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RULES FOR SALARY INCOME
Tax free salary to employee
Tax on income tax
paid by employer
Tax on salary received in
arrears
It is to be treated in
year of earning
instead of year of
received
•WAIVER OF AN AMOUNT PAYABLE BY EMPLOYEE
AMOUNT WAIVED BY THE EMPLOYER OUT OF THE AMOUNT PAYABLE BY EMPLOYEE SHALL BE INCLUDED IN THE INCOME.
•OBLIGATION OF AN EMPLOYEE PAID BY THE EMPLOYEE
ANY PAYMENT BY THE EMPLOYER TO ANOTHER PERSON ON ACCOUNT OF AN OBLIGATION OF THE EMPLOYEE.(E.G.:- INSURANCE PREMIUM), INCLUDED IN THE SALARY INCOME OF EMPLOYEE.
•TRANSFER OF PROPERTY OR PROVISION OF SERVICES TO EMPLOYEE
WHERE AN EMPLOYER TRANSFER HIS PROPERTY OR PROVIDES SERVICES TO HIS EMPLOYEE, THE AMOUNT IS CALCULATED BY LESS THE PAYMENT MADE BY THE EMPLOYEE FROM FAIR MARKET VALUE OF THE PROPERTY.
VALUATION OF ACCOMMODATION
• 45% OF MTS OR BASIC SALARY: OR FAIR MARKET RENT OF THE ACCOMMODATION
• WHICH ONE IS HIGHER TO BE INCLUDED IN TAXABLE INCOME.
VALUATION OF CONVEYANCE•For official purpose – No treatment.•For official or personal purpose – 5% of the cost.•For personal use only – 10% of the cost.
•COMPENSATORY ALLOWANCECOMPENSATORY ALLOWANCE LESS EXEMPT UP TO 75% OF GROSS SALARY
•MEDICAL ALLOWANCEMEDICAL ALLOWANCE IS EXEMPT UP TO 10% OF THE BASIC SALARY IF NO OTHER MEDICAL FACILITY IS PROVIDED BY THE EMPLOYER.
•ENTERTAINMENT ALLOWANCEFOR PERSONAL PURPOSE – TOTALLY TAXABLE
FOR OFFICIAL PURPOSE – TOTALLY EXEMPT
•OVERSEAS ALLOWANCETOTALLY TAXABLE – INCLUDED IN SALARY INCOME.
•COST OF LIVING ALLOWANCETOTALLY TAXABLE – INCLUDED IN SALARY INCOME.
•DEARNESS ALLOWANCE TOTALLY TAXABLE – INCLUDED IN SALARY INCOME
•GRATUITY AND COMMUTATION OF PENSION
• FUND APPROVED BY CIR – TOTALLY EXEMPT.
• APPROVED SUPERANNUATION FUND – TOTALLY EXEMPT.
• GRATUITY SCHEME APPROVED BY FBR LESS EXEMPT UP TO 200000 REMAINING TAXABLE.
• ANY OTHER CASE LESS EXEMPT LESSER OF 75000 OR 50% OF THE AMOUNT RECEIVED.
• PENSION ONLY ONE PENSION WITH HIGHER AMOUNT IS EXEMPT.
• BENEFIT UNDER EMPLOYEE SHARE OPTION SCHEME - TOTALLY TAXABLE.