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UNIVERSITY OF MUMBAI

RAYAT SHIKSHAN SANTHAS


KARMAVEER BHAURAO PATIL COLLAGE
VASHI, NAVI MUMBAI
PROJECT REPORT ON
INCOME FROM SALARY

SUBMITTED BY
HARSHAD M. NAGARKAR
ROLL NO.
PROJECT GUIDE

PROF.MR. VIVEK H. BOHIR


IN PARTIAL FULFILMENT FOR THE COURSE OF
MASTERS IN COMMERCE (DIRECT AND INDIRECT TAX)
M.Com. Semester - III
ACADEMIC YEAR 2014-2015

[1]

ACKNOWLEDGEMENT

I, would take this opportunity to thank the University of Mumbai for providing
me an opportunity to study on a project on Income from salary. This has been a
huge learning experience for me.
With great pleasure I take this opportunity to acknowledge people who have
made this project work possible. First of all I would sincerely like to express my
gratitude towards my project Guide Prof. VIVEK BOHIR for having shown
so much flexibility, guidance as well as supporting me in all possible ways
whenever I needed help. I am thankful for the motivation provided by my
project guide throughout and helped me to understand the topic in a very
effective and easy manner.
I would like to thank Principal Dr. V. S. Shivankar, and the coordinator of the
course Prof. K.G.Tapase for their indirect support throughout. Aniket Patil.
Without their support and conviction this project would not have been possible.
I acknowledge my indebtedness and express my great appreciation to all people
behind this work.
Signature

Harshad Nagarkar
[2]

DECLARATION

I, Harshad Milind Nagarkar student of KARMAVEER BHAURAO PATIL,


COLLEGE, VASHI Studying in M.com.Sem.-III hereby declare that I have
completed this project on Income from Salary as per the requirements of
University of Mumbai as a part of the curriculum of M.com. Sem.-III course and
this project has not been submitted to any other University or institute for the
award of any degree, diploma etc. the information is submitted by me is true and
original to the best of my knowledge.

Date: - ---------------------

-----------------------

Place: Vashi, Navi Mumbai.

[3]

RAYAT SHIKSHAN SANTHAS


KARMAVEER BHAURAO PATIL COLLEGE
VASHI, NAVI MUMBAI 400703

CERTIFICATE

This is to certify Harshad Milind Nagarkar Student of M.com. Sem. - III has
completed this project on Income from salary and has submitted a
satisfactory report under the guidance of Prof. in the partial fulfillment of
M.com.Sem.-III course of University of Mumbai in the academic year 20142015
-------------------Project Guide

-------------------Coordinator

--------------------------External

[4]

------------------principal

OBJECTIVES
After reading this lesson, you should be able to understand:
Classification of income into various heads.
Concept of salary income
Incomes forming part of salary
The computation of basic salary in grade system
[5]

Types of commission an employee can get


The concept of allowances
Various income tax provisions for computing taxable value of allowances
Computation of taxable value of allowances

RESEARCH METHODOLOGY

SECONDARY DATA

The secondary data has been collected from books, internet and research engine.
There has been immense and valuable data which put forth for the compulsion
of my project.

Index

Sr.

Title

[6]

page no.

Introduction to salary

1-9

Allowances under salary

10-16

Perquisites under salary

7-20

Deductions under salary

21-22

Exemption under salary

23-29

Computation of salary

30-37

Conclusion

38

Biligophy

[7]

39

Chaper1

INCOME FROM
SALART (U/S 1517)

INCOME FROM
HOUSE PROPERTY
U/S 22-27

PROFIT AND AGAIN


FROM BUSINESS
PROFESSINTON

HEADS OF
INCOME

U/S (28-44)

[8]

CAPTIAL GAINS
U/S (45-55)

INCOME FROM
OTHER SOURCE S
U/S (56-59)

[9]

Meaning of salary

The term salary usually refers to a payment for services. It means remuneration
for
services rendered to another person.

Basic elements of salary

Payer and payee must have employer and employee relationship.

