INCOME TAX ON SALARIES: Circular No. 17/2014

SOME ILLUSTRATIONS

Example 1

For Assessment Year 2015-16

(A) Calculation of Income tax in the case of an employee (Male or Female) below the age of sixty years and having gross salary income of:

i) Rs.2,50,000/- ,

ii) Rs.5,00,000/- ,

iii) Rs.10,00,000/-

iv) Rs.20,00,000/-. and

v) Rs. 1,10,00,000/-

(B) What will be the amount of TDS in case of above employees, if PAN is not submitted by them to their DDOs/Offices:

Click to view Part I

Income Tax on Salaries – Circular No. 17/2014

Click to view Part II
RATES OF INCOME-TAX AS PER FINANCE (No. 2) ACT, 2014

Click to view Part III

Scheme of Tax Deduction at Source from Salaries

Click to view Part IV

Persons responsible for Deducting Tax and their Duties:

Click for Part V & Para 5.1

Computation of Income Tax – Income Chargeable Under the Head Salaries

Click for Para 5.2

Definition of Salary, Perquisite and Profit in lieu of Salary (Section
17)

Click for Para 5.3

Income not included under the head Salaries

Particulars	Rupees	Rupees	Rupees	Rupees	Rupees
	(i)	(ii)	(iii)	(iv)	(v)
Gross Salary Income (including allowances)	2,50,000	5,00,000	10,00,000	20,00,000	1,10,00,000
Contribution of G.P.F.	45,000	50,000	1,00,000	1,00,000	1,00,000

Computation of Total Income and tax payable thereon

Particulars	Rupees	Rupees	Rupees	Rupees	Rupees
Particulars	(i)	(ii)	(iii)	(iv)	(v)
Gross Salary	2,50,000	5,00,000	10,00,000	20,00,000	1,10,00,000
Less: Deduction U/s 80C	45,000	50,000	1,00,000	1,00,000	1,00,000
Taxable Income	2,05,000	4,50,000	9,00,000	19,00,000	1,09,00,000
(A) Tax thereon	Nil	18,000*	1,05,000	3,95,000	3095000
Surcharge					309500
Add:
(i) Education Cess @ 2%.	Nil	360	2100	7,900	68090
(ii) Secondary and Higher Education Cess @1%	Nil	180	1050	3950	34045
Total tax payable	Nil	18,540	1,08,150	406850	3506635
(B) TDS under sec. 206AA in case where PAN is not furnished by the employee	Nil	90,000	1,30,000	406850	3506635

* includes Rebate of Rs 2000 u/s 87A

Example 2

For Assessment Year 2015-16

Calculation of Income Tax in the case of an employee below the age of sixty years having a handicapped dependent (With valid PAN furnished to employer).

S.No.	Particulars	Rupees
1	Gross Salary	4,00,000
2	Amount spent on treatment of a dependant, being person with disability (but not severe disability)	7000
3	Amount paid to LIC with regard to annuity for the maintenance of a dependant, being person with disability( but not severe disability)	60,000
4	GPF Contribution	25,000
5	LIP Paid	10,000
6	Interest Income on Savings Account	12,000

Computation of Tax

S.No.	Particulars	Rupees
1	Gross Salary	4,00,000
2	Add: Income from Other Sources Interest Income on Savings Account	Rs 12,000
3	Gross Total Income	4,12,000
4	Less: Deduction U/s 80DD (Restricted to Rs.50,000/- only)	50,000
5	Less: Deduction U/s 80C (i) GPF Rs.25,000/- + (ii) LIP Rs.10,000/- = Rs.35,000/-	35,000
6	Less: Deduction u/s 80TTA on Interest Income on savings account (restricted to Rs 10000/-)	10000
7	Total Income	3,17,000
8	Income Tax thereon/payable (includes Rebate of Rs 2000 as per Section 87A)	4,700
9	Add:
	(i). Education Cess @2%	94
	(ii). Secondary and Higher Education Cess @1%	47
10	Total Income Tax payable	4,841
11	Rounded off to	4,840

Example 3

For Assessment Year 2015-16

Calculation of Income Tax in the case of an employee below age of sixty years where medical treatment expenditure was borne by the employer (With valid PAN furnished to employer).

