Leave Salary
Leave salary received
on retirement:
Category OF Employees
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Central Government or a state government employee:
Non-Government employee:
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Any payment received as the cash equivalent of leave salary in
respect of period of earned leave at his credit at the time of his retirement
or superannuation is exempt from tax u/s 10 (10AA)(i)
Leave salary received by such employee is exempt from tax u/s
10(10AA)(ii) to the extent of the least of the following:
(a)leave encashment actually
received
(b) cash equivalent of leave
salary in respect of the period of
earned leave to the credit of the employee at the time of retirement.
(c)10 months average salary;
(d)maximum Rs.3,00,000
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Ø
Salary means:- Basic salary + D.A (If it is part
of salary for retirement benefits )+ commission (if it is based on a fixed
percentage of turnover achieved by the employee).
Ø
Last 10months should be considered from the
percentage day of retirement.
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Average salary = 10 months/10
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1 month= 30 days.
Pension
1. Uncommuted pension (i.e. Periodical pension, monthly or
otherwise) received by any employee (govt. or non-govt. employee) is taxable in
full u/s 15.
2. Commuted pension:-
A) Govt.
Employee: the commuted pension received by Govt. employee is wholly exempt from
tax u/s 10(10A)(i).
B)Non-Govt.
Employees:- Any commuted pension received by non- govt. employees is exempt
from tax u/s10(10A)(ii) as follows:
(i) If he
received gratuity:- The commuted value of 1/3 rd of the
pension which he normally entitled to received.
(ii) If he
does not received gratuity: - the commuted value of 1/2 of the pension which he normally entitle to
received…
·
Commuted pension received from a pension fund
sit up by the life insurance corporation of India is exempt from tax u/s
10(10A)(iii)
·
Commuted
pension received by a judge of supreme court or high count is fully exempt from
tax u/s 10(10A)((i)
·
Pension received by employees of the United
Nations is fully exempt from tax.
·
Pension received by a central Govt. employee who
joined on or after January 1,2004 is taxable.[ deduction available u/s 80ccd]
Gratuity
A.
Gratuity received by government employee
:- Any death-cum-retirement gratuity received by a central Government or a
state Government employee or an employee of a local authority (and not an
employee of a statutory corporation) is wholly exempt from tax u/s 10(10)(i).
B.
Gratuity received by a non-Government
employee covered under the payment of gratuity act,1972 is exempt from tax u/s
10(10)(ii) to the extent of the least of the following:-
I.
Actual amount of gratuity received.
II.
15 day salary based on salary last drawn for
each completed years of service or part thereof in excess of six month.
III.
Maximum Rs.10, 00,000.
NOTE:- salary means:- (basic salary +
dearness allowance) Dearness allowance / pay shall be considered only when it
is part or salary for computing all
retirement benefits.
c. Gratuity received by a non-Government employee and employees of
statutory corporations not covered by the payment of gratuity Act, 1972 is
exempt from tax u/s 10(10)(iii) to the extent of least of the followings:-
I.
Actual amount of gratuity received.
II.
One-half month’s average salary for each
completed year of service (Any fraction of the year is to be ignored.)
III.
Maximum Rs.10, 00,000.
Note:- salary means:- [ basic salary + D.A+ commission (if
commission is payable at a fixed percentage of turnover achieved by an
employee)]
·
Average salary is to be computed on the basis of
the average salary for 10 months the month in which retirement takes place.
House Rent Allowance [sec .10(13A) and Rule 2A]:-
Such allowance is exempt from tax to the extent of least of the
following alternatives:-
a)
Actual allowance received by the assessee for
the period during which the rental accommodation is occupied by him.
b)
Excess of rent paid over 10% of his salary.
c)
50% of his salary if residential house is
situated in Mumbai, Kolkata, Delhi and Chennai and 40% of salary in other
cases.
·
Salary means:- (basic salary + D.A+ commission)
·
Exemption not available :- in the following
cases exemption under this section is not available:
i.
Te assess stays in his own accommodation
ii.
The assessee has not actually paid any rent for
the accommodation occupied by him.
iii.
The rent paid for accommodation is not more than
10% of salary.
Entertainment Allowance [sec.16(ii)]:-
Entertainment allowance
is first included in salary income under the head ‘salaries’ and thereafter a
deduction is given u/s 16(ii).
In the case of
govt. employee (I e. center govt. or a sate govt. employee), the least of the
following is deduction:
A. 20%
of basic salary.
B. Amount
of entertainment allowance granted during the previous year;
C. Maximum
Rs.5,000.
·
In case of a non-Govt employee (including
employees of slatutory corporations and local authority) entertainment
allowance is not deductible.
Retrenchment compensation [sec.10(10B)] :-
Compensation received by a workman at the time of retrenchment is exempt
from tax to the extent of lower of the
following:
A.
Retrenchment compensation actually received;
B.
15 days ‘average pay’ for every completed year
of continuous service or any part thereof exceeding six months. [as per rule provided is section 25F(b) of
industrial disputes Act,1947];
C.
Amount specified by central Government
(ie.Rs.5,00,000 ).
[It includes under ‘profit in lieu of
salary’.]
However the aforesaid limit is not applicable
in cases where compensation paid under any scheme approved by the central Government.
Compensation received due to
voluntary retirement u/s 10(10c):- The amount of exemption u/s 10(10c) is least of the
following three alternatives:
I.
Maximum Rs.5,00,000 .
II.
Three months salary on the basis of least drawn
for each completed year of service.
III.
Monthly salary at the time of retirement x
balance of month of service left before the date of admission.
·
Salary means :- Basic salary + D.A + commission
.
Residential
Status
Resident in India:
Basic condition:- An individual is said to be resident in India in any
previous year, if he satisfies one of the following condition:-
a)
He is in India in that previous year for a
period of 182 days or more. u/s 6(i)(a)
b)
He is in India for a period of 60 days during
the previous year and 365 days or more during four years immediately preceding
the previous year.[u/s.6(1)(c)]
[Exception has been given below]
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Resident and ordinarily resident in India:-
Basic condition:- He must satisfy one of the basic conditions
as indicated above .
Additional condition:-[u/s. 6(6)(a)]
A resident individual is said to be ordinarily resident in
India in any previous year if he satisfies both the additional conditions:
i.
He has been resident in India in at least 2 out
of 10 previous years immediately preceding the relevant previous year .
ii.
He has been is India for a period of 730 days or
more during 7 years immediately preceding the relevant previous year.
·
Resident but not ordinarily resident :- An
individual is side to be resident but
not ordinarily resident in India in any previous year if –
i.
He satisfies one of the two basic condition u/s
6(i); and
ii.
He satisfies none (or one) of the two additional
condition.
·
Non-resident in India:- If the individual
does not satisfy none of the basic conditions.
·
Exception:-
A.
An Indian citizen who leaves India During any
previous for the purpose of employment outside India or an India citizen who
leaves India during the previous year as a member of the crew of an Indian ship
B.
Indian citizen or a person of Indian origin, who
is outside India, comes in a visit to India during the previous year;
For the above two
cases the period of 60 days referred to u/s.6 (1) (c) is extended to 182
days.
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