INCOME TAX ON SALARIES.

1. INCOME TAX ON SALARIES. 1.The levy of income tax in India is at present governed by two acts. a)The Income Tax Act,1961 b)The Finance Act passed each year by the Parliament. 2.Income Tax is leviable annually for each Financial Year commencing on the 1stday of April and ending on the 31st day March following. 3.Income tax on salaries is computed on annual basis and recovered as TDS on monthly basis for the sake of our convenience.

2. INCOME TAX ON SALARIES • 4.For the purpose of computing IT on salaries the term ‘salary’ includes following elements: a)Pay as defined in FR 9(21),leave salary and advance of pay. b)Bonus c) Dearness allowance d)Compensatory allowance e)House rent allowance-subject to exemption f) Value of Rent Free quarters g) Fees retainable by the employees. h) Honoraria

3. INCOME TAX ON SALARIES i)Reimbursement of tuition fees. j) Subsistence allowance k) Interim relief l) Overtime allowance m) Government Contribution to the NPS. • 5.Following items are not to be taken in to account for the purpose of computing IT on salaries : a)Sumptuary allowance and uniform allowance b) Reimbursement of cost of medical treatment subject to limits

4. INCOME TAX ON SALARIES c) Value of LTC b) cash equivalent of leave salary received at the time of retirement. c) TA granted for tour on duty and for transfer d) Composite hill compensatory allowance e) Border area /remote area /tribal area difficult area /disturbed area allowance. f) Conveyance allowance g) CEA and hostel subsidy subject to limits h) Any allowance granted for encouraging the academic, research and other professional pursuit i) Transport allowance up to Rs.1600/- for orthopedically handicapped persons and Rs.800/- for others (pm) j) Any payment from GPF

5. INCOME TAX ON SALARIES • 6.The salary income of a person is calculated on the total salary due to him(whether paid or not) as per the guidelines provided above. • 7.From the total income so arrived at(gross salary) the following deductions to the extent permissible are to be allowed to get taxable salary a) HRA exemption to the extent admissible b) Accrued interest/interest paid on HBA and income from house property if it is a minus figure. c) Donation to any recognized charitable trust/ fund such as Prime Minister’s National relief fund d) Professional tax paid to local bodies. e) For handicapped employees an amount of Rs.50000 or Rs.1,00,000/- as the case may be

6. INCOME TAX ON SALARIES • 8. With this taxable salary if the person is having any other income from other sources as informed by him the same is to be added • 9.From the taxable salary, following elements of various forms of savings are to be deducted to the extent admissible. a)Subscription to PF,LIC,PLI policies b) Subscription to any authorized pension fund c) Subscription to New pension Scheme d) Subscri. to Long term infrastructure funds e) Subscri. to any medical insurance/CGHS • 10.The total amount of savings is limited to a maximum of Rs.1,00,000/.

7. INCOME TAX ON SALARIES • 11.Thus the amount of taxable income is to arrived as follows. a)Total salary income -- ________ b)less total of exempted items( such as HRA exemption) -- ________(-) c ) Gross Taxable income -- _______ d) less savings(limited to maximum) _________(-) e) Net taxable salary ---------- __________

8. INCOME TAX ON SALARIES • 12.After arriving the net taxable income IT has to be calculated as follows. Education cess @3% of IT is to levied in all cases.

9. INCOME TAX ON SALARIES • 13.The IT and education cess so arrived at is to be dived by 12 and the same is to be recovered on monthly basis.