Illustrations - For Assessment Year 2015-16: Income Tax on Salaries Circular No. 17/2014

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INCOME TAX ON SALARIES: Circular No. 17/2014

SOME ILLUSTRATIONS

Example 1

For Assessment Year 2015-16

(A) Calculation of Income tax in the case of an employee (Male or Female) below the age of sixty years and having gross salary income of:
i) Rs.2,50,000/- ,
ii) Rs.5,00,000/- ,
iii) Rs.10,00,000/-
iv) Rs.20,00,000/-. and
v) Rs. 1,10,00,000/-

(B) What will be the amount of TDS in case of above employees, if PAN is not submitted by them to their DDOs/Offices: 

Click to view Part I Income Tax on Salaries - Circular No. 17/2014

Click to view Part II RATES OF INCOME-TAX AS PER FINANCE (No. 2) ACT, 2014

Click to view Part III Scheme of Tax Deduction at Source from Salaries

Click to view Part IV Persons responsible for Deducting Tax and their Duties:

Click for Part V & Para 5.1 Computation of Income Tax - Income Chargeable Under the Head Salaries

Click for Para 5.2 Definition of Salary, Perquisite and Profit in lieu of Salary (Section 17)

Click for Para 5.3 Income not included under the head Salaries

Particulars	Rupees	Rupees	Rupees	Rupees	Rupees
	(i)	(ii)	(iii)	(iv)	(v)
Gross Salary Income (including allowances)	2,50,000	5,00,000	10,00,000	20,00,000	1,10,00,000
Contribution of G.P.F.	45,000	50,000	1,00,000	1,00,000	1,00,000

Computation of Total Income and tax payable thereon

Particulars	Rupees	Rupees	Rupees	Rupees	Rupees
	(i)	(ii)	(iii)	(iv)	(v)
Gross Salary	2,50,000	5,00,000	10,00,000	20,00,000	1,10,00,000
Less: Deduction U/s 80C	45,000	50,000	1,00,000	1,00,000	1,00,000
Taxable Income	2,05,000	4,50,000	9,00,000	19,00,000	1,09,00,000
(A) Tax thereon	Nil	18,000*	1,05,000	3,95,000	3095000
Surcharge					309500
Add:
(i) Education Cess @ 2%.	Nil	360	2100	7,900	68090
(ii) Secondary and Higher Education Cess @1%	Nil	180	1050	3950	34045
Total tax payable	Nil	18,540	1,08,150	406850	3506635
(B) TDS under sec. 206AA in case where PAN is not furnished by the employee	Nil	90,000	1,30,000	406850	3506635

* includes Rebate of Rs 2000 u/s 87A

Example 2

For Assessment Year 2015-16

Calculation of Income Tax in the case of an employee below the age of sixty years having a handicapped dependent (With valid PAN furnished to employer). 

S.No.	Particulars	Rupees
1	Gross Salary	4,00,000
2	Amount spent on treatment of a dependant, being person with disability (but not severe disability)	7000
3	Amount paid to LIC with regard to annuity for the maintenance of a dependant, being person with disability( but not severe disability)	60,000
4	GPF Contribution	25,000
5	LIP Paid	10,000
6	Interest Income on Savings Account	12,000

Computation of Tax

S.No.	Particulars	Rupees
1	Gross Salary	4,00,000
2	Add: Income from Other Sources Interest Income on Savings Account	Rs 12,000
3	Gross Total Income	4,12,000
4	Less: Deduction U/s 80DD (Restricted to Rs.50,000/- only)	50,000
5	Less: Deduction U/s 80C (i) GPF Rs.25,000/- + (ii) LIP Rs.10,000/- = Rs.35,000/-	35,000
6	Less: Deduction u/s 80TTA on Interest Income on savings account (restricted to Rs 10000/-)	10000
7	Total Income	3,17,000
8	Income Tax thereon/payable (includes Rebate of Rs 2000 as per Section 87A)	4,700
9	Add:
	(i). Education Cess @2%	94
	(ii). Secondary and Higher Education Cess @1%	47
10	Total Income Tax payable	4,841
11	Rounded off to	4,840

Example 3

For Assessment Year 2015-16

Calculation of Income Tax in the case of an employee below age of sixty years where medical treatment expenditure was borne by the employer (With valid PAN furnished to employer).

