIgGAYAHzYa8Ow&usg=AFQjCNHzp5czBoUrjH_b8lyxPZ4RtHA6nA


25/43

2

explains everything about (ratuity and the tax implications for you.(ratuity is a part of salary that is received by an employee from his/heremployer in gratitude for the services o:ered by the employee in thecompany. (ratuity is a de&ned bene&t plan and is one of the many

retirement bene&ts o:ered by the employer to the employee upon leavinghis job. An employee may leave his job for various reasons! such as retirement/superannuation! for a better job elsewhere! on being retrenchedor by way of voluntary retirement.E,///,/;As per 5ec 4; )4;* of ncome "ax Act! gratuity is paid when an employeecompletes < or more years of full time service with the employer )minimum9=; days a year*.H 9#% / '

An employer may o:er gratuity out of his own funds or may approach a lifeinsurer in order to purchase a group gratuity plan. n case the employerchooses a life insurer! he has to pay annual contributions as decided by theinsurer. "he employee is also free to ma%e contributions to his gratuity fund."he gratuity will be paid by the insurer based upon the terms of the groupgratuity scheme.

T+7 '#+$#* '+8/;"he gratuity so received by the employee is taxable under the head ncomefrom salary>. n case gratuity is received by the nominee/legal heirs of theemployee! the same is taxable in their hands under the head ncome from

other sources>. "his tax treatment varies for di:erent categories of individualassessee. 0e shall discuss the tax treatment of gratuity for each assessee indetail.-or the purpose of calculation of exempt gratuity! employees may be dividedinto ? categories @

,overnment employees and

#ongovernment employees covered under the :ayment of ,ratuity !ct9 1JG2

#ongovernment employees not covered under the :ayment of ,ratuity !ct9 1JG2

In case of government employees D they are fully e@empt from receipt of gratuity.In case of nongovernment employees covered under the :ayment of ,ratuity !ct9 1JG2 DCa@imum e@emption from ta@ is least of the 6 belowA
http://www.business-standard.com/search?type=news&q=Taxhttp://www.business-standard.com/search?type=news&q=Salaryhttp://www.business-standard.com/search?type=news&q=Taxhttp://www.business-standard.com/search?type=news&q=Salary


26/43

2>

1. !ctual gratuity received

2. %s 109009000

6. 1 days4 salary for each completed year of service or part thereof

#oteA

ere9 salary V basic Q $! Q commission &if it4s a fi@ed N of sales turnover*.

3=ompleted year of service or part thereof4 meansA full time service of > months isconsidered as 1 completed year of service X > months is ignored.

ere9 number of days in a month is considered as 2>. )herefore9 1 days4 salary is arrivedas V salary Y 1/2>

In case of nongovernment employees not covered under the :ayment of ,ratuity !ct91JG2 D Ca@imum e@emption from ta@ is least of the 6 belowA

1. !ctual gratuity received

2. %s 109009000

6. alfmonth4s average salary for each completed year of service &no part thereof*

#oteA

ere9 salary V basic Q $! Q commission &if it4s a fi@ed N of sales turnover*.

=ompleted year of service &no part thereof* meansA full time service of 1 year isconsidered as 1 completed year of service. X 1 year is ignored.

!verage salary V10 months4 salary &immediately preceding the month of leaving thejob*/10

I''"*a"!onFet4s understand the above math clearly with an e@ampleA

+arun had been working with an I) company since past 10 years9 G months. e is retiring on1th !pril9 2010. is current Basic V %s 09000 pm9 $! V %s 9000 pm. e is going to receive agratuity amount of %s 6 lakhs on retirement. #oteA +arun4s basic and $! have been the samesince past 1 year.Fet4s consider 2 situations here D &a* +arun4s employer is covered under :ayment of ,ratuity!ct9 1JG2 and &b* +arun4s employer is not covered under :ayment of ,ratuity !ct9 1JG2.


