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FAQs

     
 
 
     

 

Income From Salary

1.
If salary for a month is not received, then can it be charged to tax?

 Salary is taxed on due or receipt basis whichever is earlier, hence, salary if due but not received will be charged to tax. Suppose if salary of March is due in March, then it will be charged to tax even if received in the month of April. 

2.
If salary is received in advance but it is not due, then is it charged to tax?

 Salary is taxed on due or receipt basis whichever is earlier, hence, salary if not due but received then will be charged to tax. Suppose if salary of March is due in April but received in March then it will be charged to tax even if it becomes due in the month of April. 

3.
What is the tax treatment of leave encashment (in the hands of Government as well as non-Government employee’s) during the continuation of service?

 Leave encashment during the continuation of service is fully taxable in the hands of Government as well as non-Government employee’s. Exemption under section 10(10AA) is available only in respect of leave encashment at the time of retirement (whether on superannuation or otherwise).

4.
What is the tax treatment of leave encashment at the time of retirement in the hands of Government employee’s?

As per section 10(10AA), leave encashment by a Government employee at the time of retirement (whether on superannuation or otherwise) fully is exempt from tax. 

5.
What is the tax treatment of leave encashment at the time of retirement in the hands of non-Government employee’s?

As per section 10(10AA), leave encashment by a non-Government employee at the time of his retirement (whether on superannuation or otherwise) is exempt. The exemption will be lower of the following amount :
1. Period of earned leave standing to the credit in the employee’s account at the time of retirement × Average monthly salary (if leave entitlement as per service rules exceeds 30 days per year of actual service, then it should be restricted to 30 days).
2. Average monthly salary × 10 (i.e., 10 month’s average salary).
3. Maximum amount as specified by the Government, i.e., Rs. 3,00,000.
4. Leave encashment actually received at the time of retirement. 

6.
While computing exemption in respect of leave encashment at the time of retirement how to compute earned leave standing to the credit in the employee’s account at the time of retirement?

While computing exemption in respect of leave encashment at the time of retirement leave standing to the credit in the employee’s account at the time of retirement will be computed as follows :

Sl. No. Particulars

1. Number of completed years of service (i.e., ignoring part of the year)

2. No. of days of leave entitlement for each year of service as per service rules (if leave entitlement as per service rules exceeds 30 days per year of actual service, then it should be restricted to 30 days)

3. Gross total leave (in days) (i.e., 1 × 2)

4. Less: Leave encashed and availed during the continuation of service (in days)

5. Period of earned leave (in days) (i.e., 3 - 4)

6. Period of leave in months (i.e., days derived at 5 above ÷ 30)

7.
While computing exemption in respect of leave encashment at the time of retirement how to compute average monthly salary?

 Average monthly salary for this purpose means average salary drawn in the past ten months immediately preceding the retirement (i.e., preceding the day of retirement). Salary for this purpose will include only following:

Basic salary.
Dearness allowance, if considered for computing all the retirement benefits. 
Commission based on fixed percentage of turnover achieved by the employee.
Apart from the above items, salary for this purpose does not include any other allowances or perquisites.

8.
What is the tax treatment of gratuity received by a Government employee?

In case of a Government employee, any death-cum-retirement gratuity received is wholly 
exempt under section 10(10)(i).

9.
What is the tax treatment of gratuity received by a non-Government employee covered by the Payment of Gratuity Act, 1972?

 Exemption in respect of gratuity received by a non-Government employee covered by the Payment of Gratuity Act, 1972 will be lower of following :

15 days salary for each completed year of service or part in excess of 6 months × years of service.
Maximum amount specified, i.e., Rs. 10,00,000.
Gratuity actually received.

10.
While computing exemption in respect of gratuity received by a non-Government employee covered by the Payment of Gratuity Act, 1972, how to compute 15 days salary?

In above case, 15 days salary will be computed as follows :

15 days salary = Salary last drawn × 15/26
Salary for this purpose will include basic salary and dearness allowance only. Items other than basic salary and dearness allowance are not to be considered.
In case of piece rated employee, 15 days’ salary will be computed on the basis of average of total wages (excluding overtime wages) received for a period of three months immediately preceding the termination of his service.
Part of the year, in excess of 6 months, shall be taken as one full year.

11.
What is the tax treatment of gratuity received by a non-Government employee not covered by the Payment of Gratuity Act, 1972?

 Exemption in case in respect of gratuity received by a non-Government employee not covered by the Payment of Gratuity Act, 1972 will be lower of the following :

Half month’s salary for each completed year of service, i.e.,
[Average monthly salary × ½] × Completed years of service. (ignore fraction of the year if any).
Rs. 10,00,000.
Gratuity actually received.

12.
While computing exemption in respect of gratuity received by a non-Government employee not covered by the Payment of Gratuity Act, 1972, how to compute half month’s salary?

 In above case, half month’s salary will be computed as follows :

Average monthly salary is to be computed on the basis of average of salary for 10 months immediately preceding the month of retirement.
Salary for this purpose will include basic salary, dearness allowance, if the terms of service so provide and commission based on fixed percentage of turnover achieved by the employee.
While computing years of service, any fraction of a year is to be ignored.
At last, average monthly salary as computed above will be divided by 2 to arrive at half month’s salary.

13.
What is the tax treatment of un-commuted pension received by a Government employee as well as non-Government employee?

Un-commuted pension received by a Government employee as well as non-Government employee is fully taxable. 

14.
14. What is the tax treatment of commuted pension received by a Government employee?

As per section 10(10A), any commuted pension, i.e., accumulated pension in lieu of monthly pension is exempt in the hands of a Government employee. 

15.
What is the tax treatment of commuted pension received by a non-Government employee?

As per section 10(10A), exemption in respect of commuted pension in case of a non-Government employee will be as follows :
If the employee receives gratuity, one third of full value of commuted pension will be exempt from tax under section 10(10A).

If the employee does not receive gratuity, one half of full value of commuted pension will be exempt from tax under section 10(10A). 

16.
How to compute value of perquisite arising from provision of rent free unfurnished accommodation in case of a Government employee?

