Skip to main content

Income from salary and Income Tax

Download Tax Saving Mutual Fund Application Forms

Invest In Tax Saving Mutual Funds Online

Buy Gold Mutual Funds

Leave a missed Call on 94 8300 8300

 

Income can be charged under this head only if there is an employer-employee relationship between the payer and payee

 

Income can be charged under this head only if there is an employer-employee relationship between the payer and payee. Salary includes basic salary or wages, any annuity, gratuity, advance of salary, leave encashment, commission, perquisites in lieu of or in addition to salary and retirement benefits. The aggregate of the above incomes, after exemptions available, is known as Gross Salary and this is charged under the head income from salary. An allowance is a fixed monetary amount paid by the employer to the employee for expenses related to office work. Allowances are generally included in the salary and taxed unless there are exemptions available. Some allowances are fully taxable such as dearness allowance, city compensatory allowance, overtime allowance, servant allowance and lunch allowance. Whereas specific exemptions are available for some allowances.

 

Basic salary along with commissions and bonuses is fully taxable.


• Conveyance Allowance: Up to Rs 800 per month is exempt from tax.

• House Rent Allowance (HRA): This allowance is given by the employer to take care your rental or accommodation expenses. The employer can choose to offer you HRA in the salary package irrespective of whether you live in a rented accommodation or in your own house. It is important to understand how the income tax department treats HRA to use it efficiently. HRA exemption depends on a simple calculation and to arrive at HRA, salary is defined as sum total of basic, dearness allowance and a percentage of commissions of turnover achieved by employee.

 

Eligibility for HRA exemption
To be eligible for HRA exemption, you must first receive HRA in your salary and live in a rented accommodation for which you pay the rent. So if you live in a house of your own, you will not be eligible for HRA exemption.

 

To claim HRA exemption
• You should receive HRA from your employer in your salary
• You should live in a rented accommodation for which you pay the rent
• Your rent should be more than 10 per cent of your salary

 

Calculation of HRA exemption
The actual exempt HRA from tax is the lowest of the three possibilities:
• Actual HRA received from employer
• 50 per cent of salary in case of metros or 40 per cent for of non-metros
• Actual rent paid minus 10 per cent of salary

 

Other considerations with HRA
If you stay in a house which belongs to your parents and you pay rent to them, then you can claim HRA. However, the income that your parents earn will need to be shown as salary in their income tax returns.

 

Calculating HRA
Ram Prasad's basic monthly salary is Rs 6,000 and the dearness allowance is 80 per cent of the basic. He resides in Delhi and pays an actual rent of Rs 3,000 a month while his employers pay him a monthly HRA of Rs 2,500. His annual salary works to: (6,000 x12) + (0.80 x 6,000 x 12) = Rs 1,29,600.

 

HRA is calculated as
• Actual annual HRA received is Rs 30,000. Since Ram Prasad is based in Delhi, take 50 per cent of his salary, which works to Rs 64,800.
• The actual rent paid is Rs 36,000 and 10 per cent of his salary works to Rs 12,960; the difference being Rs 36,000 - 12, 960 = Rs 23,040
• The minimum of these is Rs 23,040. So, Rs 23,040 of HRA is exempt from tax, while the remaining Rs 6,960 is taxed.
• Rent receipts need to be produced as proof to your employer to show that you are indeed paying rent to claim HRA.
• If you own a house and have a house loan on it, you can still avail of the HRA benefits along with the home loan tax benefits. It does not matter where your house is located, as both the home loan income tax benefits and the house rent allowance benefits can be availed simultaneously. For instance, if your house is in the same city where you are living on rent, you can justify your choice of staying on rent and still claim the HRA exemption.


Leave Travel Allowance (LTA): LTA accounts for expenses for travel when you and your family go on leave. While this is paid to you, it is tax free twice in a block of four years and the travel to avail LTA is restricted within India.


Medical Allowance: Medical expenses up to Rs 15,000 a year is tax free which can be incurred by the employee or his family members.


Perquisites: Perquisites (or personal advantage) are benefits in addition to the normal salary to which an employee has a right by way of his employment. Examples of these are rent free accommodation or car loan. There are some perquisites that are taxable in the hands of all categories of employees, some which are taxable when the employee belongs to a specific group and some that are tax free.
• After the financial year ends, your employer will give you Form 16 which will contain all the earnings, deductions and exemptions available.

