INCOME TAX COMPUTATION- SALARY
STEPS FOR CALCULATION OF INCOME TAX ON SALARIES
FIRST FIND OUT THE COMPONENT-WISE INCOME.
1. Basic Salary
2. House Rent Allowance
3. Transport Allowance
4. City Compensatory Allowance
5. Bonus
6. Arrears of Salary if any
7. Performance Incentive during the year- actually received
8. Annual Performance Bonus
9. Any Other Payment Made by the Company
10. Provisional Incentive a Team member is expected to earn during the Current Year – we assume it to be 20% higher then previous year.
OUT OF ABOVE FOLLWING WILL BE EXEMPT :
A) HOUSE RENT PAID :
FOR CALCULATING THE REBATE - FOLLOWING STEPS ARE REQUIRED :
CALCULATE THE YEARLY :
A) House Rent Paid
B) House Rent Allowance Receivable
C1) If Residing in Metropolitan Cities : 50% of Basic Salary
(i.e. Delhi, Mumabi, Kolkatta, Chennai)
C2) Otherwise : 40% of Basic Salary
D) Excess of House Rent Paid over 10% of Basic
Least of the above is exempt.
B) TRANSPORT / CONVEYANCE ALLOWANCE
IF NO REIMBURSEMENT / CONVEYANCE IS PROVIDED BY THE EMPLOYER THEN A TRANSPORT ALLOWANCE OF RS. 800/- P.M. IS EXEMPT
C) HOUSING LOAN INTEREST
AN AMOUNT TO THE EXTENT OF Rs. 1,50,000/- IS EXEMPT TOWARDS INTEREST PAYMENT FOR HOUSING LOAN.
Note : The Housing Loan Interest can be deducted only if the House for which Loan is taken is Self Occupied.
Rebate for Housing Loan Interest and House Rent can’t be given simultaneously.
I I Add:
A) IF TAKEN ANY LOAN FROM THE COMPANY- INTEREST @ 13% ON REDUCING LOAN
B) IF RENT FREE ACCOMMODATION IS PROVIDED BY THE COMPANY THEN LOWER OF 20% OF GROSS SALARY OR RENT PAID BY THE COMPANY.
C) IF JOINED THE COMPANY DURING THE YEAR – INCOME FROM THE PREVIOUS EMPLOYER DURING THE CURRENT FINANCIAL YEAR – Please provide form 16 / Salary Certificate from the previous Employer.
D) ANY OTHER INCOME LIKE INTEREST ON BANK DEPOSITS, SAVINGS BANK ACCOUNT, NSCS, INTEREST ON ANY OTHER DEPOSITS, BONDS & SAVINGS .
III RESULTANT FIGURE IS YOUR GROSS TAXABLE INCOME.
IV FOLLOWING DEDUCTIONS ARE AVAILAIBLE OUT OF THE ABOVE
A) 80G:Donation to Prime Minister Relief Fund - No Limit
B) 80 D: Mediclaim premium – Rs.10,000 Max.
C) DEDUCTION UNDER SECTION 80 C - TOTAL Rs. 1,00,000
a) PF/FPF Deducted
b) PPF
c) LIP/ULIP
d) Infrastructure Bonds
e) Housing Loan Payment – Principal
f) NSC
g) Mutual Fund Tax Shield
h) Expenses on Children Education
i) 80CCC : Pension Plan
TOTAL (a to i)
V BALANCE IS THE NET TAXABLE INCOME.
VI CALCULATE TAX ON THE NET TAXABLE INCOME AS PER FOLLOWING RATE :
FOR MEN :
0-1,60,000 Nil
1,60 ,001-3,00,000 10%
3,00,001-5,00,000 20%
5,00,001 AND ABOVE 30%
FOR WOMEN :
0-1,90,000 Nil
1,90 ,001-3,00,000 10%
3,00,001 – 5,00,000 20%
5,00,001 AND ABOVE 30%
FOR SR. CITIZEN :
0-2,40,000 Nil
2,40,001 -3,00,000 10%
3,00,001 to 5,00,000 20%
5,00,001 AND ABOVE 30%
IF THE NET TAXABLE INCOME EXCEEDS Rs.10,00,000/-
ADD 10% SURCHARGE ON THE TAX FIGURE
ADD : 3% EDUCATION CESS ON THE TAX LIABILITY
RESULTANT FIGURE IS THE NET TAX LIABILITY.
VII TAX DEDUCTIBLE AT SOURCE
The Tax as Calculated above shall be deducted in 12 instalemts spread over April to March.
This is to help Salaried class to plan their IT savings and invest immediately as they need to give proof to their employers before 28th Feb.
For more details, free guidance book send me mail.
Rajakumar
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