Any payment received by an individual from a person other than his


employer cannot be termed as salary.

Basis of charge

Salary is chargeable to tax on due or on receipt basis whichever is earlier;


Salary received in advance is taxable in the year of receipt. Such salary
not be included again in the total income when it become due;
Outstanding salary is taxable on due basis i.e. salary is taxable in the year
in which it falls due.
Arrear salary is taxable on receipt basis.
[10]

Definition of salary

As per section 17 (1) of the Income Tax, Salary includes:


i) wages;
(ii) Any annuity or pension
(iii) Any gratuity;
(iv) Any fees, commissions, perquisites or profits in lieu of or in addition
any salary or wages;

to

(v) Any advance of salary


(vi) Any payment received by an employee in respect of any period of leave
not availed of by him;
(vi) The annual accretion to the balance at the credit of an employee
participating in a recognized provident fund, to the extent to which it is
chargeable to tax under rule 6 of Part A of the Fourth Schedule; and
(vii) The aggregate of all sums that are comprised in the transferred balance as
referred to in sub-rule (2) of rule 11 of Part A of the Fourth Schedule of an
employee participating in a recognized provident fund, to the extent to which it
is chargeable to tax under sub-rule (4) thereof;
(viii) The contribution made by the Central Government [or any other
employer] in the previous year, to the account of an employee under a pension
scheme referred to in section 80CCD;

Characteristics of Salary
[11]

1. The relationship of payer and payee must be of employer and employee


for an income to be categorized as salary income. For example: Salary
income of a Member of Parliament cannot be specified as salary, since it is
received from Government of India which is not his employer.
2. The Act makes no distinction between salary and wages, though generally
salary is paid for non-manual work and wages are paid for manual work.
3. Salary received from employer, whether one or more than one is included in
this head.
4. Salary is taxable either on due basis or receipt basis which ever matures
earlier:
I) Due basis when it is earned even if it is not received in the previous
year.
ii) Receipt basis when it is received even if it is not earned in the previous
year.
iii) Arrears of salary- which were not due and received earlier are taxable
when due or received, whichever is earlier.

Chapter 2

Allowances
Extra compensation paid by the employer, apart from salary, due to presence of
some unusual conditions in rendering the service is called allowance.
[12]

Allowances by whatever name called is taxable. However following allowance


are exempt to certain extent.

Some common allowance, which are exempt to the extent of amount received or
the received other limit specified, whichever is less;

sr
no
1

limit specified (amount up to


which exempt)

Nature of Allowance

Children Education Allowance

Hostel Expenditure Allowance for


the children

Transport Allowance to meet the


expenditure for the purpose of
commuting between the place of
residence and the place of work

Maximum of Rs. 100 p.m. per


child up to maximum of 2
children
Maximum of Rs. 300 p.m. per
month per up to maximum of 2
children
Maximum of Rs. 800 p.m. (Rs.
1600 p.m. if the employment is
blind or orthopedically
handicapped).

Fully Exempt from tax


Fully Taxable Allowance
1. Allowances to Govt. employees
outside India
1. Dearness Allowance
2. Allowances
to
high
court
2. City
Compensatory
&Supreme Court judges.
Allowance
3. Allowance from United Nations
Organizations.
3. Rural Allowance
4. Special allowance
4. Proctorship Allowance
5. Warden ship Allowance
6. Project Allowance
7. Deputation Allowance
8. overtime Allowance
9. Interim Allowance
10.Tiffin Allowance
11.Fixed Medical Allowance
12.Servant Allowance
[13]

Other Special Allowances

Children Education Allowance


Tribal Area Allowance
Hostel Expenditure Allowance
Remote Area Allowance
Compensatory Field Area Allowance
Counter Insurgency Allowance
Border Area Allowance
Hilly Area Allowance

Entertainment Allowance
It is the amount paid by employer for availing entertainment services. Under
section 16(ii) of Income Tax Act, 1961 it is entitled to deduction in tax from is
salary. But in this case deduction is given to his gross salary which also includes
entertainment allowance. Deduction in tax against this allowance can be divided
into two parts :
In case of Government employee entitled to minimum deduction of