S.No.	Particulars	Rupees
1	Gross Salary	5,20,000
2	Medical Reimbursement by employer on the treatment of self and dependent family member	35,000
3	Contribution of GPF	20,000
4	LIC Premium	20,000
5	Repayment of House Building Advance	25,000
6	Tuition fees for two children	60,000
7	Investment in Unit-Linked Insurance Plan	30,000
8	Interest Income on Savings Account	8,000
9	Interest Income on Time Deposit	15,000

Computation of Tax

S.No.

Particulars

Rupees

Gross Salary

5,20,000

Add: Perquisite in respect of reimbursement of Medical Expenses

20,000

In excess of Rs.15,000/- in view of Section 17(2)(v)

Income from Other Sources

i)	Interest Income on Savings Account	Rs 8,000
ii)	Interest Income on Savings Account	Rs 15,000

23,000

Gross Total Income

5,63,000

a.Less: Deduction U/s 80C

(i)	GPF		Rs.20,000/-
(ii)	LIC		Rs.20,000/-
(iii)	Repayment of House Building Advance		Rs.25,000/-
(iv)	Tuition fees for two children		Rs.60,000/-
(v)	Investment in Unit-Linked Insurance Plan		Rs.30,000/-
	Total	=	Rs.1,55,000/-
	Restricted to		Rs. 1,50,000/-
b.	Less: Deduction u/s 80TTA on Interest Income on savings account (restricted to Rs 8000/- available only on Savings account interest)		Rs8,000/-
	Total deduction available		Rs 1,58,000/-

1,58,000

Total Income

4,05,000

Income Tax thereon/payable
(includes Rebate of Rs 2000 as per Section 87A)

13,500

Add:

(i). Education Cess @2%

270

(ii). Secondary and Higher Education Cess @1%

135

Total Income Tax payable

13,905

Rounded off to

13,910

Example 4

For Assessment Year 2015-16

Illustrative calculation of House Rent Allowance U/s 10 (13A) in respect of residential accommodation situated in Delhi in case of an employee below the age of sixty years (With valid PAN furnished to employer).

S.No.	Particulars	Rupees
1	Salary	3,50,000
2	Dearness Allowance	2,00,000
3	House Rent Allowance	1,40,000
4	House rent paid	1,44,000
5	General Provident Fund	60,000
6	Life Insurance Premium	4,000
7	Subscription to Unit-Linked Insurance Plan	50,000

Computation of total income and tax payable thereon

S.No.

Particulars

Rupees

Salary + Dearness Allowance + House Rent Allowance
3,50,000+2,00,000+1,40,000 = 6,90,000

6,90,000

Total Salary Income

6,90,000

Less: House Rent allowance exempt U/s 10(13A):
Least of:

(a).	Actual amount of HRA received	=	1,40,000
(b).	Expenditure of rent in excess of 10% of salary (including D.A. presuming that D.A. is taken for retirement benefit) (1,44,000-55,000)	=	89,000
(c).	50% of Salary(Basic+ DA)	=	2,75,000

89,000

Gross Total Income

6,01,000

Less: Deduction U/s 80C

(i).	GPF		Rs.60,000/-
(ii).	LIC		Rs. 4,000/-
(iii).	Investment in Unit-Linked Insurance Plan		Rs.50,000/-
	Total	=	Rs.1,14,000/-

1,14,000

Total Income

4,87,000

Tax payable on total income
(includes Rebate of Rs 2000 as per Section 87A)

21700

Add:

(i). Education Cess @2%

434

(ii). Secondary and Higher Education Cess @1%

217

Total Income Tax payable

22351

Rounded off to

22350

Example 5

For Assessment Year 2015-16

Illustrating valuation of perquisite and calculation of tax in the case of an employee below age of sixty years of a private company in Mumbai who was provided accommodation in a flat at concessional rate for ten months and in a hotel for two months ( With valid PAN furnished to employer).

