Continuing the previous article on taxation of salary
components, in this part I will discuss taxation on various allowances and
perquisites among the components.
A.
Allowances:
1.
Allowances that are fully taxable-
i.
Dearness allowance
ii.
Overtime allowance
iii.
Fixed medical allowance
iv.
City compensatory allowance
v.
Interim allowance
vi.
Servant allowance
vii.
Any cash allowance
2.
Allowances that are partially taxable-
i.
House rent allowance (HRA) [ sec 10(13A)]:
HRA grant to employees is exempt to the least of following:
Metro cities
(Delhi, Mumbai, Kolkata, Chennai, Bangalore) |
Other cities
|
1) Allowance actually received
|
1) Allowance actually received
|
2) Rent paid – 10% of salary
|
2) Rent paid – 10% of salary
|
3) 50% of salary
|
3) 40% of salary
|
Notes-
1)
Salary here includes = basic salary + dearness
allowance + commission as fixed % of turnover
2)
Exemption is available to employees who actually
pay rent for the period the accommodation is occupied
ii.
Special allowances [sec 10(14)]:
1)
Children education allowance is exempt upto Rs.
100 per month per child for maximum of 2 children
2)
Hostel expenditure allowance is exempt upto Rs.
300 per month per child upto maximum of 2 children
3)
Transport allowance exempt upto Rs. 800 per
month
4)
Tribal area allowance exempt Rs. 200 per month
5)
Allowance granted to transport employees to meet
expenses (Running truck, etc.) is exempt upto 7)% of such allowance or Rs. 6000
per month whichever is less.
3.
Allowances that are fully exempt :-
a)
Allowances granted to government employees
outside India
b)
Allowances granted to high court or supreme
court judges
c)
Allowances paid by the United Nations
Organization
d)
Compensatory allowance received by a judge
There are certain deductions allowed from gross salary (Sec
16) those are discussed here:-
a)
Deduction for entertainment allowance- e.g.
Sumptuary allowance
This deduction is allowed only to Government employees to the extent of
least of following-
i.
Rs. 5000
ii.
(1/5) th of basic salary
iii.
Actual Entertainment allowance received
b)
Professional tax-
The tax paid by assessee for tax on
employment. If profession tax is paid by the employer the deduction for this is
maximum Rs. 2500 per year.
B.
Perquisites :-
The values of any other benefits apart from
those mentioned above are included in perquisites.
(i)
Rent free accommodation provided by the employer
to the employee.
(ii)
Accommodation provided at concessional rate
which is not owned by the employer.
(iii)
Any benefit provided by the employer to the
employee (whether free of cost or at concessional rate).
(iv)
Any obligation of the employee met by the
employer.
(v)
Any sum paid by the employer, directly or
indirectly or through a fund, to keep assurance on the life of the assessee or
to effect a contract for an annuity( other than a DLI Fund, RPF and Approved
Superannuation Fund).
(vi)
The value of any fringe benefit which is not
chargeable to tax under Fringe Benefit Tax, provided by the employer to the
employee.
Note: Following points is to be
noted:
(i)
Perquisites in point No. (i) to (v) is taxable
in the hands of all employees whether specified or not.
(ii)
(ii) Perquisites in Point No. (vi) is taxable in
the hands of Specified Employees only.
(iii)
Specified Employees:
Specified Employee is an employee who
(a) is a director of the employer company.
(b) is an employee who has (shareholding of > 20 %) in the company
(c) an employee who draws Rs. 50,000.00 or more during the P/Y. For
calculating Rs. 50,000 all monetary payments is to be included.
v
Perquisites
which are exempt in the hands of all employees:-
1.
Any sum paid by the employer in respect of any
expenditure actually incurred by the employee on his medical treatment or
treatment of family member A) in a hospital maintained by the government or any
local authority or in any other approved hospital
B) IN a hospital approved by Chief Commissioner for the medical treatment of prescribed diseases
B) IN a hospital approved by Chief Commissioner for the medical treatment of prescribed diseases
2.
Group Medical Insurance taken by an employer or
reimbursement of medical insurance premium paid by the employee on his own
health or on health of any family member
3.
Any sum paid or reimbursed by employer for
medical treatment not exceeding Rs. 15000
4.
Goods manufactured by employer sold to employees
at concessional rates
5.
Amount spent on training of employees
6.
Gifts not exceeding Rs. 5000 per annum
7.
Free lunch facility (Exempt upto Rs. 50 per day)
8.
Club Facility
Only the exempt perquisites are covered here. There are
other perquisites which are provided by an employer as mentioned in the first
few points of perquisite above. In case of any suggestion comments are always
welcome. Keep commenting!!
No comments:
Post a Comment