Direct Taxation

1. DIRECT TAX

3. INCOME FROM SALARY
Deduction under section 16 :
The income chargeable under the head salary(salaries) shall be
computed after making the following deduction from gross salary
* Deduction for entertainment allowance,
* Deduction for profession tax.
Deduction for entertainment allowance :
* Entertainment allowance is not eligible for exemption but only
qualifies for deduction,
* Therefore entertainment allows is first included in gross salary and
then make a deduction section us 16(2) can be claimed,
* This deduction is available only in the case of government employees
and not in case of other employees,
* The deduction allowable in case of government employee is to the
extend of the least of the following
- limit 5000
- 15th of basic salary
- actual entertainment allowance received.

4. Profession tax us 16(3) :
* Deduction is allowed in respect of any sum paid by the assessee on
account of tax on employment levied by or under any law,
* In case profession tax is paid by employer on behalf of employee the
amount so paid should be included in gross salary as a perquisite and then deduction
section us 16 subsection three can be claimed,
* The amount of profession tax levied by any local authority shall not
exceed rs.2500 per annum article 276(2) of constitution of India.
Profession tax
Employer on
behalf of
employee
Employee
himself
First we should
included in gross
salary and then
make a deduction
section us 16(3).
No need to included
in gross salary.

6. GRATUITY 10(10)
For government employee :
Any deathcum retirement gratuity received by the government employee
is fully exempted from tax.
For private employee :
Private employee
Covered act 1972 Not covered act 1972
* 10,00,000
* Actual gratuity received
* 15/26 X last drawn salary X
number of completed year
of service
* Salary meaning = Bp + DA (
whether forming part of
retirement benefits or not)
* 10,00,000
* Actual gratuity received
* 1/2 X average of 10 month
salary X number of completed
year of service
* Salary meaning = Bp +
DA(wether forming part of
retirement benefits commission
as percentage of turnover)

7. Notes :
* Bp = Basic salary
* DA = Dearness allowance
PENSION US 10(10A)

8. Formate :
Uncommuted pension before the date
Of commutation = xxxx
Uncommuted pension after the date
Of commutation = xxxx
Commuted pension = xxxx
(-) exemption us 10(10A) = xxxx. = xxxx (+)
xxxx
LEAVE ENCASHMENT US 10(10AA)
Leave encashment received = xxxx
(-) Exemption us 10(10AA) :
(Least of the following )
* 3,00,000 which
* Actual leave salary received ever
* Leave credit is
* Avg.of 10 month salary X 10 less = (xxxx)
xxxx

9. RETRENCHMENT COMPENSATION US 10(10B) :
Retrenchment compensation received = xxx
(-) Exemption us 10(10B) :(least of the following)
* 5,00,000
* Actual amount received
* Amount determined under industrial disputes = xxx
xxx
VOLUNTARY COMPENSATION 10(10C) :
Voluntary compensation received = xxx
(-) Exemption us 10(10C) :
(Least of the following)
* 5,00,000
* Actual amount received
* A) last drawn salary x 3 x no.of
* Completed year of services = xxx
* B) last drawn salary x balance
* no.of month of services left = xxx
* (Which ever is high). xxx. = xxx
*
* Xxx

10. HOUSE RENT ALLOWANCE US 10(13A) :
House rent allowance received = xxx
(-) Exemption us 10(13A) :
(Least of the following)
* Rent paid - 10% of salary
* Actual amount received
* 50% for matro cities / 40% for
* Non matro cities of salary xxx. = xxx
*
* Xxx
Notes :
* matro cities - Chennai, Mumbai, Delhi, kolkatta.
* salary meaning = Basic salary + dearness allowance ( whether forming part of
Retirement benefits commission as % of turn over )
ALLOWANCE US 10(14)
There are three types of allowances, they are
* Fully taxable allowance,
* Specified allowance,
* Limited allowance.

12. PERQUISITE

14. Notes :
* Fully exempted - Government hospital, government approved hospital,
employer maintained hospital, central board of income tax.
* limite upto 15000 us 17(2)(5) - private hospital.
UNFURNITURE ACCOMMODATION
Accommodation owned by employer :
* Less than 10 lakhs - 7.5% of salary
* 10 lakhs to 25 lakhs - 10% of salary
* More than 25 lakhs - 15% of salary
Accommodation is taken on lease by the employer and
provided to the employee :
(Least of the following)
15% of salary = xxx
(Or)
Rent paid = xxx = xxx
(-) amount recovered from employee = xxx
xxx

16. Notes :
Salary meaning = Basic pay + dearness allowance ( forming part of
Retirement benefits) + commission + bonus + all taxable
Allowance.
FURNITURE ACCOMMODATION
Value of unfurnitured accommodation computed as above = xxx
(+) 10% of original cost of furniture owned and provide by
the employer = xxx
(+) furniture rent = xxx
(-) amount recovered from employee = xxx
xxx

18. LOAN
Particular computer and electronic car other movable asset
Method of WDV WDV SLM
Depreciation
Rate of
Depreciation
For every 50% 20% 10%
Completed
Year
Format :
Actual cost = xxx
(-) depreciation = xxx
xxx
(-) sales value = xxx
Taxable value of perquisite = xxx

21. Thank you