The value of perquisite in the hands of Government employee in respect of rent free unfurnished accommodation provided by the employee will be the licence fees of such accommodation. 

17.
How to compute value of perquisite arising from provision of rent free unfurnished accommodation in case of a non-Government employee?

In this case, the value of perquisite will be computed on the basis of population of the city in which the accommodation is provided and the nature of the accommodation, i.e., whether the accommodation is owned by the employer or is taken on rent by the employer. Valuation will be as follows:
(a) In case of accommodation owned by employer. 
 
Population of the city (based on 2001 Census ) where the property is located Value of perquisite 
Not exceeding 10 lakhs 7.5% of the salary 
Exceeding 10 lakhs but not exceeding 25 lakhs 10% of the salary
Exceeding 25 lakhs 15% of the salary 
 
(b) In case of accommodation taken on lease or rent by the employer :
In this case, the value of perquisite will be lower of following :
(a) Rent of the accommodation paid or payable by the employer; or
(b) 15% of the salary.
Any amount recovered by the employer from the employee for providing the accommodation will be reduced from the value computed as above. 
Note 1: For the above purpose, “Salary” means:
Salary for the period during which the accommodation was occupied by the employee.
Salary shall be computed on due basis.
If the employee is employed with more than one employer, then salary from all such employers is to be considered.
Salary for this purpose shall include all payments, except the following:
(a) Dearness allowance, if it is not taken into account, while computing retirement benefits (i.e., DA not in terms).
(b) Employer’s contribution to provident fund account of the employee.
(c) All allowances which are exempt from tax.
(d) Value of perquisites (whether monetary or non-monetary).

(e) Lumpsum payments received at the time of termination of service or superannuation or voluntary retirement, like gratuity, severance pay, leave encashment, voluntary retirement benefits, commutation of pension and similar payments. 

18.
How to compute value of perquisite arising from provision of rent free furnished accommodation in case of a Government as well as non-Government employee?

Perquisite in respect of furnished accommodation will be computed as follows :
Particulars (Rs.)
Compute value of accommodation considering accommodation as unfurnished accommodation (as per rules discussed in preceding FAQs ) XXXXX
Add : 10% per annum of the original cost of furniture to the employer or actual hire charges (paid or payable) by the employer (if the furniture is hired by the employer) XXXXX
Value of furnished accommodation XXXXX 

19.
How to compute value of perquisite arising from provision of accommodation at concessional rate in case of a Government as well as non-Government employee?

 Value of perquisite arising from provision of accommodation at concessional rate in case of a Government as well as non-Government employee will be computed as follows:

 
Particulars (Rs.)
Compute value of accommodation considering accommodation as rent free accommodation (as per rules discussed in preceding FAQs) XXXXX
Less : Amount recovered from the employee in respect of the accommodation XXXXX
Value of furnished accommodation (if positive) XXXXX
 

20.
How to compute value of perquisite arising from provision of accommodation in case of a Government as well as non-Government employee if more than one accommodation is provided?

Where on account of transfer of an employee from one place to another, he is provided with accommodation at the new place of posting while retaining the accommodation at old place, then the value of perquisite will be computed as follows:
For first 90 days, accommodation which has a lower value will be considered; and

After 90 days, both the accommodations will be considered for value of perquisite. 

21.
How to compute value of perquisite arising from provision of accommodation in a hotel?

Value of such accommodation will be lower of :
(a) 24% of salary paid or payable; or
(b) actual charges paid or payable by the employer to such hotel, for the period during which such accommodation is provided in the previous year.
Note : Nothing shall be charged to tax in respect of an accommodation provided in a hotel (on transfer of the employee) for a period not exceeding 15 days (in aggregate) during the previous year.

 

22.
How to compute value of perquisite arising from provision of domestic servant?

The value of benefit to the employee (or any member of his household) resulting from the provision of services of a sweeper, a gardener, a watchman or a personal attendant, by the employer shall be the actual cost to the employer. The actual cost in such a case shall be the total amount of salary paid or payable by the employer or any other person on his behalf for such services reduced by any amount paid by the employee for such services. 

The above rule will remain same in case of Government employee as well as Non-Government employee. 

23.
How to compute value of perquisite arising from provision of gas, water or electricity?

The value of the perquisite arising on account of supply of gas, electricity, or water to the employee will be the amount paid by the employer to the supplying agency in cases where the supply is made from resources not owned by the employer. If supplies are made by the employer from his own resources without purchasing from the outside agencies, then the value of the perquisite will be ‘the manufacturing cost per unit incurred by the employer’. Where the employee is paying any amount in respect of such services, the amount so paid by the employee shall be deducted from the value so arrived at. 

24.
How to compute value of perquisite resulting from the provision of educational facility to the members of household of the employee?

The nature of perquisite resulting from the provision of educational facility to the members of household of the employee can be classified as follows :
(1) Education facility provided to the children of the employee in an educational institute maintained and owned by the employer or where free educational facilities are allowed in any other educational institution by reason of his being in employment of that employer.
(2) Education facility provided to the members of household (other than children) in an educational institute maintained and owned by the employer or where free educational facilities are allowed in any other educational institution by reason of his being in employment of that employer.
(3) Education facility provided to the children or member of household of the employee in any other institution. 
The detailed discussion in each of the above cases is as follows :
(1) Education facility provided to the children of the employee :
Where the education facility is provided to the children of the employee in an educational institution which is maintained and owned by the employer or where such free educational facilities are provided in any institution by reason of his being in employment of that employer, then the value of perquisite shall be the cost of such education in a similar institution in or near the locality. However, nothing shall be chargeable to tax if the cost of such education (or the value of such benefit) per child does not exceed Rs. 1,000 per month. If the cost of such education facility exceeds Rs. 1,000 per child, then the same shall be charged to tax. 
(2) Education facility provided to the members of household of the employee (other than children of the employee) : 
Where the education facility is provided to members of household of the employee in an educational institution which is maintained and owned by the employer or where such free educational facilities are provided in any institution by reason of his being in employment of that employer, then the value of perquisite shall be the cost of such education in a similar institution in or near the locality. The benefit of exemption upto Rs. 1,000 per child per month is available only in respect of the children of the employee and not in respect of any other member of the household. 
(3) Education facility provided in any other institution :
Where the educational institution is not covered under above category, the value of the perquisite is required to be determined at the amount of expenditure incurred by the employer in that behalf. The words used in the sub-rule are ‘amount of expenditure incurred by the employer in that behalf’, and not ‘amount paid by the employer to the educational institution’; it is immaterial whether the employer directly meets the expenses or whether the employee initially incurs the expenses and then gets the amount reimbursed from the employer. Even if the employer reimburses the amount to the employee, it will still retain the character of ‘amount of expenditure incurred by the employer in that behalf.’