Entertainment allowance received


20% of basic salary excluding any other allowance
Rs. 5000 In case of other employee entitled to minimum deduction of
(a) Entertainment allowance received
20% of basic salary excluding any other allowance
Rs. 7500
Entertainment allowance received during 1954-1955

[14]

Specific allowances that are fully exempt in the hands of employees


Allowance
Travelling allowance

Conditions to claim full exemption


Should be provided by the employer
and spent by the employee to meet the
cost of official tour or transfer
expenses. Cost of travel or transfer
includes payments for transfer,
packing and transportation of personal

Daily Allowance

effects.
Should be spent by the employee for
meeting the daily charges incurred on

Conveyance allowance

a tour or transfer.
Should be used by the employee to
meet the expenditure on
conveyance in performance of official

Helper allowance

duties
Should be used by an employee to
meet the expenditure on a helper who
assists him in the performance of

Academic allowance

official duties
Should be used by the employee for
his academic research and training

Uniform allowance

pursuits.
Should be spent by the employee for
purchasing/maintaining office uniform
for official duties.
[15]

HOUSE RENT ALLOWANCE [Sec. 10(13A) Rule 2A]


Conditions for claiming exemption:
Assessed is in receipt of HRA
Pays rent
Rent paid is more than 10% of salary.
Very Important:
The exemption shall be calculated on the basis of where the accommodation is
situated.
If the place of employment is the same for the whole year, then exemption
shall be calculated for the whole year.
If there is a change in place during the previous year, then it will be calculated
on a monthly basis
Exemption should be calculated in respect of the period during which rental
accommodation is occupied by the employee during the previous year.
Salary for the period during which rental accommodation is not occupied shall
not be considered.

Salary for HRA= Basic Pay + DA(considered for retirement benefits) +


Commission ( if received as a fixed percentage on turnover as per terms of
employment)

[16]

CALCULATION OF TAXABLE HRA


PARTICULAR

AMOUN

AMOUN

T
XXX

Amount received during the financial year for HRA


Less: Exemption u/s 10(13A) Rule 2A Least of the
followings:

xxx

(a) Actual amount received

xxx

(b) 50% of the salary if house is placed at Delhi,


Mumbai,
Kolkata, and Chennai
OR
40% of the salary in it is placed in any other city

xxx

(c) Rent paid less 10% of Salary


TAXABLE HRA

XXX

[17]

GRATUITY
1. Government Employee: Fully exempted from tax u/s 10(10)(i).
2. Non-Govt. Employee:
(a) Employee covered by Payment of Gratuity Act,1972

Computation of Taxable Gratuity:


PARTICULAR

AMOUN

AMOUN

T
XXX

Amount received as Gratuity


Less: Exemption u/s 10(10)(ii)
Least of the followings:
(i) Actual amount received

xxx

(ii) 15/26 Last drawn salary No. of years of


completed

xxx

service or part thereof in excess of 6 months


10,00,000

(iii) Maximum Limit


Taxable Gratuity

XXX

PENSION
[18]

Taxability of Commuted Pension:


(a) Pension is received in lump sum as per the terms of the employment on
retirement or superannuation.
(b) Full Value of Commuted Pension = Amount received on commutation /
percentage of commutation.
Recipient
Government employee

Amount Taxable
Fully exempted u/s 10(10A)(i)

( Central/State/Local
Authority or Statutory Corporation)
Non-Govt. employee who has also

Amount Received

received

Less: 1/3 of Full Value of Commuted

Gratuity u/s 10(10A)(ii)


Non-Govt. employee who has not

Pension
Amount Received

received

Less:1/2 of Full Value of Commuted

Gratuity u/s 10(10A)(iii)

Pension

Chapter 3

[19]

Perquisite
Under section 17(2) of Income Tax Act, 1961 perquisite is defined as:
Amount paid for the rent-free accommodation provided to the assessed by
his employer
Any concession in the matter of rent respecting any accommodation
provided to the assesses by his employer
Any benefit or amenity granted or provided free of cost or at concessional
rate in any of the following cases:

1. Employer may provide accommodation facility to the employee with or


with furniture. Such accommodation may be rent free at a concessional
rent.