27/43

2G

Z (alary V Basic Q $! V %s 09000 pm Q %s 9000 pm V %s 9000 pmZ !verage salary V 10 months4 salary &immediately proceeding the month of leaving the job*/10V &%s 9000 pm Y 10*/10 V %s 9000 pm. )herefore9 halfmonth4s average salary is V %s9000/2

Important points to rememberZ generally9 only government employers give $! to their employees. !bove e@ample is onlyfor illustrative purpose.Z )he salary of the employee may differ over a period of time on account of change in basic9$! and/or other factors.Z In case gratuity is received from more than one employer during the previous year9 ma@imume@emption allowed is up to %s 109 009000.Z Where employee has already claimed gratuity e@emption in any previous year &s*9 thema@imum e@emption amount allowed for the current previous year i.e. %s 109 009000 will bereduced by the amount of deduction already claimed in the previous years.

Z In case of an employee who is employed in a seasonal establishment &not employedthroughout the year*9 the gratuity e@emption shall be for seven days wages for each season.

11. C$$8#9 :#*%/* 8*9#' I*$# T+7 A T+7 '#+$#* P#*%/*!nan!a' Yea* 14215 (Aemen" Yea* 15219):ension is a retirement benefit. (ince this is payable to an employee or to his dependents byvirtue of past employment9 this is ta@ed as salary in the hands of the employee. )a@ is deductibleon pension income under section 1J2 of Income )a@ act on payment. owever9 family pension

received by the dependents of the employee will be ta@ed under the head income from othersources as there is no employer employee relationship between the payer and payee. )$( is notdeductible on family pension as it is not covered under section 1J2 of the Income ta@ act. )heprovisions under Income )a@ are enumerated belowA

12 L#+.# #*+%4$#*

LEAVE ENCASHMENT GROUP NO3 1 MEMBERS: !ashima kapil Canishthakur !nupam aditya !nand singh negi argovind sahu emlata yadav

LEAVE ENCASHMENT'mployee4s defined benefit.'mployees are entitled to

various types of leave while Z leaves in each year that he has accumulated.)he cashvalue of those leave will be they are in service.nder this benefit9employee gets cashpayments for unavailing the allowed deducted from the paymentswhich have been

already availed by the employee.ence the cash payment availed by the employee inreturn of the unavailed leave is known as leave encashment.

OF+e"!.e of 'ea.e ena-men"it encourages employees to avail the leave on planned


28/43

2?

7 systematic basis.8or employer it favours that his work is done dy his employees in a

smooth manner.8or employees9 if they don4t avail their leave then they are rewarded in

the form of leave encashment.But in case9 when employees avail the leave within thelimit of leave allowed to them by their employer9 at least they don4t get deduction fromtheir basic salary.

T;:#% ,#+.#%8or emergency purposes. #o accumulation. =asual leave

ave to avail within the year only. 8or sickness. !ccumulation allowed as Cedical

leave per service rules. 8or general purposes. =arry forward is allowed. :rivileged

leave #onstatutory benefit to employee on e@it from service.

E$:,;##% +'# ,+%%/#9 /* +#'/#%. 2. #on,overnment1.

,overnment employees. 'mployee. Feave encashment during the Feave encashment

during the service is always ta@able. (ervice is always ta@able. 'ncashment of

accumulated 'ncashment of accumulated leave at the time of leave at the time of

retirement retirement is fully e@empt. is e@empt up to some e@tent . )he govt.employees are not )he nongovt. employees are allowed to accumulate leave allowedto accumulate leave for more than 10 months. per the norms of employer .

LEAVE ENCASHMENTthe unavailed leave has to be calculated on the basis of

ma@ 60 days leave for every completed year of services.But if employer has providedleave9 which is less than 6o days in a p.y9 then this calculation shall be based on such

no.of leaves.If any employee retires from more than 1 employer then the e@emption foreach employer shall be calculated separately but the total e@emption shall not e@ceed

%s.69 009 00 .Feave salary received by the family members after death of the

employees is fully e@empt from ta@.

LEAVE ENCASHMENT10 months last drawn salary of just preceding the date of

retirement is considered as the average salary.(alary considers in the calculation of

unvailed leave is VB.(Q=-CI((I-#&fi@ed N*Q$.!Y,overnment employees mean

employees of central govt or state govt.8or non govt. employees9 least of below values shall be e@empt of ta@ from the accumulated leave encashment. i*actual amount

received. ii* %s.69 009000 iii*10 @ avg salary iv* avg salary @ unavailed leave/60.Feavesalary paid to legal heirs of a deceased employee is not liable to ta@.