In all the cases discussed above, if any amount is paid by or recovered from the employee, the value of the perquisite should be reduced by the amount so paid or recovered. 

25.
Is value of free training provided by the employer to the employee charged to tax as perquisite?

Amount spent by the employer for the purpose of providing free training to the employee is not taxable in the hands of the employee. 

26.
If the employer reimburses the school fees of employee’s family members will it be charged to tax in the hands of the employee?

Reimbursement of expenditure incurred for the education of the children/member of the household of the employee is taxable as a perquisite in all cases (i.e., specified employee as well as non-specified employee). 

27.
If the employer directly pays the school fees of employee’s family members will it be charged to tax in the hands of the employee?

School fees of the children/family members of the employees, paid by the employer directly to the school are taxable as a perquisites in all cases (i.e., in the hands of specified as well as non-specified employees). 

28.
How to compute value of perquisite arising on account of granting of interest free loan by the employer or granting of loan at concessional rate of interest?

 The value of perquisite arising on account of interest free loan or concessional loan granted by the employer will be computed on the basis of the rate of interest on such loans charged by the State Bank of India as on the 1st day of the relevant previous year, in respect of loans for the same purpose advanced by it (i.e., State Bank of India). The value of perquisite will be determined as follows :

Particulars Interest free loan Concessional loan
Interest on the respective loan computed on the basis of rate of interest on such loan charged by State Bank of India prevailing on the first day of the previous year XXXXXX XXXXXX
Less: Amount recovered from the employee for the respective loan ------------- XXXXXX
Perquisite in respect of interest free or concessional loans XXXXXX XXXXXX
 
Interest shall be computed on monthly basis by considering maximum outstanding monthly balance. 
Suppose the loan is granted on 1-12-2012 and the rate of interest of State Bank of India on such loan as on 1-4-2012 is at 8% per annum, perquisite will be computed by considering 8% as rate of interest. If the employer is recovering interest at 3% per annum, then perquisite will be computed by considering interest rate at 5% per annum (8% – 3%).
Nothing is charged to tax in respect of perquisite arising on account of interest free or concessional loan granted by the employer for medical treatment of specified diseases.
Nothing is charged to tax in respect of perquisite arising on account of interest free or concessional loan granted by the employer where the amount of loan is petty, not exceeding in the aggregate Rs. 20,000. It should be noted that the limit of Rs. 20,000 applies to the aggregate of all loans which are petty and which are taken during a particular previous year, either by the employee or by a member of his household. The loan may be taken for any purpose.
 

29.
How to compute value of perquisite arising on account of granting of use of any movable assets belonging to the employer?

The value of perquisite to the employee resulting from the use by the employee (or any member of his household) of any movable asset (other than assets already specified in rule 3 and other than laptops and computers) belonging to the employer shall be determined at rate of 10% per annum of the actual cost of such asset to the employer. 
If the assets are hired by the employer, the value of perquisite will be the actual amount of rent or charge paid or payable by the employer for the said asset. 
The amount calculated as above shall be reduced by the amount, if any, paid by or recovered from the employee for such use.

It should be noted that nothing is charged to tax in respect of computer or laptops provided by the employer to the employee. 

30.
How to compute value of perquisite arising on account of transfer of assets belonging to the employer?

When a movable asset owned by the employer is transferred to the employee, either free of cost or at a concessional rate, the benefit accruing to the employee from such transfer will result in perquisite in the hands of the employee. Value of perquisite in this case will be excess of WDV (i.e., cost less normal wear and tear) of the asset over the amount recovered from the employee in respect of such transfer. In above case, WDV is determined as follows:
(a) In case of electronic items (i.e., computer and related items only), WDV shall be computed on reducing balance method by deducting 50% depreciation for each completed year. In case of motor car, rate of depreciation will be at 20% for each completed year.

(b) In case of any other asset, WDV is to be computed by deducting 10% of actual cost (i.e., as per straight line method) for each completed year. 

31.
How to compute value of perquisite arising on account of running and maintenance expenses met by the employer in respect of a car owned by the employee?

This situation can further be classified as follows :
(1) Car is used for official purpose only.
(2) Car is used for private purpose only. 
(3) Car is used for official as well as private purposes.
The taxable value of perquisite in above cases will be computed as follows:
(a) If car is used wholly for official purpose: 
Nothing is charged to tax, if conditions specified in note* given below are satisfied.
(b) If car is used wholly for private purpose of employee or any member of his household: 
Value of perquisite will be computed as follows:
Particulars (Rs.)
Actual expenditure incurred or reimbursed by the employer XXXXX
Less: Amount recovered from the employee XXXXX
Value of perquisite (if positive) XXXXX
 
(c) If car is used partly for private purpose of employee or any member of his household and partly for official purpose: 
Value of perquisite will be computed as follows:
Particulars (Rs.)
Actual expenditure incurred or reimbursed by the employer XXXXX
Less: Prescribed amount, i.e, Rs. 1,800 per month where the cubic capacity of the engine does not exceed 1.6 litres (i.e., 1600 cc) and Rs. 2,400 per month, if the cubic capacity exceeds 1.6 litres. Rs. 900 per month will be deducted, if chauffeur is provided.
(Higher amount can be deducted, if conditions specified in the note* given below are satisfied) XXXXX
Less: Amount recovered from the employee XXXXX
Value of perquisite (if positive) XXXXX
 

*Note: The employer has maintained complete details of journey undertaken for official purpose which should include date of journey, destination, mileage, amount of expenditure incurred thereon and the employer gives a certificate to the effect that such an expenditure was incurred wholly for performing official duty. 