[20]

a) For Rent free Accommodation


The amount taxable for such perquisite is as follows:

Type
of Taxable
amt
employee
unfurnished
accommodation
(1)

for Taxable amt to be


added if furniture
is
provided
(2)

Taxable amt
furnished
accommodation
(3)

for

a.
Government
employees

Amt payable as per 10% per annum (1) Plus (2)


Govt. rules
of
cost
of
furniture or rent
payable
b. Non - Government employees:
If house is
owned
by
the employer

15% of salary if
population
exceeds
25
lakhs.

10% per annum


of
cost
of
furniture or rent
payable.

(1) Plus (2)

10% of salary if
population
is
between 10 to
25 lakhs.
7.5% of salary
if population is
below 10 lakhs.
If house is
10% per annum (1) Plus (2)
not owned 15% of salary or lease of
cost
of
by
the rent, whichever is furniture or rent
employed
lower
payable
Note: Salary for the purpose of above includes basis, D.A, bonus, commission,
free and all taxable allowance by whatever name called, but doesnt include
allowance which are exempt or doesnt form part of salary for the calculation of
retirement benefit and also does not include the employers contribution to PF.
2. Car Facility
Motor car facility provided by an employer is taxable in the hands of the
employee on the
following basis.
[21]

Car is
owned by

Car is
maintained by

Employer

Employer

Employee

Used by
employees for

Person
chargeable

Official
purpose

Not a Perquisite

Not
applicable

Personal
Purpose

Maintenance +
10%
Depreciation

Specified
Employee

Both Purpose

Rs. 1,800 /Rs.


2,400 p.m

Official
purpose

Not a Perquisite

Personal
Purpose
Both Purpose
Official
purpose
Personal
Purpose

Employee

Taxable Value

Employer
Both Purpose

Hire charges of
the car /10%
depreciation
Rs.600/900 p.m
Not a Perquisite

Not
applicable
Specified
Employee
Not
applicable

Maintenance
Actual
expenditure
incurred - Rs
1,800 /2,400+
(Rs 900p.m. for
driver, if any)

Specified
Employee

Not
applicable
# depends on the cubic capacity of the car whether it exceeds 1.6 liters or not.
Employee

Any Purpose

Not a Perquisite

3. Gas, Electricity or Water Supply


Employer may also provide gas, electricity or water supply to the employee
either free of cost or at concessional price.

[22]

Following will be the taxable amount.

Situations (1)

If employer provides the


above free of cost (2)

If employer provides the


above at a concessional rate
(3)

If the employer
purchases it from
outside:

Cost incurred by the


employer to provide the
same

Column (2) - amount


recovered from the
employee.

if the employer
provides it from its own
source:

Manufacturing cost per


unit

Column (2) - amount


recovered from the
employee.

Insurance paid by the employer


Any premium borne by the employer to run an assurance on the life of the
employees taxable in the hands of the employee.

Chapter 4
DEDUCTION FROM SALARY
The following two deductions from Gross salary are allowed vide section 16

[23]

(1) Entertainment allowance


(2) Professional tax
ENTERTAINMENT ALLOWANCE
ONLY TO GOVERNMENT EMPLOYEE
It is initially included in gross taxable salary. Thereafter, section
16(ii) allows a deduction from Salaries only to the Government
employees to the least of the following:
a. 1/5th of the Basic Salary.
b. Rs. 5000
c. Amount of entertainment allowances actually received.
NON GOVERNMENT EMPLOYEE
It is not entitled to any deduction for entertainment allowances.
BASIC SALARY above would include Dearness Allowance if it forms part of
salary but exclude bonus, allowances, benefits and perquisites.
PROFESSIONAL TAX
Section 16(iii) allows a deduction from salaries of the amount of tax on
employment imposed by or under any law by the State Government under
Article 276 of the constitution.
COMPUTING DEDUCTIONS UNDER CHAPTER VI A
ASSESSEE:
PREEVIOUS YEAR:
ASSESSMENT YEAR:
PARTICULARS
Rs.

