Money Management - Salary

8/3/2019 Money Management - Salary

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Basic Concepts of

Income from Salary


2/13

Chargeability

Employer employee relationships

Charged on receipt or accrual basis

Taxable if received from one or more employers

Advance salary

Leave salary

Arrear salary

Bonus

Commission

Ex gratia

Retrenchment compensation


3/13

Allowance

City compensatory allowance Taxable

House Rent allowance taxable (least of the following is

deductible from actual HRA received) Actual HRA received

40% or 50% of salary

Rent Paid 10% of Salary

Entertainment allowance taxable (exempt for Government

employee)


4/13

Allowance Contd

In the following cases unutilised amount is taxable, if the

amount is utilised for the purpose it has been given, it will not

be taxable

Travelling allowance/ transport allowance Daily allowance

Helper allowance

Research allowance

Uniform allowance Conveyance allowance for official purpose


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Allowance contd..

Conveyance allowance to commute between office andresidence Rs.800 p.m. is exempt

Children education allowance is exempt Rs.100 per monthper child, max. 2 children

Hostel allowance is exempt Rs.300 per month per child,max. 2 children

Some specific type of allowance paid to army personnel areexempt


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Allowance contd

Tiffin allowance taxable

Fixed medical allowance taxable

Servant allowance taxable

Allowance paid to High Court and Supreme Court judges is

exempt from tax


7/13

Perquisites

Furnished/

unfurnished house

without rent or at

concessional rent

1. Not chargeable to tax if it is provided in remote area

2. After transfer hotel accommodation for 15 days is exempt

3. House of High Court and Supreme Court judges not

taxable

4. For others it is taxable as per the rules

5. (a) for governemnt employees taxable as per government

rules

(b) for non government employees depending on

population of the town the ownership of house

Service of a sweeper,Gardner, watchman or

personal attendant

Taxable only for specific employees

Supply of gas,

electricity or water for

household purposes



8/13

Perquisites Contd.

Education facility to

employees family

members


Leave travel concession 1. Not taxable twice in a block of 4 years

2. Taxable for specific employees

Amount paid by an

employer in respect of any

obligation which otherwise

would have been payable

by the employee

1. Lic Premium

2. Tax borne by employer

3. Bill in the name of employee paid by employer

Interest free loans or

concessional loans

1. If aggregate amount of original loan does not exceed

Rs.20,000, the perquisite is not taxable

2. Loan for medical treatment (as per rule 3A) is not

taxable subject to few conditions

3. Other loans are taxable as per the rates of SBI

Providing use of movable

asset

Not taxable e.g. Laptop, mobile etc.


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Perquisites

Transfer of movable

asset

Taxable as per rules

Medical facility Taxable as per rules

Car facility Taxable as per rules

Free food, beverage 1. Not taxable2. Meals (lunch and/or dinner) taxable if the cost of meal to

employer is in excess of Rs.50 per meal

Travelling / touring

accommodation

Not taxable, In certain cases taxable

Gift or gift voucher 1. Gifts above Rs.5000 are taxable whether cash or kind2. Gifts in cash are always taxable

Credit card and club

facility

If in the name of company, not taxable


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Free House

Population of city as per

2001 census where

accommodation is

provided

where the

accommodation is

owned by the employer

where the accommodation

is taken on lease or rent by

the employer

Exceeding 25 lakhs 15% of salary Lease rent payable or 15% of

salary whichever is lower

Exceeding 10 lakhs upto 25

lakhs

10% of salary Same as above

Any other 7.5% of salary Same as above

Houses situated in remote areas are exempt, (areas located at least 40Km away

from a town having population not exceeding 20,000

for government employees, house is taxable as per government rules

10% of the cost of furniture is added in all the employee cases as perquisite

of furniture

Any rent charged by the employer is deducted from the calculation as per rules


11/13

Perquisites in respect of movable assets

Mode of valuation Perquisite in respect of sale of movable assets to

employees

Electronic items/

computers

Motor car Any other asset

Step 1 find out cost of theasset to employer

Actual cost to theemployer

Actual cost tothe employer

Actual cost tothe employer

Step 2 Less normal wear

and tear for completed years

during which the asset was

used by the employer for his

business

50% for each

completed year

by reducing

balance method

20% for each

completed year

by reducing

balance method

10% for each

completed year

by fixed method

or on actual cost

Step 3 Less amount

recovered from employee

Consideration

received

Consideration

received

Consideration

received

Taxable value of the

perquisite Step 1 Step 2

Step3

Balancing

amount if it is

positive

Balancing

amount if it is

positive

Balancing

amount if it is

positive


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Medical Facility

Type of hospital/

clinic

Nature of medical facility

to employee and his

family members

Expenditure Is it chargeable to

tax

Maintained by

employer

Any Incurred by

employer

Not chargeable to

tax any limit

Maintained or

approved by

Government

Any Incurred or

reimbursed by

employer

Not chargeable to

tax any limit

Approved by chief

commissioner for

specific disease

For treatment of

prescribed diseases

Incurred or

reimbursed by

employer

Not chargeable to

tax any limit

Maintained by any

other person

Any Incurred or

reimbursed by

employer

Not chargeable to

tax upto Rs.15,000

excess taxable

Outside India Any No limit Not chargeable *

Treatment outside India is exempt for employee whose income is less than Rs.2,00,000

Expenditure should be permitted by Reserve Bank of India


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Car facility

Car owner Expenses Wholly personal Partly personal partly

official

Employee Employer Actual expenses

incurred

Up to 1.6cc 1600 p.m

Above 1.6cc 1800 p.m.

Driver Rs.900 p.m.

Employer Employee Wear and tear or

hire charges anddriver salary

Up to 1.6cc 600 p.m

Above 1.6cc 900 p.m.Driver Rs.900 p.m.

Employer Employer Running and

maintenance exp

and driver salary

Up to 1.6cc 1800 p.m

Above 1.6cc 2400 p.m.

Driver Rs.900 p.m.

1. Where the car is owned by the employee and the expenses are met by him there

is no perquisite

2. if the car is used wholly for official purpose it is not perquisite whether expenses

are born by employer or employee

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Money Management - Salary