32.
How to compute value of perquisite arising on account of motor car provided by the employer and maintenance and running expenses of the car are also met by the employer?

This situation can further be classified as follows :
(1) Car is used for official purpose only.
(2) Car is used for private purpose only. 
(3) Car is used for official as well as private purposes.
The taxable value of perquisite in above cases will be computed as follows:
(a) If car is used wholly for official purpose: 
Nothing is charged to tax, if conditions specified in note given below are satisfied.
Note: The employer has maintained complete details of journey undertaken for official purpose which should include date of journey, destination, mileage, amount of expenditure incurred thereon and the employer gives a certificate to the effect that such an expenditure was incurred wholly for performing official duty.
(b) If car is used wholly for private purpose of employee or any member of his household: 
 
Value of perquisite will be computed as follows:
 
 
Particulars (Rs.)
Actual expenditure incurred or reimbursed by the employer XXXXX
Add: 10% per annum of cost of car, if car is owned by the employer or actual hire charges, if car is hired by the employer
XXXXX
Less: Amount recovered from the employee XXXXX
Value of perquisite (if positive) XXXXX
 
(c) If car is used partly for private purpose of employee or any member of his household and partly for official purpose: 
Value of perquisite will be computed as follows:

Value of perquisite will be calculated at the rate of Rs. 1,800 per month where the cubic capacity of the engine does not exceed 1.6 litres (i.e., 1600 cc) or Rs. 2,400 per month, if the cubic capacity of the engine exceeds 1.6 litres and Rs. 900 per month, if chauffeur is provided (nothing is deductible for amount recovered from the employee).  

33.
How to compute value of perquisite arising on account of motor car provided by the employer and maintenance and running expenses of the car are met by the employee?

This situation can further be classified as follows :
(1) Car is used for official purpose only.
(2) Car is used for private purpose only. 
(3) Car is used for official as well as private purposes.
The taxable value of perquisite in above cases will be computed as follows:
(a) If car is used wholly for official purpose: 
Nothing is charged to tax, if conditions specified in note given below are satisfied.
Note: The employer has maintained complete details of journey undertaken for official purpose which should include date of journey, destination, mileage, amount of expenditure incurred thereon and the employer gives a certificate to the effect that such an expenditure was incurred wholly for performing official duty.
(b) If car is used wholly for private purpose of employee or any member of his household: 
Value of perquisite will be computed as follows:
Particulars (Rs.)
10% per annum of cost of car, if car is owned by the employer or actual hire charges, if car is hired by the employer plus salary paid to chauffeur by the employer, if any XXXXX
Less: Amount recovered from the employee XXXXX
Value of perquisite (if positive) XXXXX
(c) car is used partly for private purpose of employee or any member of his household and partly for official purpose: 

Value of perquisite will be calculated at the rate of Rs. 600 per month, where the cubic capacity of the engine does not exceed 1.6 litres (i.e., 1600 cc) or Rs. 900 per month, if the cubic capacity exceeds 1.6 litres and Rs. 900 per month, if chauffeur is provided (nothing is deductible for amount recovered from the employee). 

34.
How to compute value of perquisite arising on account of running and maintenance expenditure met or reimbursed by the employer in respect of any automotive conveyance (other than car) owned by the employee?

The value of perquisite in above case under different situations will be as follows :
  (a) If the vehicle is used wholly for official purpose : 
Nothing is charged to tax, if conditions specified in note given below are satisfied.
Note: The employer has maintained complete details of journey undertaken for official purpose which should include date of journey, destination, mileage, amount of expenditure incurred thereon and the employer gives a certificate to the effect that such an expenditure was incurred wholly for performing official duty.
(b) If the vehicle is used partly for private purpose of employee or any member of his household and partly for official purpose : 
Value of perquisite will be computed as follows:
Particulars (Rs.)
Actual expenditure incurred by the employer XXXX
Less: Rs. 900 per month [a higher amount can be deducted, if conditions specified in note given above] XXXX
Less: Amount recovered from employee XXXX

Value of perquisite (if positive) XXXX 

35.
How to compute value of perquisite arising on account of provision of free or concessional meal by the employer?

Value of perquisite in respect of food and other non-alcoholic beverages provided in office premises or through non-transferable paid vouchers usable only at eating joints will be as follows:
Particulars (Rs.)
Cost to the employer in respect of aforesaid items in excess of Rs. 50 per meal XXXXX
Less : Amount recovered from the employee XXXXX
Value of perquisite (if positive) XXXXX
Nothing shall be charged in respect of:
(a) Food and other non-alcoholic beverages provided in working hours in remote area or in an offshore installation.
(b) Light refreshment (i.e., tea or non-alcoholic beverages and snacks) provided during working hours including working on holidays, overtime, etc.

Expenditure on provision of free meals in excess of Rs. 50 per meal is treated as perquisite - Circular No. 15/2001, dated December 12, 2001. 

36.
How to compute value of perquisite arising on account of provision of credit card by the employer?

Value of perquisite arising on account of provision of credit card by the employer will be computed as follows :
Particulars (Rs.)
Expenditure incurred by the employer (See note) in respect of credit card used by the employee or any member of his household XXXXX
Less: Amount recovered from the employee XXXXX
Less: Expenditure on use for official purposes (*) XXXXX
Value of perquisite (if positive) XXXXX
Note : Expenditure will include membership fees, annual fees incurred by the employee/member of his household, which is charged to a credit card (including add-on-credit card), provided by the employer or otherwise paid/reimbursed by the employer.
(*) Expenditure incurred on official purpose will be deducted only if:
(a) A complete detail of such an expenditure (including the date and nature of expenditure) is maintained by the employer ; and

(b) Employer gives a certificate to the effect that such expenditure was incurred exclusively for the performance of duties. 