[24]

DEDUCTIONS UNDER CHAPTER VI A


1. SECTION 80C
Life insurance premium
Deferred annuity
Deferred annuity by government
Contribution to statutory P.F
Contribution to P.P.F
Contribution to recognized P.F
National saving scheme
National savings certificates
Unit linked insurance plan
P.O cumulative time deposits
Pension fund of UTI
Housing finance deposits
New house
Tuition fees
Infrastructure debentures
Bank fixed deposits
NABARD bonds
P.O. 5 year time deposit____________________
2. Section 80D : medical insurance
Self, spouse, dependent children
Parents
Additional ( senior citizen)

15000
15000
5000______

3. Section 80DD maintenance of handicapped ( Rs.


50000 to Rs. 100000)
4. Section 80DDB medical treatment (40000 to 60000)
5. Section 80E interest on higher education loan
6. Section 80U blind/handicapped/retarded ( lump sum)
( 50000 or 100000)
TOTAL DEDUCTIONS

Chapter 5
[25]

xxxxx

xxxxx
xxxxx
xxxxx
xxxxx
XXXXX

Exemption from salary


LEAVE ENCASHMENT
1. Leave encashment while in service is fully taxable as income of previous year
in which it is enchased.
2. Leave encashment on retirement: if
(a) an individual receives leave encashment on his retirement, then the amount
received will be eligible for exemption. The amount of exemption is based on
his employment:
(b) Government employee: fully exempted from tax
(c) Non-Govt. employee: An individual who is not a Government employee is
also entitled for exemption in respect of Leave Encashment compensation
received by him.
3. Computation of exemption from Leave Encashment:
Step 1 : Computation of Salary = 10 months average salary preceeding the
month of retirement.
Step 2 : Salary = Basic Pay + Dearness Allowance (forming a part of salary for
retirement benefits) + Commission
(if received as a fixed percentage on turnover)

[26]

Step3 : This calculation is only applicable where the employer has sanctioned
leave to the employee in excess of 30 days for every completed year of service.
Particulars

Amount

(i) Leave credit available on the date


xxx
of retirement
xxx
Less: Excess leave sanctioned by the
employer
(Leave sanctioned by the employer per
year 30 days per year) No. of
completed years of service)

Leave credit on the basis of 30 days


credit for completed years of service
(ii) Leave salary on the basis of 30
days credit = Step 3(i) x Step 1

xxx
xxx

[27]

Taxable Leave Salary on Retirement:


Particulars
Amount Received on Leave Encashment

Amount

Amount
xxx

Less: Exemption u/s 10(10AA)


Least of the followings:
(i) Actual amount of Leave encashment received

xxx

(ii) Average salary of the individual for the past 10


months 10 months

xxx

(iii) Maximum Limit

xxx

(iv) Leave at credit at the rate of 30 days p.a. for every


Completed

xxx

year of service as calculated in Step 3(ii)


Taxable Value of Leave Encashment

PROVIDENT FUND
[28]

xxx
xxx

Provident fund scheme provides for monthly contributions from the


employees as well as the employer to a Provident fund account. The balance to
the credit of such accounts also earns interest. The entire balance is paid to an
employee on his retirement. The taxability of employers contribution, interest
credited annually and balance paid on retirement depends upon the type of
Provident fund. There are different types of provident fund such as
1. Statutory provident fund
2. Recognizes provident fund
3. Unrecognized provident fund.

Particulars
Contribution
by
Assessors
contribution
Employers
contribution

Statutory
Employers and
employees
Deduction u/s
80c
Not taxable

Interest
credited

Fully exempted

Recognized
Employers and
employees
Deduction u/s 80c
Amount exceeding
12% of salary is
taxable
Exempt up to 9.5%
p.a. any excess is
taxable.