S.No.	Particulars	Rupees
1	Gross Salary	5,20,000
2	Medical Reimbursement by employer on the treatment of self and dependent family member	35,000
3	Contribution of GPF	20,000
4	LIC Premium	20,000
5	Repayment of House Building Advance	25,000
6	Tuition fees for two children	60,000
7	Investment in Unit-Linked Insurance Plan	30,000
8	Interest Income on Savings Account	8,000
9	Interest Income on Time Deposit	15,000

Computation of Tax

S.No.	Particulars	Rupees
1	Gross Salary	5,20,000
2	Add: Perquisite in respect of reimbursement of Medical Expenses	20,000
	In excess of Rs.15,000/- in view of Section 17(2)(v)
3	Income from Other Sources   i) Interest Income on Savings Account Rs 8,000 ii) Interest Income on Savings Account Rs 15,000	23,000
4	Gross Total Income	5,63,000
5	a.Less: Deduction U/s 80C (i) GPF Rs.20,000/- (ii) LIC Rs.20,000/- (iii) Repayment of House Building Advance Rs.25,000/- (iv) Tuition fees for two children Rs.60,000/- (v) Investment in Unit-Linked Insurance Plan Rs.30,000/- Total = Rs.1,55,000/- Restricted to Rs. 1,50,000/- b. Less: Deduction u/s 80TTA on Interest Income on savings account (restricted to Rs 8000/- available only on Savings account interest) Rs8,000/- Total deduction available Rs 1,58,000/-	1,58,000
6	Total Income	4,05,000
7	Income Tax thereon/payable (includes Rebate of Rs 2000 as per Section 87A)	13,500
8	Add:
	(i). Education Cess @2%	270
	(ii). Secondary and Higher Education Cess @1%	135
9	Total Income Tax payable	13,905
10	Rounded off to	13,910

Example 4

For Assessment Year 2015-16

Illustrative calculation of House Rent Allowance U/s 10 (13A) in respect of residential accommodation situated in Delhi in case of an employee below the age of sixty years (With valid PAN furnished to employer).

S.No.	Particulars	Rupees
1	Salary	3,50,000
2	Dearness Allowance	2,00,000
3	House Rent Allowance	1,40,000
4	House rent paid	1,44,000
5	General Provident Fund	60,000
6	Life Insurance Premium	4,000
7	Subscription to Unit-Linked Insurance Plan	50,000

Computation of total income and tax payable thereon

S.No.	Particulars	Rupees
1	Salary + Dearness Allowance + House Rent Allowance 3,50,000+2,00,000+1,40,000 = 6,90,000	6,90,000
2	Total Salary Income	6,90,000
3	Less: House Rent allowance exempt U/s 10(13A): Least of:   (a). Actual amount of HRA received = 1,40,000 (b). Expenditure of rent in excess of 10% of salary (including D.A. presuming that D.A. is taken for retirement benefit) (1,44,000-55,000) = 89,000 (c). 50% of Salary(Basic+ DA) = 2,75,000	89,000
4	Gross Total Income	6,01,000
5	Less: Deduction U/s 80C (i). GPF Rs.60,000/- (ii).  LIC Rs. 4,000/- (iii). Investment in Unit-Linked Insurance Plan Rs.50,000/- Total = Rs.1,14,000/-	1,14,000
6	Total Income	4,87,000
7	Tax payable on total income (includes Rebate of Rs 2000 as per Section 87A)	21700
8	Add:
	(i). Education Cess @2%	434
	(ii). Secondary and Higher Education Cess @1%	217
9	Total Income Tax payable	22351
10	Rounded off to	22350

Example 5

For Assessment Year 2015-16

Illustrating valuation of perquisite and calculation of tax in the case of an employee below age of sixty years of a private company in Mumbai who was provided accommodation in a flat at concessional rate for ten months and in a hotel for two months ( With valid PAN furnished to employer).