S.No.	Particulars	Rupees
1	Salary	7,00,000
2	Bonus	1,40,000
3	Flat at concessional rate (for ten month).= Rs.3,60,00	3,60, 000
4	Hotel rent paid by employer (for two month)	1,00,000
5	Cost of furniture	2,00,000
6	Free gas, electricity, water etc. (Actual bills paid by company)	40,000
7	Rent recovered from employee	60,000
8	Subscription to Unit Linked Insurance Plan	50,000
9	Life Insurance Premium	10,000
10	Contribution to recognized P.F.	42,000

COMPUTATION OF TOTAL INCOME AND TAX PAID THEREON:

S.No.

Particulars

Rupees

Salary

7,00,000

Bonus

1,40,000

Total Salary(1+2) for the purpose of valuation of perquisites (12 months)

8,40,000

Valuation of perquisites

4(a)

Perquisite for flat:

Lower of (15% of salary for 10 months = Rs.1,05,000/-) and (actual rent paid= Rs 3,60,000) i.e.	Rs. 1,05,000/-
Less : Rent recovered	Rs.60000/-

Rs 45,000

1,38,600

4(b)

Perquisite for hotel :
Lower of (24% of salary of 2 months=Rs 33,600)
and (actual payment= Rs 1,00,000)

Rs 33,600

4(c)

Perquisites for furniture
@ 10% of cost of Rs.2,00,000

Rs 20,000

4(d)

Perquisite for free gas, electricity, water etc.

Rs 40,000

Total

1,38,600

Gross Total Income (Rs.8,40,000+ 1,38,600)

9,78,600

Gross Total Income

9,78,600

Less: Deduction U/s 80C:

(i).	Provident Fund (80C)	:	Rs.42,000/-
(ii).	LIC (80C)	:	Rs.10,000/-
(iii).	Subscription to Unit Linked Insurance Plan(80C)	:	Rs.50,000/-
	Total	=	Rs.1,02,000/-

1,02,000

Total Income

8,76,600

Tax Payable

1,00,320

Add:

(i). Education Cess @2%

2,006

(ii). Secondary and Higher Education Cess @1%

1,003

Total Income Tax payable

1,03,329

Rounded off to

1,03,330

Example 6

For Assessment Year 2015-16

Illustrating Valuation of perquisite and calculation of tax in the case of an employee below the age of 60 years of a Private Company posted at Delhi and repaying House Building Loan ( With valid PAN furnished to employer).

S.No.	Particulars	Rupees
1	Salary	4,00,000
2	Dearness Allowance	1,00,000
3	House Rent Allowance	1,80,000
4	Special Duties Allowance	12,000
5	Provident Fund	60,000
6	LIP	10,000
7	Deposit in NSC VIII issue	30,000
8	Rent Paid by the employee for house hired by her	1,20,000
9	Repayment of House Building Loan (Principal)	60,000
10	Tuition Fees for three children (Rs.10,000 per child)	30,000

Computation of total income and tax payable thereon

S.No.

Particulars

Rupees

Gross Salary (Basic+DA+HRA+SDA)

6,92,000

Less: House rent allowance exempt U/s 10 (13A)

Least of:

(a).	Actual amount of HRA received.	:	Rs.1,80,000
(b).	Expenditure on rent in excess of 10% of salary(Including D.A.)assuming D.A. is included for retirement benefits (1,20,000- 50,000)	:	Rs.70,000
(c).	50% of salary (including D.A)	:	Rs. 2,00,000

70,000

Gross Total Taxable Income

6,22,000

Less: Deduction U/s 80C

(i).	Provident Fund	:	Rs.60,000
(ii).	LIP	:	Rs.10,000
(iii).	NSC VIII Issue	:	Rs.30,000
(iv).	Repayment of HBA	:	Rs.60,000
(v).	Tuition Fees (Restricted to two children)	:	Rs.20,000
	Total	:	Rs.1,80,000
	Restricted to		Rs.1,50,000

1,50,000

Total Income

4,72,000

Income Tax thereon/payable
(includes Rebate of Rs 2000 as per Section 87A)

20,200

Add:

(i). Education Cess @2%

404

(ii). Secondary and Higher Education Cess @1%

202

Total Income Tax payable

20,806

Rounded off to

20,810

Example 7

For Assessment Year 2015-16

A. Calculation of Income tax in the case of a retired employee above the age of sixty years but below the age of 80 years and having gross pension of:

