2. R Venkatakrishnan & Associates, Chartered Accountants
Topics
Introduction1
Salary Income2
Special Exemptions in Salary Income3
Deductions from Taxable Income4
Other Information5
3. Confusions in Jan to Mar
R Venkatakrishnan & Associates, Chartered Accountants
How do I
learn
about my
investment
and taxes?
Can I use
both HRA
and Home
loan to save
taxes?
What is the
max I can
save on
Taxes?
How much
tax I Need to
pay this
year?
PPF,FD or
Insurance
for Tax
saving?
What is the
mystery of
80’s in tax
planning?
Why did I buy
that insurance
thing which I
never require? How much
benefit I can get
for my home
and education
loan?
4. R Venkatakrishnan & Associates, Chartered Accountants
1. Introduction
Income tax:- Tax on the income earned. Income tax is an
important source of revenue for government in all the countries
today.
Income :- Income means some monetary returns periodically
received from some definite source.
Who is supposed to pay income tax :-
- An individual
- A company
- A firm
- A HUF
- A local authority
- A BOI or AOP
- AJP
5. R Venkatakrishnan & Associates, Chartered Accountants
Total Income of an Individual Assessee
Particulars Amount
Income from Salary 7,50,000
Income from House Property (1,50,000)
Profits/Gains from Business or Profession 50,000
Income from Capital Gains 35,000
Income from other source 15,000
Gross Total Income 7,00,000
Less : Deductions under Chapter VI-A (1,20,000)
Total Income 5,80,000
* The above figures are illustrative
6. R Venkatakrishnan & Associates, Chartered Accountants
2. SALARY INCOME
(SECTION 15,16 & 17)
What is salary?
Every payment made
By employer to employee
For services rendered
Includes both monetary and non monetary facilities
Foregoing salary is salary income
Tax free salary should include the tax paid by the employer
Basis of Charge
Salary is chargeable to tax when it is due to be paid whether it is paid or not
Salary is chargeable to tax when any amount is paid whether it is due or not
Arrears of salary paid to employee is chargeable to tax (in the year of receipt)
7. R Venkatakrishnan & Associates, Chartered Accountants
2. SALARY INCOME contd..
Salary includes…
8. R Venkatakrishnan & Associates, Chartered Accountants
2. SALARY INCOME contd..
Income from “Salary”
includes
Salary Allowances
Fully
Taxable
Fully
Exempted
Partially
Exempted
Special
Exemptions
Perquisites
Taxable
Perquisites
Non
Taxable
Perquisites
Profit in
lieu of
salary
9. R Venkatakrishnan & Associates, Chartered Accountants
2. SALARY INCOME contd..
Salary includes:
Basic salary and allowances
DA
Advance salary
Arrear Salary
Leave salary
Fully Taxable Salary:
Family Allowance
Overtime, servant, warden
Allowance.
Lunch or Tiffin allowance
Leave encashment during service
Monthly or uncommuted pension
Bonus
Commission
Profit in lieu of salary
10. R Venkatakrishnan & Associates, Chartered Accountants
2. SALARY INCOME contd..
Travelling Allowance
Daily Allowance
Conveyance Allowance
Helper Allowance
Academic Allowance
Uniform Allowance
Fully Exempted Allowances:
Note: Allowances received should be expensed towards official performance of duties only.
Partially Exempted Allowances:
Type of Allowance Amount of Exemption (in Rs.)
Children Education Allowance `100 p.m. per child (restricted to 2 children)
Children Hostel Expenditure Allowance `300 p.m. per child (restricted to 2 children)
Transport Allowance `800 p.m. (`1600 p.m. if the employee is
blind/handicapped)
Note: Partially exempted allowances mentioned above are not complete and includes other
allowances mentioned in section 10(14) of the Act.
11. R Venkatakrishnan & Associates, Chartered Accountants
2. SALARY INCOME contd..
Perquisites includes any amount due to or received in lump sum or
otherwise, by an assessee, from an employer. Perquisites are usually
attached to a position, by an organization.
Perquisites Meaning:
Value of Rent free accommodation given by the Employer.
Value of Accommodation given at concessional rate.
Value of benefit given free of cost or at concessional rate.
Sum paid by employer on behalf of the employees for any obligation payable by
the employee.
Value of any specified securities or sweat equity shares allocated to employee at
free of cost or at a concessional rate.
Amount contributed by employer to an approved superannuation fund in excess
of Rs.1,00,000/-.
Sum paid/payable by the employer towards insurance on the life of the Individual.
Perquisites includes
12. R Venkatakrishnan & Associates, Chartered Accountants
3.Special Salary Exemptions
House Rent Allowance
• The HRA exemption, that can be claimed for
the Tax Exemption is minimum of the
following:
• Actual HRA received.