Unrecognized
Employers and
employees
No income tax
benefit
Not taxable at the
time of
contribution
On Employees
contribution
taxable under the
head Other
Sources
On Employers
contribution
not taxable at the
time of credit.

NORMAL RATE OF TAXES


FOR THE ASSESSMENT YEAR 2013-14 AND PREVIOUS YEAR 2012-13
[29]

SR NO.
1.

TOTAL INCOME
Where the total income

RATE OF TAX
Nil

does not exceed Rs.


2.

3.

4.

200000
Where the total income

10 % of the amount by

exceeds Rs. 200000 but

which the total income

does not exceed Rs.

exceeds Rs. 200000

500000
Where the total income

Rs. 30000 plus 20% of

exceeds Rs. 500000 but

the amount by which the

does not exceed Rs.

total income exceeds Rs.

1000000.
Where the total income

500000
Rs. 130000 plus 30% of

exceeds Rs. 1000000

the amount by which the


total income exceeds Rs.
1000000.

Rates of tax for every individual, resident in India, who is of the age of sixty
years or more but less than eighty years at any time during the financial
year.
SR NO.
1.

TOTAL INCOME
Where the total income
does not exceed Rs.
250000
[30]

RATE OF TAX
Nil

2.

3.

4.

Where the total income

10 % of the amount by

exceeds Rs. 250000 but

which the total income

does not exceed Rs.

exceeds Rs. 250000

500000
Where the total income

Rs. 25000 plus 20% of

exceeds Rs. 500000 but

the amount by which the

does not exceed Rs.

total income exceeds Rs.

1000000.
Where the total income

500000
Rs. 125000 plus 30% of

exceeds Rs. 1000000

the amount by which the


total income exceeds Rs.
1000000.

In case of every individual being a resident in India, who is of the age of


eighty years or more at any time during the financial year.
SR NO.
TOTAL INCOME
RATE OF TAX
1.
Where the total income
Nil
does not exceed Rs.
2.

3.

500000
Where the total income

20 % of the amount by

exceeds Rs. 500000 but

which the total income

does not exceed Rs.

exceeds Rs. 500000

1000000
Where the total income

Rs. 100000 plus 30% of

[31]

exceed Rs. 1000000.

the amount by which the


total income exceeds Rs.
1000000

COMPUTATION OF INCOME FROM SALARY.


Name of assesses
Previous year 1-4-2012 to 31-3-2013
[32]

Assessment year 2013-14


Particular
Income from salary

Amount

1. salary
gross- net + deductions
due/ deemed to accrue in India
advance/ arrears received
voluntary payments
less:- exempt u/s 10
2. allowances
dearness allowances
entertainment allowances
leave travel allowances( less
exempt u/s10(10) )
house rent allowances ( less

XXXXX

exempt u/s 10(13) )


expenses allowances ( less
exempt u/s 10(14) )
3. Annuity ( less : exempt u/s
10(13))
4. Pension
uncommented (monthly)
commuted
less:- commuter pension exempt u/s
10(10A)
govt employee fully
exempt
non govt :a. gratuity, 1/3 of full
XXXXX

commuted value
[33]

b. otherwise, of full

XXXXX

commuted value
5. Gratuity (gross loss: exempt u\s
10(10)
govt employee fully exempt
employee under payment of
gratuity act least of
a) Salary p.m x 15/26 x completed
year of service.
b) Rs. 10,00,000
c) Gratuity actually received.
Other employee:- lower of
a. Average salary of last 10
months x 3/2 x no. of years
of service
b. Rs. 10,00,000
c. Gratuity actually received.
6. Fees and Commissions
7. Perquisites
Perquisites taxable for all

XXXXX

employees
Perquisites not taxable at all.