Particulars	Rupees (i)	Rupees (ii)	Rupees (iii)
Gross Pension	4,50,000	8,00,000	12,50,000
Contribution of P.P.F.	70,000	1,00,000	1,50,000

B What will be the amount of TDS in case of above employees, if PAN is not submitted by them to their DDOs/Offices:

Computation of Total Income and tax payable thereon

Particulars	Rupees (i)	Rupees (ii)	Rupees (iii)
Gross Pension	4,50,000	8,00,000	12,50,000
Less: Deduction U/s 80C	70,000	1,00,000	1,50,000
Taxable Income	3,80,000	7,00,000	11,00,000
Tax thereon (A)	6,000	60,000	1,50,000
Add:
(i) Education Cess @ 2%.	120	1200	3000
(ii) Secondary and Higher Education Cess @1%	60	600	1500
Total tax payable	6,180*	61,800	1,54,500
B. TDS under sec. 206AA in case where PAN is not furnished by the employee	16,000	80,000	1,60,000

*includes Rebate of Rs 2000 as per Section 87A

Example 8

For Assessment Year 2015-16

A. Calculation of Income tax in the case of a retired employee above the age of 80 years and having gross pension of:

Particulars	Rupees (i)	Rupees (ii)	Rupees (iii)
Gross Pension	5,00,000	8,00,000	12,50,000
Contribution of P.P.F.	80,000	1,20,000	1,50,000

B What will be the amount of TDS in case of above employees, if PAN is not submitted by them to their DDOs/Offices:

Computation of Total Income and tax payable thereon

Particulars	Rupees (i)	Rupees (ii)	Rupees (iii)
Gross Pension	5,00,000	8,00,000	12,50,000
Less: Deduction u/s 80C	80,000	1,20,000	1,50,000
Taxable Income	4,20,000	6,80,000	11,00,000
Tax thereon (A)	Nil	36,000	1,30,000
Add:
(i) Education Cess @ 2%.		720	2600
(ii) Secondary and Higher Education Cess @1%		360	1300
Total tax payable	Nil	37,080	1,33,900
B. TDS under sec. 206AA in case where PAN is not furnished by the employee	Nil	37,080	1,33,900

Other Parts of Circular

1. Income Tax on Salaries – Assessment Year 2015-16 – Financial Year 2014-15 Circular No. 17/2014

2. RATES OF INCOME-TAX AS PER FINANCE (No. 2) ACT, 2014: Click to View

3. SECTION 192 OF THE INCOME-TAX ACT, 1961: BROAD SCHEME OF TAX DEDUCTION AT SOURCE FROM “SALARIES”: Click to View

4. PERSONS RESPONSIBLE FOR DEDUCTING TAX AND THEIR DUTIES: Click to View

5. COMPUTATION
OF INCOME UNDER THE HEAD “SALARIES” View

5.1 INCOME
CHARGEABLE UNDER THE HEAD “SALARIES”: View

5.2 DEFINITION
OF “SALARY”, “PERQUISITE” AND “PROFIT IN LIEU OF SALARY”
(SECTION 17): View

5.3 INCOMES
NOT INCLUDED UNDER THE HEAD “SALARIES” (EXEMPTIONS) View

5.4 DEDUCTIONS
U/S 16 OF THE ACT FROM THE INCOME FROM SALARIES View

ANNEXURE 1 – SOME ILLUSTRATIONS – For Assessment Year 2015-16

Stay connected with us via Facebook, Google+ or Email Subscription.

Subscribe to Central Government Employee News & Tools by Email [Click Here]
Follow us: Twitter [click here] | Facebook [click here] | Google+ [click here]
Admin

Illustrations – For Assessment Year 2015-16: Income Tax on Salaries Circular No. 17/2014

COMMENTS

Leave a Reply Cancel reply

Get new posts by email:

Illustrations – For Assessment Year 2015-16: Income Tax on Salaries Circular No. 17/2014

RECOMMENDED FOR YOU

COMMENTS

Leave a Reply Cancel reply