37.
How to compute value of perquisite arising on account of provision of club facility by the employer?

Value of perquisite arising on account of provision of club facility by the employer will be computed as follows :
Particulars (Rs.)
Expenditure incurred by the employer in respect of club facility used by the employee or any member of his household XXXXX
Less: Amount recovered from the employee XXXXX 
Less: Expenditure on use for official purposes XXXXX
Value of perquisite (if positive) XXXXX
Note : 
(1) Expenditure incurred by the employer will include expenditure incurred or reimbursed by the employer in respect of club facility used by the employee or any member of his household or annual or periodical fees paid or payable to a club.
(2) Expenditure incurred on official purpose shall be deducted only if:
(a) A complete detail of such an expenditure (including date and nature of expenditure and its business expediency) is maintained by the employer ; and
(b) Employer gives a certificate to the effect that such expenditure was incurred exclusively for the performance of duties.
Nothing shall be charged to tax in respect of:
(a) Health club, sports and other facilities provided uniformly to all classes of employees by the employer.

(b) Initial one-time deposit or fees for corporate or institutional membership fees paid by the employer, where benefit does not remain with particular employee after cessation of employment - Circular No. 15/2001, dated December 12, 2001. 

38.
How to compute value of perquisite arising on account of gift given by the employer?

Value of any gift, gift vouchers, etc., received from the employer by the employee or member of his household, shall be equal to the value of such gift. Nothing shall be charged to tax, if aggregate value of such gift, vouchers, etc., during the previous year do not exceed Rs. 5,000. 

39.
How to compute value of perquisite arising on account of provision of free use of telephone by the employer?

Nothing is taxed in respect of expenses on telephone including a mobile phone actually incurred by the employer on behalf of an employee. Hence, no perquisite will arise in respect of provision of mobile phone to the employee. 

40.
How to compute value of perquisite arising on account of provision of medical facility by the employer?

Following are the provisions relating to valuation of perquisite in respect of medical facility provided (in India) by the employer to the employee or any family member (*) of the employee :
(*) Family member for this purpose means spouse/children of the employee, parents, brothers and sisters of the employee or any of them wholly or mainly dependent on the employee. 
Nothing will be charged to tax in respect of medical facility provided in a hospital:
(a) Maintained by the employer ; or
(b) Maintained by the Government or local authority or other person but approved by Government for treatment of its employees.
(c) Approved by the Chief Commissioner having regard to the prescribed guidelines. In this case, exemption is available only for treatment of prescribed diseases given in rule 3A. A certificate from the hospital specifying nature of disease as well as amount of expenditure should be obtained.

(d) In respect of medical facility/expenses in any hospital other than discussed in (a) to (c) above, amount of expenditure incurred or reimbursed by the employer in excess of Rs. 15,000 (in aggregate per year) will be value of the perquisite charged to tax, in the hands of employee. 

41.
How to compute value of perquisite arising on account of payment or reimbursement of group medical insurance premium for employees and their family members by the employer?

Nothing is charged to tax in respect of group medical insurance premium for employees and their family members, paid or reimbursed by the employer. 

42.
Fixed medical allowance and perquisite are same or different?

Fixed medical allowance and perquisite are different. Valuation of perquisite arising on account of provision of medical facility by the employer is discussed in preceding FAQ. Fixed medical allowance is fully taxable. 

43.
What is the exemption available to an employee in respect of leave travel concession?

An employee can claim exemption under section 10(5) in respect of Leave Travel Concession. Exemption under section 10(5) is available to all employees (i.e., Indian as well as foreign citizens).
Exemption is available in respect of value of any travel concession or assistance received or due to the employee, from his employer (including former employer) for himself and his family members in connection with his proceeding on leave to any place in India.
Other provisions to be kept in mind in this regard are as follows :
Where journey is performed by air : Amount of exemption will be lower of amount of economy class air fare of the National Carrier by the shortest route or actual amount spent.
Where journey is performed by rail : Amount of exemption will be lower of amount of air- conditioned first class rail fare by the shortest route or actual amount spent. The same rule will apply where journey is performed by any other mode and the place of origin of journey and destination are connected by rail. However, where the place of origin and destination are not connected by rail, exemption will be as follows:
(a) If recognised public transport exists: Exemption will be lower of first class or deluxe class fare by the shortest route or actual amount spent.
(b) If no recognised public transport exists: Exemption will be lower of amount of air-conditioned first class rail fare by the shortest route (considering as if journey is performed by rail) or actual amount spent.
Block : Exemption is available for 2 journeys in a block of 4 years. The block applicable for current period is calendar year 2010-13. The previous block was of calendar year 2006-2009.
Carry over: If an employee has not availed of travel concession or assistance in respect of one or two permitted journeys in a particular block of 4 years, then he is entitled to carry over one journey to the next block. In this situation, exemption will be available for 3 journeys in the next block. However, to avail of this benefit, exemption in respect of carried over journey should be utilised in the first calendar year of the next block. In other words, in case of carry over, exemption is available in respect of 3 journeys in a block, provided exemption in respect of at least 1 journey is claimed in the first year of the next block.
Exemption is in respect of actual expenditure on fare, hence, if no journey is performed, then no exemption is available.
Family : Family will include spouse and children of the individual, whether dependent or not and parents, brothers, sisters of the individual or any of them who are wholly or mainly dependent on him.

Exemption is restricted to only 2 surviving children born after October 1, 1998 (multiple births after first single child will be considered as one child only). However, such restriction is not applicable to children born before October 1, 1998. 

44.
What is the tax treatment of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer or former employer, free of cost or at concessional rate to the employee?

With effect from assessment year 2010-11, FBT has been abolished and sub-clause (vi) of section 17(2) has been substituted with new sub-clause so as to include in the definition of perquisite the value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer or former employer, free of cost or at concessional rate to the employee. Thus, if any of the above mentioned shares/securities are transferred by the employer to the employee on or after 1-4-2009, then fair market value of such shares/securities on the date of exercise of the option, less amount recovered from the employee, will be the taxable value of perquisite in the hands of the employee. It will be taxed in the previous year in which the shares are allotted or transferred to the employee.