(everal case study1. %ohit4s employer has credited him the leave of 0 days peryear[[[..then also the ma@imum permissible unavailed leave under the I) act91J>Gfor the 2> yrs of service is \\\\\\\\\V2> @ 60 V G?0.2. If in case9 2 days are credited torohit being a non govt employee [[..then the permissible unavailed leave will be\\\\\\\V 2> @ 2 V >0.&as less than 60 days is considered*.6. Cr. is an govt employee7 got %s. 09000 as leave encashment at the time of retirement. )hen\\\\\\completeamount will be e@empt as Cr. is an govt employee.. Cr. j gets the same amount as leaveencashment during his continue service then\\\\\his income will be added in the gross


29/43

2J

total income 7 will be ta@ed according to the slab rate in which he falls in to.

=ase study 6.Cr.@9 non govt employee retired after serving for 1> years 7 G months tothe firm. !t retirement he received a sum of %s.09 000 as leave encashment forunavailed leave of 600 days. e was entitled for 0 days leave per year. Basis salary is

%s.?00 p.m. compute leave encashment e@empt from ta@] Feast of the following ista@ e@emptA 1. 09000 &actual amount received* 2. 69 009000 &ma@imum amounte@empted* 6. 10 @ ?00 V ?000 &10 @ 10 months average salary* . ?00 @ 10/60

V2200 &avg salary @ unveiled leave /60*ow to compute unavailed leave]

ow to compute unavailed leave] =alculation of company )a@ lawunavailed leaveAFeave allowed 0 days per year 60 days per year =ompleted years 1> years 1> years)otal leave allowed 1> @ 0 V>0 days during 1> @ 60 V?0 days during the wholeservice. )he whole service. navailed leave 600 &given*!vailed leave >0O600 V 6060navailed leave 600 &given* ?0O60 V 10

If any 5ueries]

1>!P'#%%/*+, T+7

!nan!a' Yea* 14215 (Aemen" Yea* 15219)

P*ofe!ona' Ta a'o *enone a Ta on Em6'omen" ! 6a! "o "-e "a"e%o.e*nmen"& I" ! e"e F "-e em6'oe* f*om "-e a'a* 6aaF'e "o "-e em6'oeean - "a ! 6a! "o "-e "a"e %o.e*nmen" on Fe-a'f of "-e em6'oee& P*ofe!ona'Ta ! 'e.!e F "-e "a"e %o.e*nmen" ne* "-e *!%-" %!.en !n a*"!'e 89 of "-eCon"!""!on& A !" ! a 6a*" of a'a* an 6a! "o "-e S"a"e $o.e*nmen", !" ! a''oea a e"!on -!'e a''a"!n% "-e "aaF'e amon" ne* "-e -ea Inome f*omSa'a*!e& T- P*ofe!ona' "a on em6'omen" ! a''oe a a e"!on ne*e"!on 19 (!!!) of "-e Inome Ta A", !n "-e fo''o!n% mannerA

1

F/*+*/+, Y#+' 1


30/43

60

)he 8ifth and residuary head of income is Income from -ther (ources;. 'very income whichdoes not specifically fall under any of the preceding 8our heads of income &vi covers any income which

does not fall under any other head of income. owever9 (ubsection &2* of section > specifies ?Incomes which are always ta@able under the head Income from other (ources;.

$ene*a' P*o.!!on = Se& 59(1) #

)he following incomes are generally chargeable under the head Income from -ther (ources;A

a. income from subletting

b. interest on bank deposits and loans

c. income from royalty

d. director4s fee

e. ground rent

f. agricultural income from a place outside India

g. director4s commission for standing as a guarantor to bankers

h. director4s commission for underwriting shares of new company

i. e@amination fees received by a teacher from a person other than his employer

j. rent of plot of land

k. insurance commission

l. mining rent and royalty

m. casual income

n. annuity payable under a will9 contract9 trust deed

o. salaries payable to a Cember of :arliament

p. interest on securities issued by a foreign ,overnment

5. family pension received by family members of a deceased employee


31/43

61

r. in case of retirement 9 interest on employee4s contribution if provident fund is unrecogni