S.No.	Particulars	Rupees
1	Salary	7,00,000
2	Bonus	1,40,000
3	Flat at concessional rate (for ten month).= Rs.3,60,00	3,60, 000
4	Hotel rent paid by employer (for two month)	1,00,000
5	Cost of furniture	2,00,000
6	Free gas, electricity, water etc. (Actual bills paid by company)	40,000
7	Rent recovered from employee	60,000
8	Subscription to Unit Linked Insurance Plan	50,000
9	Life Insurance Premium	10,000
10	Contribution to recognized P.F.	42,000

COMPUTATION OF TOTAL INCOME AND TAX PAID THEREON:

S.No.	Particulars		Rupees
1	Salary		7,00,000
2	Bonus		1,40,000
3	Total Salary(1+2) for the purpose of valuation of perquisites (12 months)		8,40,000
Valuation of perquisites
4(a)	Perquisite for flat:   Lower of (15% of salary for 10 months = Rs.1,05,000/-) and (actual rent paid= Rs 3,60,000) i.e. Rs. 1,05,000/- Less : Rent recovered Rs.60000/-	Rs 45,000	1,38,600
4(b)	Perquisite for hotel :Lower of (24% of salary of 2 months=Rs 33,600) and (actual payment= Rs 1,00,000)	Rs 33,600
4(c)	Perquisites for furniture@ 10% of cost of Rs.2,00,000	Rs 20,000
4(d)	Perquisite for free gas, electricity, water etc.	Rs 40,000
4	Total	1,38,600
5	Gross Total Income (Rs.8,40,000+ 1,38,600)		9,78,600
6	Gross Total Income		9,78,600
7	Less: Deduction U/s 80C:   (i). Provident Fund (80C) :  Rs.42,000/- (ii). LIC (80C) :  Rs.10,000/- (iii). Subscription to Unit Linked Insurance Plan(80C) :  Rs.50,000/- Total = Rs.1,02,000/-		1,02,000
8	Total Income		8,76,600
9	Tax Payable		1,00,320
10	Add:
	(i). Education Cess @2%		2,006
	(ii). Secondary and Higher Education Cess @1%		1,003
11	Total Income Tax payable		1,03,329
12	Rounded off to		1,03,330

Example 6

For Assessment Year 2015-16

Illustrating Valuation of perquisite and calculation of tax in the case of an employee below the age of 60 years of a Private Company posted at Delhi and repaying House Building Loan ( With valid PAN furnished to employer).

S.No.	Particulars	Rupees
1	Salary	4,00,000
2	Dearness Allowance	1,00,000
3	House Rent Allowance	1,80,000
4	Special Duties Allowance	12,000
5	Provident Fund	60,000
6	LIP	10,000
7	Deposit in NSC VIII issue	30,000
8	Rent Paid by the employee for house hired by her	1,20,000
9	Repayment of House Building Loan (Principal)	60,000
10	Tuition Fees for three children (Rs.10,000 per child)	30,000

Computation of total income and tax payable thereon

S.No.	Particulars	Rupees
1	Gross Salary (Basic+DA+HRA+SDA)	6,92,000
	Less: House rent allowance exempt U/s 10 (13A)
	Least of:   (a). Actual amount of HRA received. : Rs.1,80,000 (b). Expenditure on rent in excess of 10% of salary(Including D.A.)assuming D.A. is included for retirement benefits (1,20,000- 50,000) : Rs.70,000 (c). 50% of salary (including D.A) : Rs. 2,00,000	70,000
2	Gross Total Taxable Income	6,22,000
3	Less: Deduction U/s 80C (i). Provident Fund : Rs.60,000 (ii). LIP : Rs.10,000 (iii).  NSC VIII Issue : Rs.30,000 (iv).  Repayment of HBA : Rs.60,000 (v). Tuition Fees (Restricted to two children) : Rs.20,000 Total : Rs.1,80,000 Restricted to Rs.1,50,000	1,50,000
4	Total Income	4,72,000
5	Income Tax thereon/payable (includes Rebate of Rs 2000 as per Section 87A)	20,200
6	Add:
	(i). Education Cess @2%	404
	(ii). Secondary and Higher Education Cess @1%	202
7	Total Income Tax payable	20,806
8	Rounded off to	20,810