 

45.
What is manner of computation of exemption in respect of House rent allowance (HRA)?

Exemption in respect of HRA will be lower of following 
(a) 40% of salary (50% in case of metro cities) 
(b) Actual amount of HRA
(c) Rent paid in excess of 10% of salary 

Salary will be computed on due basis and for the period for which the accommodation is taken on rent by the employee.. Salary will include basic salary plus Dearness allowance which is in terms and commission based on percentage of turnover. 

46.
What is the tax treatment of employers’ contribution to provident fund?

Employers’ contribution to Statutory Provident Fund is not liable to tax in the hands of the employee.
Employers’ contribution to Recognised Provident Fund is not liable to tax in the hands of the employee upto 12% of the salary. Contribution in excess of 12% of salary is charged to tax in the hands of the employee.

Employers’ contribution to Un-recognised Provident Fund is not liable to tax in the hands of the employee. 

47.
My employer has not allowed me relief under section 89 and has deducted tax without allowing relief under section 89, can I claim relief while filing the return of income?

If the employer fails to provide relief under section 89 and deducts excess tax, then one can claim the same in the return of income and can claim refund of excess tax deducted. While computing TDS from salary, relief can be granted only by an employee being a Government servant or an employee in a company, co-operative society, local authority, university, institution, association or body. For claiming relief under section 89 one needs to provide form No. 10E to the employer. 

48.
Which form is to be used to claim relief under section 89?

To claim relief under section 89(1), the employee should furnish Form No. 10E to the employer or Tax authority (as the case may be). 

49.
What is the tax treatment of salary received from abroad for services rendered abroad?

If the assessee is a resident and ordinarily resident in India, then salary income will be charged to tax in India even if service is rendered outside India.

50.
In which year salary due but not received is chargeable to tax?

Salary income is chargeable to tax on due or receipt basis, whichever is earlier Hence, salary if due but not received will be charged to tax in the year of its accrual, i.e., the year in which it becomes due. 

51.
What is the tax treatment of leave encashment in the hands of an employee of the Central or the State Government?

Encashment of leave, i.e., leave salary encashed during the continuance of service is charged to tax in the hands of Government employee as well as non-Government employee. However, leave salary encashed at the time of retirement is fully exempt in the hands of the Central Government and the State Government employees. 

52.
My employer is paying me HRA but there is no such specification in Form 16. How to claim exemption in respect of HRA? Also please give the limit of exemption in respect of HRA.

 Exemption in respect of HRA is available only in the month in which the employer has paid HRA. If in any month’s consolidated salary is paid without giving any bifurcation of the payment then it may mean that no HRA is being paid for that period. In that case he cannot claim exemption in respect of HRA (since no HRA is received).

Exemption will only start from the month in which the employer pays HRA. i.e., when it is mentioned in Salary slip/Form 16. If the employer has paid HRA but it is not bifurcated in the salary slip, then the employer should be requested to provide the bifurcation on the salary slip/Form 16.

As per section 10(13A), read with rule 2A, the exemption in respect of HRA will be lower of the following amounts :

   (1)   50% of salary, when residential house is situated at Mumbai, Kolkata, Delhi or Chennai and 40% of salary where residential house is situated at any other place.

   (2)   HRA actually received by the employee in respect of the period during which rental accommodation is occupied by the employee during the previous year.

   (3)   Rent paid in excess of 10% of salary.

Salary will include basic salary, dearness allowance forming part of salary while computing all retirement benefits and commission based on fixed percentage of turnover achieved by the employee. Apart from this salary for this purpose does not include any other allowances/perquisites.

Salary for this purpose shall be computed on due basis in respect of period during which the accommodation is occupied by the employee in the previous year.

53.
What are the provisions relating to valuation of perquisite in respect of medical facility provided by the employer?

Following are the provisions relating to valuation of perquisites in respect of medical facility provided (in India) by the employer to the employee or any family member (*) of the employee :

(*) Family member for this purpose means spouse/children of the employee, parents, brothers and sisters of the employee or any of them wholly or mainly dependent on the employee.

Nothing will be charged to tax in respect of medical facility provided in a hospital:

   (a)   Maintained by the employer,

   (b)   Maintained by the Government or local authority or other person but approved by Government for treatment of its employees,

    (c)   Approved by the Chief Commissioner having regard to the prescribed guidelines. In this case exemption is available only for treatment of prescribed diseases given in rule 3A. A certificate from the hospital specifying nature of disease as well as amount of expenditure should be obtained.

   (d)   In respect of medical facility/expenses in any hospital other than discussed in Sl. Nos (a) to (c) above, amount of expenditure incurred or reimbursed by the employer in excess of Rs. 15,000 (in aggregate per year) will be value of the perquisite charged to tax in the hands of the employee.

Nothing is charged to tax in respect of group medical insurance premium for employees and their family members, paid or reimbursed by the employer. 

54.
How to compute relief under section 89 in respect of arrears of salary?

Under section 89, read with rule 21A(2), an employee can claim relief in respect of arrears of salary. Relief can be computed in the following manner:

Step 1 : Calculate total tax liability (including surcharge and cess, if any) on the total income, including the additional salary of the previous year in which such salary is received.

Step 2 : Calculate total tax liability (including surcharge and cess, if any) on the total income, excluding the additional salary of the previous year in which such salary is received.

Step 3. Find the difference between tax computed at step Nos (1) and (2) above.

Step 4 : Calculate total tax liability (including surcharge and cess, if any) on the total income, including the additional salary of the previous year(s) to which such salary relates to.

Step 5 : Calculate total tax liability (including surcharge and cess, if any) on the total income, excluding the additional salary of the previous year(s) to which such salary relates to.

Step 6 : Find the difference between tax computed at Sl. nos. (4) and (5) above.

Relief under section 89 is the excess of tax computed at Step 3 over tax computed at Step 6. No relief is available if tax computed at Sl No. 3 is less than tax computed at Sl. No. 6.

If the additional salary pertains to more than one previous year, then relief shall be computed in above manner by spreading such salary over the previous years to which such salary pertains to. 

