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 1st day 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.
 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
 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
 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
 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
 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/.
 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 ---------- __________

 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.
NET TAXABLE INCOME RATE OF INCOME TAX
WOMENEMPLOYEES OTHERS
Up to Rs.1,80,000 NIL NIL
Rs1,80,001-Rs.1,90,000 NIL 10% of income exceeding
Rs.1,80,000
Rs1,90,001-Rs.2,50,000 10% of income exceeding 10% of income exceeding
Rs.1,90,000 Rs.1,80,000

Rs2,50,001-Rs.5,00,000 10% of income exceeding 10% of income exceeding

Rs.1,90,000 Rs.1,80,000

Rs.5,00,001 –Rs8,00,000 Rs31,000/- + 20% of Rs32,000/- + 20% of

income exceeding income exceeding
Rs.5,00,000 Rs.5,00,000
 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.