• Rent paid less 10% of the Salary.
• 40%/50% of Salary.
• If the rent paid during the year exceeds 1
lakh, you need to submit the PAN of the
landlord or declaration from landlord(if PAN
not available) to employer.
13. R Venkatakrishnan & Associates, Chartered Accountants
3.Special Salary Exemptions contd..
Leave Travel Assistance (LTA)
• Meaning: Leave Travel Assistance may be provided by the employer to the employee
and his family -
• In connection with his proceeding on leave to any place in India, while in service.
• Proceeding to any place in India after the retirement or termination from service.
• Family of an Individual means:
• Spouse and children of the Individual, and
• Parents, Brothers and Sisters of the individual or any of them, wholly or mainly
dependent on him.
• Conditions for Benefit:
• The Individual can avail the benefit of LTA offered by his employer twice in block of
four years,
• This exemption is available only for two children of an Individual born on or after
01.10.1998. But there is no limit in case of children born before 01.10.1998.
• Amount of Exemption for LTA:
• The maximum amount of exemption is the cost of travel on the shortest route. The
Exemption amounts for various travelling modes are calculated in the following
manner:
Mode of Travel Class of Travel Amount Exempt
Airways Economy Class Travel Charges on the Shortest Route collected by National Airways
Train I class AC Travel Charges on the Shortest Route
Recognized Transport Deluxe Class Travel Charges on the Shortest Route
Other Transport - I Class AC fare as per Railways, equivalent for the distance for Shortest
Route.
14. R Venkatakrishnan & Associates, Chartered Accountants
3.Special Salary Exemptions contd..
Unfurnished
accommodation
Owned by
Employer
Population > 25L
– 15% of Salary
Population > 10L
– 10% of Salary
Other places
– 7.5% of Salary
Not owned by
employer
Rent paid by
employer or 15%
of salary,
whichever is
lower
Accommodation in
the hotel
24% of salary or
actual charges,
whichever is
lower
Furnished
Accommodation
Furniture owned by
Employer
Value of
Unfurnished
Accommodation +
10% p.a. of Cost
of furniture
Hired from Third
Party
Value
Unfurnished
Accommodation
+ Actual Charges
Taxability of Rent Free Accommodation
15. R Venkatakrishnan & Associates, Chartered Accountants
3.Special Salary Exemptions contd..
Private purpose Official Purpose Private and official purpose
Car owned by the employee and expenses met by him
Not a perquisite Not a perquisite Not a perquisite
Car owned by the employee and expenses are reimbursed by the employer
Actual Expense
Less : Amount recovered
Not a perquisite Actual Expense Less:
Up to 1.6Ltrs 1800+900 for chauffer
Above 1.6Ltrs 2400+900 for chauffer
Car is owned/ hired by the employer and expenses met by the employer
Actual Expense
Add: Depreciation @10%
/ hire charges
Less : Amount recovered
Not a perquisite Taxable Value
Up to 1.6Ltrs 1800+900 for chauffer
Above 1.6Ltrs 2400+900 for chauffer
Car is owned/ hired by the employer and expenses met by the employee
Depreciation @10% / hire
charges
Less : Amount recovered
Not a perquisite Taxable Value
Up to 1.6Ltrs 600+900 for chauffer
Above 1.6Ltrs 900+900 for chauffer
Taxability of Motor Car Benefits
16. R Venkatakrishnan & Associates, Chartered Accountants
4.Deductions from Taxable Income
Tax Saving Sections:
Section 80C
(Lots of Options
discussed in detailed
later)
Section 80CCC
(Pension Products)
Section 80CCD
(Approved Pension
Scheme)
Maximum Deduction of Rs.1,00,000/-
Investment&
Expenditure
17. R Venkatakrishnan & Associates, Chartered Accountants
Section 80C,80CCC,80CCD
The Maximum deduction available combining all the following
investments/expenditures is Rs 1 Lakh.