32/43

62

$ro&ts and gains of business or profession! @ )i* the pro&ts and gains of anybusiness or profession which was carried on by the assesses at any timeduring the previous year7

)ii* Any compensation or other payment due to or received by! @ )a* Any

person! by whatever name called! managing the whole or substantially thewhole of the a:airs of an ndian company! at or in connection with thetermination of his management or the modi&cation of the terms andconditions relating thereto7

)b* Any person! by whatever name called! managing the whole orsubstantially the whole of the a:airs in ndia of any other company! at or inconnection with the termination of his o'ce or the modi&cation of the termsand conditions relating thereto7

)c* Any person! by whatever name called! holding an agency in ndia for any

part of the activities relating to the business of any other person! at or inconnection with the termination of the agency or the modi&cation of theterms and conditions relating thereto7

)d* Any person! for or in connection with the vesting in the (overnment! orin any corporation owned or controlled by the (overnment! under any law forthe time being in force! of the management of any property or business7

)iii* ncome derived by a trade! professional or similar association fromspeci&c services performed for its members7

)iiia* $ro&ts on sale of a license granted under the mports )Control* Brder!4)iiib* Cash assistance )by whatever name called* received or receivable byany person against exports under any scheme of the (overnment of ndia7

)iiic* Any duty of customs or excise repaid or repayable as drawbac% to anyperson against exports under the Customs and Central xcise FutiesFrawbac% Gules! 4D47

)iv* "he value of any bene&t or per#uisite! whether convertible into money

or not! arising from business or the exercise of a profession7

)v* Any interest! salary! bonus! commission or remuneration! by whatevername called! due to! or received by! a partner of a &rm from such &rm+

$rovided that where any interest! salary! bonus! commission orremuneration! by whatever name called! or any part thereof has not beenallowed to be deducted under clause


33/43

66

)b* Bf section =;! the income under this clause shall be adjusted to theextent of the amount not so allowed to be deducted7

)vi* Any sum received under a Hey man insurance policy including the sumallocated by way of bonus on such policy.

xplanation+ -or the purposes of this clause! the expression Hey maninsurance policy shall have the meaning assigned to it in clause )4;F* ofsection 4;.

xplanation 4 + 0here speculative transactions carried on by an assesses areof such a nature as to constitute a business! the business )hereinafterreferred to as speculation business* shall be deemed to be distinct andseparate from any other business.

16!G#*#'+, #7:#*98'#8%>=&1*F/*+*/+, Y#+' 1> &(=*.

"E#penditure$ need not involve actual parting %ith money or property ! mere liability to satisfy

an obligation by an assesses is undoubtedly not 3e@penditure4 it is only when he satisfies theobligation by delivery of cash or property or by settlement of accounts that there is [email protected] e@penditure does not necessarily involve actual delivery of or parting with money orproperty. ! mere forbearance to reali>K >2 I)% >6? &(=*.

L/+/,//#%

Provision for actuarial valued lia!ilities is allo%a!le If an amount is set apart for discharge of aliability on actuarial valuation that has to be allowed as deduction (&,v.Electric +amp 'frs.)&ndia* )P.* +tdS1J?GK 1> I)% 11 &=al.*.

+ia!ilities can !e spread over a period of years0 %here found necessary )he facts may justifyan assesses who has incurred e@penditure in a particular year to spread and claim it over a periodof ensuing years. Issuing debentures at a discount is one such instance9 where although theassessee has incurred the liability to pay the discount in the year of issue of debentures9 thepayment is to secure a benefit over number of years. )here is a continuing benefit to the businessof the company over the entire period. )he liability should9 therefore9 be spread over the periodof the debentures 'adras &ndustrial &nvestment (orpn. +td.v. (&,S1JJGK J1 )a@man 60/22


34/43

6

I)% ?02 &(=*.

ifficulty in estimation of value cannot convert accrued lia!ility into conditional one )hedifficulty in the estimation thereof would not convert an accrued liability into a conditional one (alcutta (o. +td.v. (&,S1JJK 6G I)% 1 &(=*.