Example 7

For Assessment Year 2015-16

A. Calculation of Income tax in the case of a retired employee above the age of sixty years but below the age of 80 years and having gross pension of:

Particulars	Rupees (i)	Rupees (ii)	Rupees (iii)
Gross Pension	4,50,000	8,00,000	12,50,000
Contribution of P.P.F.	70,000	1,00,000	1,50,000

B What will be the amount of TDS in case of above employees, if PAN is not submitted by them to their DDOs/Offices:

Computation of Total Income and tax payable thereon

Particulars	Rupees (i)	Rupees (ii)	Rupees (iii)
Gross Pension	4,50,000	8,00,000	12,50,000
Less: Deduction U/s 80C	70,000	1,00,000	1,50,000
Taxable Income	3,80,000	7,00,000	11,00,000
Tax thereon (A)	6,000	60,000	1,50,000
Add:
(i) Education Cess @ 2%.	120	1200	3000
(ii) Secondary and Higher Education Cess @1%	60	600	1500
Total tax payable	6,180*	61,800	1,54,500
B. TDS under sec. 206AA in case where PAN is not furnished by the employee	16,000	80,000	1,60,000

*includes Rebate of Rs 2000 as per Section 87A

Example 8

For Assessment Year 2015-16

A. Calculation of Income tax in the case of a retired employee above the age of 80 years and having gross pension of:

Particulars	Rupees (i)	Rupees (ii)	Rupees (iii)
Gross Pension	5,00,000	8,00,000	12,50,000
Contribution of P.P.F.	80,000	1,20,000	1,50,000

B What will be the amount of TDS in case of above employees, if PAN is not submitted by them to their DDOs/Offices:

Computation of Total Income and tax payable thereon

Particulars	Rupees (i)	Rupees (ii)	Rupees (iii)
Gross Pension	5,00,000	8,00,000	12,50,000
Less: Deduction u/s 80C	80,000	1,20,000	1,50,000
Taxable Income	4,20,000	6,80,000	11,00,000
Tax thereon (A)	Nil	36,000	1,30,000
Add:
(i) Education Cess @ 2%.		720	2600
(ii) Secondary and Higher Education Cess @1%		360	1300
Total tax payable	Nil	37,080	1,33,900
B. TDS under sec. 206AA in case where PAN is not furnished by the employee	Nil	37,080	1,33,900

Other Parts of Circular

1. Income Tax on Salaries - Assessment Year 2015-16 - Financial Year 2014-15 Circular No. 17/2014

2. RATES OF INCOME-TAX AS PER FINANCE (No. 2) ACT, 2014: Click to View

3. SECTION 192 OF THE INCOME-TAX ACT, 1961: BROAD SCHEME OF TAX DEDUCTION AT SOURCE FROM "SALARIES": Click to View

4. PERSONS RESPONSIBLE FOR DEDUCTING TAX AND THEIR DUTIES: Click to View

5. COMPUTATION OF INCOME UNDER THE HEAD "SALARIES" View

5.1 INCOME CHARGEABLE UNDER THE HEAD "SALARIES": View

5.2 DEFINITION OF “SALARY”, “PERQUISITE” AND “PROFIT IN LIEU OF SALARY” (SECTION 17): View

5.3 INCOMES NOT INCLUDED UNDER THE HEAD "SALARIES" (EXEMPTIONS) View

5.4 DEDUCTIONS U/S 16 OF THE ACT FROM THE INCOME FROM SALARIES View

ANNEXURE 1 - SOME ILLUSTRATIONS - For Assessment Year 2015-16