 

 

 

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at

PrajnaCapital [at] Gmail [dot] Com

 

---------------------------------------------

Invest Mutual Funds Online

Invest Any Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Any Fund Application Forms

---------------------------------------------

 

Best Performing Mutual Funds

    1. Largecap Funds             Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Franklin India Bluechip
      4. ICICI Prudential Top 100 Fund

B. Large and Midcap Funds         Invest Online

      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
      4. Birla Sun Life Front Line Equity Fund
      5. Franklin India Prima

C. Mid and SmallCap Funds          Invest Online

      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
      5. Birla Sun Life Dividend Yield Plus
      6. SBI Emerging Businesses Fund
      7. HDFC Mid-Cap Opportunities Fund
      8. ICICI Prudential Discovery Fund

D. Small and MicroCap Funds   Invest Online

      1. DSP BlackRock MicroCap Fund

2.       Franklin India Smaller Companies

E. Sector Funds          Invest Online

      1. Reliance Banking Fund
      2. Reliance Banking Fund
      3. ICICI Prudential Banking and Financial Services Fund

F. Tax Saver Mutual Funds      Invest Online

1. ICICI Prudential Tax Plan

2. HDFC Taxsaver

      1. DSP BlackRock Tax Saver Fund
      2. Reliance Tax Saver (ELSS) Fund

G. Gold Mutual Funds        Invest Online

      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund
      4. Birla Sun Life Gold

H. International funds         Invest Online

1. Birla Sun Life International Equity Plan A

2. DSP BlackRock US Flexible Equity

3. FT India Feeder Franklin US Opportunities

4. ICICI Prudential US Bluechip Equity

5. Motilal Oswal MOSt Shares NASDAQ-100 ETF

Popular posts from this blog

ULIP Review: ProGrowth Super II

  If you are interested in a death cover that's just big enough, HDFC SL ProGrowth Super II is something worth a try. The beauty is it has something for everybody — you name the risk profile, the category is right up there. But do a SWOT analysis of the basket, and the gloss fades     HDFC SL ProGrowth Super II is a type-II unit-linked insurance plan ( ULIP ). Launched in September 2010, this is a small ticket-size scheme with multiple rider options and adequate death cover. It offers five investment options (funds) — one in each category of large-cap equity, mid-cap equity, balanced, debt and money market fund. COST STRUCTURE: ProGrowth Super II is reasonably priced, with the premium allocation charge lower than most others in the category. However, the scheme's mortality charge is almost 60% that of LIC mortality table for those investing early in life. This charge reduces with age. BENEFITS: Investors can choose a sum assured between 10-40 times the annualised premium...

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

Bharat Bond ETF

Top SIP Funds Online   The government of India has paved the way for the launch of India's first corporate bond ETF called as Bharat Bond ETF. Edelweiss Mutual Fund will be managing it. The fund is mandated to invest in AAA-rated bonds of select public sector companies (see the table 'List of constituents and their proportions in the portfolio'). The government has a threefold objective behind launching this product. One, to deepen the liquidity of the Indian debt markets and provide a gateway for easy retail participation. Two, to solve investors' dilemma of picking premium bonds. Lastly, to help the underlying government-owned companies raise funding for their operations. But does it make sense for you, the investor, to invest in it? Lets find out. What is the product? As the name suggests, it is an exchange-traded fund which will be listed on a stock exchange from where its units can be bought and sold post launch. It will have two variants - one maturing in 3 ye...

What is Electronic Clearing Service (ECS)?

  As the name suggests, it's an electronic process through which money can be transferred from one bank account to another. According to RBI, this mode is usually used for regular payments and receipts, like distribution of dividend, interest, salary, pension etc. This mode is also used for collection of bills for telephone, electricity, water, various types of taxes, payment of EMIs , investments in mutual funds , payment of insurance premium etc. There are two types of ECS , like most other banking transactions, ECS credit and ECS debit. An ECS credit is used by a bank account holder , usually a large company or an institution for services like payment of dividend, in terest, salary, pension etc. If your mutual fund pays you dividend to your bank account, of all probability it is being paid through ECS credit.ECS debit, on the other hand, is used when a company or an institution is getting money from a large number of people. For example if you are investing in a mutual fund sc...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now