Accrued !ut undercharged lia!ility must !e allo%ed under mercantile system In the case of anassesses maintaining his accounts on mercantile system9 a liability already accrued9 though to bedischarged at a future date9 would be a proper deduction while working out the profits and gainsof his business9 regard being had to the accepted principles of commercial practice andaccountancy. It is not as if such deduction is permissible only in case of amounts actuallye@pended or paid. Rust as actual receipts as well as those accrued due are brought in for incometa@ assessment9 so also liabilities accrued due would be taken into account while working out theprofits and gains of the business 'etal o# (o. of &ndia +td.v. ,heir 2or/menS1J>JK G6 I)%6 &(=*.

+ia!ility of earlier year cannot !e ignored straighta%ay If any liability9 though relating to theearlier year9 depends upon making a demand and its acceptance by the assesses and such liabilityhas been actually claimed and paid in the later previous years9 it cannot be disallowed asdeduction merely on the basis of the accounts are maintained on mercantile basis and that itrelated to a transaction of the earlier year Saurashtra (ement 3 (hemical &ndustries +td. v.(&,S1JJK ?0 )a@man >1/216 I)% 26 &,uj.*.

isputed lia!ilities are allo%a!le in year of ad4udication5settlement Where a liability arisingout of a contractual obligation is disputed9 the assesses is entitled9 in the assessment year relevantto the previous year in which the dispute is finally adjudicated upon or settled9 to claim adeduction in that behalf (&,v.Phalton Sugar 2or/s +td.S1J?>K 1>2 I)% >22 &Bom .*.

Statutory lia!ilities can !e claimed at any stage of proceedings ! statutory liability of anassesses9 following the mercantile system9 is allowable in the year in which it arisesnotwithstanding the fact that it is disputed by the assesses and no entries are made in the booksof account. )he mere fact that such a deduction was not claimed before the I)- is not of much

15C+:/+, G+/*

BASIS O CHAR$E

F/*+*/+, Y#+' 1


35/43

6

Ae".

Ca6!"a' Ae" means property of any kind held by an assesses. owever9 it does not include A

1. (tock9 (tores9 %aw Caterials held in business

2. ,old Bonds

6. %ural !gricultural Fand

. :ersonal effect like 8urniture9 Cotor =ar9 !/=9 %efrigerator etc.

Jee''e* -e' fo* 6e*ona' e ! "*ea"e a Ca6!"a' Ae"& Rewellery includes ornamentsmade of ,old9 (ilver9 :latinum or any other :recious Cetal / (tone.

Ca6!"a' Ae" a*e of "o "6e #

1. Fong )erm =apital !ssets

2. (hort )erm =apital !ssets

)he nature of the !sset and the period of holding determine whether it is a Fong)erm !sset or a(hort)erm one as given below A

Na"*e of Ae"LON$ TER

Ca6!"a' Ae"

SHORT TER

Ca6!"a' Ae"

(hares of a =ompany9 nits of)I/ Cutual 8und

When held for C-%' than 12months

When held for F'(( than 12months

!ll other !ssets&other than above*

When held for C-%' than 6>months

When held for F'(( than 6>months

In other words9 capital gain4s ta@ liability arises only when the following conditions are satisfied

(ondition 1 )here should be a capital asset


36/43

6>

(ondition 6 )he =apital !sset is transferred by the assesses.

(ondition 7 (uch transfer takes place during the previous year

(ondition 8 !ny profit or gains arises as a result of transfer

(ondition 9 (uch profit or gains is not e@empt from ta@ under section 9 B9 $9'=9 ,9 and ,!.

owever9 the following points should be considered A

1. In some cases =apital ,ain is ta@able in a year other than the year in which the capitalasset is transferred.

2. Income cases =apital ,ain arises even if there is no )ransfer; or =apital !ssets .

16!D#*//* '+*%#'nder (ection 2&G* of )he Income )a@ !ct9 1J>1 transfer of capital assets is defined asA

(ale9 e@change and relin5uishment of assets

'@tinguishment of any rights in capital assets

!c5uisition of capital assets or rights

=onversion of capital asset by its owner as stock in trade of his business9 it may also be aterm of transfer

)ransfer of immovable property under (ection 6! of )ransfer of :roperty !ct9 1??2

!ny transaction by which an assesses become enable to act as a member of cooperativesociety

!ny transaction by which an assessee ac5uire shares in cooperative society


37/43

6G

1!S4' T#'$ C+:/+, G+/*%

Financial Year 14-15 (Assessmen Year 15-1!)

