CA Archit Nevatia
Charge of Income Tax
Types of Residential Status
The different types of residential status are:-
RATES OF INCOME TAX (Assessment Year 2015-16)
|1||Up to 250000||NIL|
2. In case of resident senior citizen i.e. age above 60 years but below 80 years
|1||Up to 300000||NIL|
Note: In case of residents individual if their total income is not more than Rs.500,000 than U/s 87A there is Tax Credit Relief of 10% of Taxable Income or upto maximum of Rs.2000.
Income From Salary
Salary includes [section17 (1)] :-
BASIS OF CHARGE
Income is taxable under head “Salaries”, only if there exists Employer – Employee Relationship between the payer and the payee. The following incomes shall be chargeable to income-tax under the head “Salaries”:-
Allowance is generally defined as a fixed quantity of money or other substance given regularly in addition to salary for the purpose of meeting some particular requirement connected with the services rendered by the employee or as compensation for unusual conditions of that service.
Exemption In Respect Of House Rent allowance is regulated by rule 2A. The least of the three given below is Exempt from Tax.
|1||An Amount Equal to 50 % of Salary. Where Residential House in situated at Bombay, Calcutta, Delhi or Madras and An Amount Equal to 40 % of Salary where Residential House is situated at any Other Place.|
|2||House Rent Allowance Received by The Employee in Respect of The Period during which Rental Accommodation is Occupied by the Employee during the Previous Year.|
|3||The Excess of Rent Paid over 10 % of Salary.|
4. Special allowances prescribed as exempt under section 10(14) – In the cases given below the amount of exemption under section 10(14) is :–
i. The amount of the allowance ; or
ii. The amount utilized for the specific purpose for which allowance is given.
Whichever is lower.
5. When exemption does not depend upon expenditure –
Whichever is lower.
|Name of allowance||Exemption as specified in rule 2BB|
|Children education allowance||The amount exempt is limited to Rs. 100 per month per child up to a maximum of two children.|
|Hostel expenditure allowance||It is exempt from tax to the extent of Rs. 300 per month per child up to a maximum of two children.|
|Transport allowance||It is exempt up to Rs. 800 per month (Rs. 1,600 per month in the case of an employee who is blind or orthopedically handicapped)|
1. Gratuity [Sec.10(10)] – Gratuity is a retirement benefit. It is generally payable at the time of cessation of employment and on the basis of duration of service. Tax treatment of gratuity is given below:
2. PENSION [SEC. 17(1)(ii)] – Pension is chargeable to tax as follows :-
3. Annuity [Sec. 17(1)(ii)] – An annuity payable by a present employer is taxable as salary even if it is paid voluntarily without any contractual obligation of the employer. An annuity received from an ex-employer is taxed as profit in lieu of salary.
4. Retrenchment compensation [Sec. 10(10B)] – Compensation received by a workman at the time of retrenchment is exempt from tax to the extent of the lower of the following:
a. an amount calculated in accordance with the provisions of sec. 25F(b) of the Industrial Disputes Act, 1947; or
b. such amount as notified by the Government (i.e., Rs, 5, 00, 000); or
c. the amount received.
5. Compensation received at the time of Voluntary Retirement [sec.10 (10C)] – Compensation received at the time of voluntary retirement is exempt from tax, subject to certain conditions. Maximum amount of exemption is Rs. 500000.
Provident Fund Scheme is a welfare scheme for the benefit of employees. The employee contributes certain sum to this fund every month and the employer also contributes certain sum to the provident fund in employees A/c. the employers contribution to the extent of 12% is not chargeable to tax.
Encashment of leave by surrendering leave standing to one’s credit is known as “leave salary”.
1. Employment Tax / Professional Tax [Sec.16(iii)]: Any sum paid by assessee on account of a tax on employment within the meaning of Article 276(2). Under the said article employment tax cannot exceed Rs. 2500 p.a.
Relief in respect of Advance or Arrears of Salary u/s 89
When an assessee is in receipt of a sum in the nature of salary, being paid in arrears or in advance, due to which his total income is assessed at a rate higher than that at which it would otherwise have been assessed, Relief is granted on an application made by the assessee to the assessing officer.
Income From House Property
Basis of Charge
Conditions to be Satisfied
1. The property must consist of buildings or lands appurtenant to such buildings.
2. The assessee must be the owner of such house property.
3. The property should not be used by the owner thereof for the purpose of any business or profession carried on by him, the profits of which are chargeable to tax.
Deduction Admissible u/s 24
i. Statutory deduction :- 30% of Annual Value (i.e.30% of NAV)
ii. Interest payable on capital borrowed for acquisition, construction, repair, renewal or reconstruction of house property :- Actual amount of interest for the year on accrual basis plus 1/5th of the interest, if any, pertaining to the pre-acquisition or pre-construction period.
Deduction for Interest on Capital Borrowed in case of SOP
Maximum limit of deduction in respect of interest on capital borrowed in case of a Self-occupied property whose annual value is assessed at NIL, is Rs. 1,50,000
|Interest on capital borrowed on or after 1-4-1999 for acquisition or construction of house||1,50,000|
|In any other case||30,000|
Income From Other Sources
General [Section 56(1)]
Income of every kind, which is not to be excluded from the total income and not chargeable to tax under any other head, shall be chargeable under the head “Income from Other Sources”.
Specific Income [Section 56(2)]
Deductions Under Chapter VI-A
The total income of an assessee is to be computed after making deductions permissible u/s 80C to 80U. However, the aggregate amount of deductions cannot exceed the Gross Total Income.
Deduction for Payment of Life Insurance Premia, etc., [Section 80C]
Deduction under this section is allowed as follows –
Investment Options under Section 80C
Contribution to Certain Pension Funds [Section 80CCC]
– Amount paid or deposited by individual in the previous year –
– Quantum of Deduction: Deduction shall be allowed to the extent of lower of the following –
Contribution to Pension Account [Sec. 80CCD]
Deduction to the Extent: –
|Maximum 10% of Salary (In case of employment)|
|Maximum 10% of Gross Total Income (In case of Self-employment)|
Aggregate Limit u/s 80C, 80CCC & 80CCD
The aggregate amount of deductions under section 80C, section 80CCC and section 80CCD shall not, in any case, exceed Rs.1,50,000.
Deduction In Respect Of Health Insurance Premia [Sec. 80D]
Maintenance of A Dependant Being Person With Disability [Section 80DD]
Deduction is available in respect of –
Deduction shall be allowed to the extent of –
Medical Expenditure on self or Dependent Relative, etc. [Sec. 80DDB]
Deduction is available in respect of sum actually paid during previous year for medical treatment of prescribed disease or ailment for the following –
Deduction shall be available to the extent of lower of the following –
Deduction in respect of Interest on Loan taken for Higher Education [Sec.80E]
Deduction in respect of Donations [Section 80G]
Deductions in respect of House Rent [Sec.80GG]
Deduction on Savings Bank Account [Sec.80TTA]
Deduction in respect of person with Disability [Section 80U]