55.
How to compute relief under section 89 in respect of gratuity?

Relief in respect of taxable gratuity [i.e., gratuity received in excess of amount exempt under section 10(10),] can be classified as follows:

   (a)   Gratuity payable in respect of service of 15 years or more:

In this case relief is computed as follows:

     1.   Compute the average rate of tax on the total income (including gratuity) of the year in which gratuity is received.

     2.   Compute the average rate of tax on the total income of previous three years by adding one-third of gratuity to each of three years.

     3.   Find the average of the three average rates determined in Sl. No. (2) above.

     4.   Find the difference of rate determined at Sl Nos. (1) and at (3),

     5.   Amount of relief is tax on gratuity computed at the rate determined (i.e., excess rate) in (4) above.

Average rate of tax (%) =  Tax liability for the year X 100

                                                    Taxable income for that year

   (b)   Gratuity payable in respect of service of less than 15 years, but not less than 5 years:

In this case relief is computed in the same manner as discussed in (a) above, except that gratuity is to be spread equally over past two years instead of three years.

    (c)   No relief is available for gratuity received in respect of service rendered for a period of less than 5 years. 

56.
Which form is to be filled up for availing relief under section 89(1)?

To claim relief under section 89(1), the employee should furnish Form No. 10E to the employer or tax authority (as the case may be). 

57.
How can an employee obtain Form No. 16? Can the same be downloaded from any site?

The employee can obtain Form No. 16 from the employer.

 

As regards the generation of Form 16 by the employer consider the following producer :

In respect of TDS certificate for salary, all deductors (including Government deductors who deposit TDS in the Central Government Account through book entry) shall issue Part A of Form No. 16, by generating and subsequently downloading it through TRACES Portal (https://www.tdscpc.gov.in), in respect of all sums deducted on or after the 1st day of April, 2012 under the provisions of section 192 of Chapter XVII-B. Part A of Form No 16 has a unique TDS certificate number. 'Part B (Annexure)' of Form No. 16 has to be prepared by the deductor manually and issued to the deductee after due authentication and verification alongwith Part A of the Form No. 16 stated above.

 

The certificate so issued can be authenticated either by using digital signature or manual signature. 

58.
I am a salaried employee. Every month I am paying rent for a residential accommodation acquired for myself and for my family. However, I am not receiving House Rent Allowance from my employer-company. Is there any other section under which I can claim deduction in respect of rent of residential accommodation paid by me?

Yes, you can claim deduction in respect of rent of residential accommodation paid by you under section 80GG. The provisions in this regard are as follows:

 

A self employed person or a salaried employee who is not receiving HRA can claim deduction under section 80GG in respect of rent of residential accommodation paid by him. The provisions in this regard are as follows:

Deduction under section 80GG is available only to an individual who satisfies following conditions:

 

·         He/she should be self-employed or a salaried employee who has not received house rent allowance from his/her employer at any time during the previous year.

·         The individual, his/her spouse or minor children and HUF of which he/she is a member should not own any residential accommodation at the place where such an individual resides or performs duty of his employment or carries on a business or profession.

·         If the assessee owns a residential accommodation at any other place (other than specified above), then he/she should not have claimed the benefit of SOP in respect of such property.

·         Deduction under this section is lower of the following amounts:

    (i)   Rs. 2,000 per month.

   (ii)   25% of total income after certain adjustments [hereafter referred to as adjusted gross total income (AGTI)].

  (iii)   Rent paid in excess of 10% of adjusted gross total income.

 

Adjusted GTI : It means gross total income less following:

 

    (i)   Deductions under sections 80C to 80U, except 80GG.

   (ii)   Long-term capital gain, short-term capital gain taxable under section 111A.

  (iii)   Income covered under section 115A (i.e., dividend, royalty, etc., received by non-resident). 

59.
What will be the tax treatment of reimbursement by the employer of exam fee of a higher professional course?

If the education undertaken relates to official duty then the same will not be treated as a perquisite and will not be charged to tax. 

60.
I retired from my job in 2012. After retirement I received arrears of salary from my employer. Under which head of income arrears of salary will be charged to tax?

As per section 15, any salary due from an employer or a former employer to an assessee in the previous year is taxed as salary income. Thus, arrears of salary even if received after retirement will be taxed as salary income.

61.
I am a partner in firm and received salary of Rs. 84,000. Under which head the same will be charged to tax?

 Any income is taxed under the head salary if the relationship between the payer and payee is that of employer and employee. In case of a partnership firm, there is no such relation ship between the firm and the partners, thus, salary received by the partners from the firm is taxed as business income and not as salary income.

62.
I am a Government employee and am receiving entertainment allowance. Will it be charged tax or is it exempt from tax?

Entertainment allowance is first included in salary and then as per section 16(ii), a Government employee can claim deduction in respect of entertainment allowance of lower of the following amounts :

  (1)  20% of salary (Salary will include only basic salary), or,

            (2)        Rs. 5,000 per annum

The above benefit is not available to a non-Government employee.

63.
What is the tax treatment of transfer/travelling allowance?

Exemption in respect of transfer/travelling allowance will be lower of the amount of allowance or the amount utilised for the purpose for which it is granted.

E.g., If Rs. 8,400 is received on account of transfer allowance and Rs. 8,000 is the expense on transfer incurred by the employee, then out of Rs. 8,400, Rs. 8,000 will be exempt and balance Rs. 400 will be charged to tax.  

64.
What is the tax treatment of transfer/travelling allowance?

Exemption in respect of transfer/travelling allowance will be lower of the amount of allowance or the amount utilised for the purpose for which it is granted.

E.g., If Rs. 8,400 is received on account of transfer allowance and Rs. 8,000 is the expense on transfer incurred by the employee, then out of Rs. 8,400, Rs. 8,000 will be exempt and balance Rs. 400 will be charged to tax.  

65.
What is the tax treatment of transfer/travelling allowance?

Exemption in respect of transfer/travelling allowance will be lower of the amount of allowance or the amount utilised for the purpose for which it is granted.

E.g., If Rs. 8,400 is received on account of transfer allowance and Rs. 8,000 is the expense on transfer incurred by the employee, then out of Rs. 8,400, Rs. 8,000 will be exempt and balance Rs. 400 will be charged to tax.  