8. Profit in lieu of salary


Compensation for
termination of employment
Compensation for
modification of terms of

[34]

employment
Employers contribution to
PF + interest thereon
Less:-

XXXXX

Compensation to

XXXXX

workman/ VRS
Payment from statutory
P.F
Payment from
superannuation fund.
9. Leave encashment ( gross less

XXXXX

exempt u/s 10(10AA)


Government employees , fully
exempt
Non govt employee least of
Encashment of earned leave
10 x average salary for last
10 months
Rs. 300000
Amount actually received

GROSS TAXABLE SALARY


Less :- deduction under section 16
Entertainment allowances
Govt.Empolyee least of
a. 1/5th of Basic salary
b. Rs.5,000
c. Actual allowance
[35]

Professional tax

XXXXX

NET TAXABLE SALARY ( GROSS


LESS DEDUCTION)

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX
[36]

IIIustration 1(Retiring Employee)


Mr. X retired from the services of M/s Y ltd. On 31.01.2013 after completing
service of 30 years and one month. He had joined the company in 1982 at the
age of 30 years and received the following on his retirement:
1) Gratuity Rs.6, 00,000. He was covered under the payment of gratuity act,
1972.
2) Leave encashment of Rs. 3, 30,000 for 330 day leave balance in his
account. He was credited 30 days leave for each completed year of
service.
3) As per the scheme of the company, he was offered a car which was
purchased on 01.02.2010 by the company for Rs. 5, 00,000. Company has
recovered 2,00,000 from him for the car. Company depreciated vehicles
at the rate of15% on straight line method.
4) An amount of Rs. 3, 00,000 as commutation of 2/3 of his pension.
5) Company presented him a gift voucher worth Rs.6,000 on his retirement.
6) His colleagues also gifted him a television ( LCD) worth 50,000 form
their own contribution.
[37]

Following are the other particulars;


1) He has drawn a Basis salary of Rs. 20,000 and 50% Dearness allowance
per allowance per month for the period from 01.04.2012 to 31.01.2013.
2) Received pension of 5,000 per month for the period 01.02.2013 to
31.03.2013 after commutation of pension.
Compute his total income from the above for Assessment Year 2013-14.

Solution:

Computation of Gross total Income


Particular
Basic Salary (20,000 *10)
DA (2,00,000*50%)
Gift voucher (6000-5000)
Motor car ( WN)
Uncommitted Pension (Sec 17(1)( (5,000*2)
Commuted pension (Sec10(10A))
Gratuity (Sec10(10))
Leave salary ( Sec 10(10A))

Rs.
2,00,000
1,00,000
1000
56,000
10,000
1,50,000
80,789
1,30,000

Gross Salary

7,27,769

Working notes:
1.
[38]

Motor car ( 17(2)(viii)rule3(7)(viii) cost


Less: Depreciation @20%
01.02.2010-31.01.2011
01.02.2011-31.01.2012
01.022013-31.01.2013
WDV
Less: Amount Recovered
Perquisite value of Car

5,00,0000
1,00,000
80,000
64,000
2,56,000
2,00,000
56,000

2.
commuted pension {Sec 10(10)}
Amount received
(Less) Exempted (3,00,000*3/2*1/3)
Taxable

3,00,000
1,50,000
1,50,000

3. Gratuity {Sec10 (10)}


Least of the following is exempt
1. Gratuity received-Rs.6, 00,000
2. Rs. 10, 00,000
3. 15/26*30,000*30=5, 19,231
Received
=6, 00,000
Exempt
=5, 19,231
Taxable
= 80,769

4. Leave Salary {Sec 10(10A)}


Least of the following is exempt
1.
2.
3.
4.

Rs.3,30,000
Rs. 10*20,0000 =2,20,000
Rs.3,00,000
330/30*20,000 =2,20,000
[39]

Received
Exempt
Taxable

= Rs. 3, 30,000
= Rs. 2, 00,000
= Rs. 1, 30,000

CONCLUSION

1. The employee or individual who earn salary has to pay tax on income of
previous year in the assessment year.
2. They can also get benefits of deduction which help them to reduce tax
liability.
3. The individual has to pay tax in advance if his tax liability is more than
Rs. 10000 in previous year through assumption .

[40]

Bibliography

www.google.com

[41]

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