(hort )erm =apital ,ains is computed as belowA

()=,V8ull value of consideration &=ost of ac5uisition Q cost of improvement Q cost oftransfer*

)he following e@ample illustrates the difference between ()=, and F)=,.

LML a resident individual sells a residential house on 12..0J for %s. 29 009000/. )he house waspurchased by him on .G.200G for %s. 9 009000/ and he had spent %s.19 009000/onimprovement during Cay 200. $uring the previous year 2010 2011 his income under all otherheads &other than capital gains* was #IF

(ince LML has held the capital asset for less than 6> months9 &.G.200> to 12..200J* it is a shortterm capital asset for him and its transfer gives rise to short term capital gains.

()=, on sale of houseV29009000 9009000 19009000V1J9009000

Income under E=apital ,ainsEV1J9009000

Income under the heads other than =apital ,ainsV#il

Income under E=apital ,ainsEV1J9009000

,ross )otal IncomeV1J9009000

)otal IncomeV1J9009000

)a@ on total incomeV929000

In case LML sells the same house on 12.6.2011 for the same consideration9 the residential housebecomes a long term capital asset as the period of holding would be more than 6> months&.G.200G to 12.6.2011* and its transfer gives rise to long term capital gains.

(ale considerationV29009000

Inde@ed cost of ac5uisitionA 9009000 @ 1/?0V9G69J?

!ddA Inde@ed cost of improvementA 19009000 @ 1/JGV19109?>

Inde@ed cost of ac5uisition Q Inde@ed cost of improvementV>9?9?26


38/43

6?

Income under the head E=apital ,ainsEV1?9191GG

Income under the heads other than =apital ,ainsV#il

Income under the head E=apital ,ainsEV1?9191GG

,ross total incomeV1?9191GG

)-)!F I#=-C' &rounded off*V1?9191?0

)a@ thereonA

)a@ on income other than F)=,V#il

)a@ on F)=, P 20N of &1?9191?019109000*V696906>

Yminimum slab for that assessment year

)otal ta@ payableV696906>

1!D##$#9 % #7#8/*

F/*+*/+, Y#+' 1


39/43

6J

1!D#98/* U*9#' S#/* !0 C

F/*+*/+, Y#+' 1


40/43

0

Cutual 8und.

10. :ayment to notified annuity plan of FI=

11. (ubscription towards notified nits of Cutual 8und or )I.

12. =ontribution to notified :ension 8und set up by Cutual 8und or )I.

16. !ny sum paid as subscription to ome Foan !ccount (cheme of the #ationalousing Bank.

1. !ny sum paid as )uition 8ees for full time education of any 2 children of anindividual.

1. !ny payment towards the cost of purchase / construction of a residential :roperty.

1>. !mount invested in approved $ebenture of9 and e5uity shares in9 public companyengaged in infrastructure.

1G. !mount deposited in as )erm $eposit for a period of years or more inaccordance with a scheme framed by the ,overnment.

1?. (ubscription to any notified Bonds of #ational Bank for !griculture and %ural$evelopment & #!B!%$*

1J. !mount deposited under (enior =iti


41/43

1

2. %s. 19009000

Whichever is F'((]

20!S#!0D

F/*+*/+, Y#+' 1>-1< "A%%#%%$#* Y#+' 1


42/43

2

2>!I*$# T+7 S,+ & D#98/*% FY 2015-16!

P':%#9 T+7 S,+ ' F/*+*/+, Y#+' 1


43/43

incomeslabs

investment of Gs. 4!;;!;;;/

5ec.E;CCC

Across allincomeslabs

Kpto Gs. ?;!;;/ saved onnvestment of Gs.4!;;!;;;/

All our $ension $lans

5ec. E; FPAcross allincomeslabs

Kpto Gs. 4;!E4 All our Jealth nsurance$lans

All the health insuranceriders available with ourConventional $lans

"otal5avings$ossible PP

Gs. =4!D4

Documents

Tax3 Complete 3