All the investments in 80C,80CCC,80CCD can be categorized as follows:
Investment
Options (I)
Provident Fund
Public Provident Fund
National Savings
Certificate(NSC)
Senior Citizens Savings
Scheme
Tax Savings Fixed
Deposits
Investment
Options (II)
Life Insurance Premium
Pension plans from
insurance companies
New pension Scheme
Tax Savings Mutual
Funds
Central Govt Employees
Pension Scheme
Expenditures
Principal payment on
Home loan
Stamp duty and
registration cost of the
house
Tuition Fee for 2
children
18. R Venkatakrishnan & Associates, Chartered Accountants
Tax Saving Sections contd..Donations
Section 80G
Donations to charitable
funds and charitable
institutions
10% on Adjusted GTI
50% or 100% of
donation
Section
80GGA
Donations for scientific
research or rural
development
No limit
Section
80GGC
Donations to political
parties
No limit
HealthandWell
being
Section
80D
Medical
Insurance for
Family and
parents
Deduction up to
Rs.15,000/- or
Rs.20,000/-
Section
80DD
Maintenance and
medical treatment
of Disabled
dependent
Deduction up to
Rs.50,000/- or
Rs.1,00,000/-
Section
80DDB
Treatment of
Certain
disease/ailment
Deduction up to
Rs.40,000/-or
Rs.60,000/-
Section
80U
Physically
disabled
Assessee
Deduction of
Rs.50,000/- or
Rs.1,00,000/-
19. R Venkatakrishnan & Associates, Chartered Accountants
Tax Saving Sections contd..Others
Section 80GG
Payment of rent in the
place of HRA
Deduction up to
Rs.24,000/-
Section
80CCG
Rajiv Gandhi Equity
Savings Scheme
Deduction up to
Rs.25,000/-(50% of
amount invested)
Section
80TTA
Interest received in
Savings Account
Deduction up to
Rs.10000/-
Loans
Section 80E
Interest payable on
education loan
No limit for deduction
Section 24
Interest payable on
Housing loan
Deduction up to
Rs.1,50,000/- on
housing loan
Section 80EE
(w.e.f. AY 2014-15)
Interest payable on
Housing Loan
Deduction up to
Rs.1,00,000/-
20. R Venkatakrishnan & Associates, Chartered Accountants
Rajiv Gandhi Equity Savings Scheme(RGESS)
RGESS is a new tax saving scheme which was announced in 2012 to encourage first time investors in
stock market
Under RGESS, you are eligible for a tax deduction on 50% of the amount invested
The maximum amount eligible for investment in a year is 50000.
So limit on max deduction is 50% of 50000=25000
You can invest in BSE-100 and CNX-100 and public sector enterprises ( Navaratna, Maharatna,
Miniratna)
Mutual funds which invests only in these companies are also eligible for deduction
Who can Invest in RGESS:
This scheme is for new investors to come into stock market. Encourage them to invest in stock markets.
Who didn’t have a Demat A/c on Nov 23, 2011(i.e the date on which the scheme notified.
Have not transacted in equity or derivative before the above date.
Had a demat account but as second joint holder.
Your Gross Total Income Should be less than 12L
Open a Demat
Account
Designate the A/c
as RGESS account
Buy Eligible
Stocks
Submit Demat
statement as proof
to claim tax
benefit
Steps to claim Tax Benefit in RGESS
21. R Venkatakrishnan & Associates, Chartered Accountants
5.Other Important Information
Home Loan: Interest and Principal
Buying a house is one of the top most priority for most
The Good news is you get tax deduction on both principal and interest payment on your
Housing Loan
Home Loan
Principal
Deduction u/s 80C up to
Rs.1 lakh
Interest
Deduction u/s 24 up to
Rs.1.5 lakh
Addl Deduction u/s 80EE
up to Rs.1 lakh
Deduction on Principal payment on Home Loan
Deduction up to Rs 1 Lakh is allowed on the principal repayment of the housing loan if the house is self
occupied or vacant.
The house should be registered in the name of the assessee. (Can be Joint owner as well)
The loan should be from Banks, NBFCS or respective employers. Loans taken from friends/relatives does
not qualify for this deduction.
The deduction is available also for people with multiple properties.
22. R Venkatakrishnan & Associates, Chartered Accountants
Home Loan: Interest and Principal
Deduction on Interest payment on Home Loan
Deduction up to Rs.1.5Lakh is allowed on the Interest payment of the housing loan in case of
single non-rented house.
Incase of rented or multiple houses there is no limit on amount of deduction.
All the rent you received will be your taxable income(Income)
Interest paid will be taken as expense(Expense)
Net amount will be considered as your Income/Loss from House Property.
Additional Deduction on Interest Payment on Housing Loan
A new section 80EE has been inserted w.e.f FY 2013-14, which gives additional deduction of
Rs.1lakh on payment of interest on housing loan subject to following conditions:
The Loan needs to be taken in the financial year 2013-14
Loan should be taken from banks or housing finance companies
Loan < 25L
Value of House <40L
No other property at the time of loan sanction.
The additional deduction on Interest payment of home loans can be claimed in FY 2013-14, in case
you are not able exhaust the limit in FY 2013-14, The balance can be claimed in FY 2014-15
24. R Venkatakrishnan & Associates, Chartered Accountants
Any Questions
Prepared By:
Korada Devi Vara Prasad
Audit Executive –CA Final , CWA Final
R Venkatakrishnan & Associates
Email us at: assurance@rvkassociates.com
Visit us at : http://www.rvkassociates.com