66.
Is daily allowance taxable?

An employee can claim exemption in respect of any allowance (commonly known as daily allowance), whether granted on tour or for the period of journey in connection with transfer to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty. Exemption in respect of daily allowance will be lower of the amount of allowance or the amount utilised for the purpose for which allowance is granted.

E.g., If Rs. 8,400 is received on account of daily allowance and Rs. 8,000 is the expense incurred by the employee to meet the ordinary daily charges incurred by him on account of his absence from his normal place of duty, then out of Rs. 8,400, Rs. 8,000 will be exempt and balance Rs. 400 will be charged to tax. 

67.
Is daily allowance taxable?

An employee can claim exemption in respect of any allowance (commonly known as daily allowance), whether granted on tour or for the period of journey in connection with transfer to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty. Exemption in respect of daily allowance will be lower of the amount of allowance or the amount utilised for the purpose for which allowance is granted.

E.g., If Rs. 8,400 is received on account of daily allowance and Rs. 8,000 is the expense incurred by the employee to meet the ordinary daily charges incurred by him on account of his absence from his normal place of duty, then out of Rs. 8,400, Rs. 8,000 will be exempt and balance Rs. 400 will be charged to tax. 

68.
What is conveyance allowance and what is its tax treatment?

Many times employee is granted allowance to meet the expenditure incurred on conveyance in performance of duties of an office or employment of profit. This allowance is commonly known as conveyance allowance.

Exemption in respect of conveyance allowance will be lower of the amount of allowance or the amount utilised for the purpose for which it is granted.

69.
What is the tax treatment of uniform allowance?

Many times employee is granted allowance to meet the expenditure incurred on the purchase or maintenance of uniform for wearing it during the performance of the duties of an office or employment of profit (commonly known as uniform allowance). Exemption in respect of uniform allowance will be lower of the amount of allowance or the amount utilised for the purpose for which allowance is granted. 

70.
What is the tax treatment of uniform allowance?

Many times employee is granted allowance to meet the expenditure incurred on the purchase or maintenance of uniform for wearing it during the performance of the duties of an office or employment of profit (commonly known as uniform allowance). Exemption in respect of uniform allowance will be lower of the amount of allowance or the amount utilised for the purpose for which allowance is granted. 

71.
What is the tax treatment of uniform allowance?

Many times employee is granted allowance to meet the expenditure incurred on the purchase or maintenance of uniform for wearing it during the performance of the duties of an office or employment of profit (commonly known as uniform allowance). Exemption in respect of uniform allowance will be lower of the amount of allowance or the amount utilised for the purpose for which allowance is granted. 

72.
What is the tax treatment of children’s education allowance?

As per rule 2BB(2), an employee can claim exemption in respect of children’s education allowance of lower of the amount of allowance or Rs. 100 per month per child. This allowance is limited to 2 children of the employee. 

73.
What is the tax treatment of children’s education allowance?

As per rule 2BB(2), an employee can claim exemption in respect of children’s education allowance of lower of the amount of allowance or Rs. 100 per month per child. This allowance is limited to 2 children of the employee. 

74.
What is the tax treatment of children’s education allowance?

As per rule 2BB(2), an employee can claim exemption in respect of children’s education allowance of lower of the amount of allowance or Rs. 100 per month per child. This allowance is limited to 2 children of the employee. 

75.
What is the tax treatment of children’s hostel allowance?

As per rule 2BB(2), an employee can claim exemption in respect of children’s hostel allowance of lower of the amount of allowance or Rs. 300 per month per child. This allowance is limited to 2 children of the employee.

76.
What is the tax treatment of children’s hostel allowance?

As per rule 2BB(2), an employee can claim exemption in respect of children’s hostel allowance of lower of the amount of allowance or Rs. 300 per month per child. This allowance is limited to 2 children of the employee.

77.
What is the tax treatment of transport allowance

As per rule 2BB(2), an employee can claim exemption in respect of transport allowance (i.e., granted for journey between office and residence) of lower of the amount of allowance or Rs. 800 per month. 

78.
What is the tax treatment of transport allowance

As per rule 2BB(2), an employee can claim exemption in respect of transport allowance (i.e., granted for journey between office and residence) of lower of the amount of allowance or Rs. 800 per month. 

79.
What is the tax treatment of transport allowance received by a blind or orthopaedically handicapped employee?

As per rule 2BB(2), an employee can claim exemption in respect of transport allowance (i.e., granted for journey between office and residence) of lower of the amount of allowance or Rs. 800 per month. However, in case of an employee who is orthopaedically handicapped or blind, the exemption of Rs. 800 will be increased to Rs. 1,600 per month.

80.
Can I claim exemption in respect of leave encashment received during continuance of service?

Leave encashment during the continuation of service is fully taxable. Exemption under section 10(10AA) is available only in respect of leave encashment at the time of retirement (whether on superannuation or otherwise).

81.
Can I claim exemption in respect of leave encashment received during continuance of service?

Leave encashment during the continuation of service is fully taxable. Exemption under section 10(10AA) is available only in respect of leave encashment at the time of retirement (whether on superannuation or otherwise).

82.
Is monthly pension received after retirement taxable? If yes, then under which head of income?

Monthly pension received after retirement is fully taxable and is taxable as salary income. 

83.
Is monthly pension received after retirement taxable? If yes, then under which head of income?

Monthly pension received after retirement is fully taxable and is taxable as salary income. 

84.
My employer has provided me a domestic servant a free of cost. Will it amount to perquisite?

 The value of benefit to the employee (or any member of his household) resulting from the provision of services of a sweeper, a gardener, a watchman or a personal attendant, shall be treated as perquisite and the value of such perquisite shall be the actual cost to the employer by the employer. The actual cost in such a case shall be the total amount of salary paid or payable by the employer or any other person on his behalf for such services reduced by any amount paid by the employee for such services.

 

85.
My employer has provided me a domestic servant a free of cost. Will it amount to perquisite?

 The value of benefit to the employee (or any member of his household) resulting from the provision of services of a sweeper, a gardener, a watchman or a personal attendant, shall be treated as perquisite and the value of such perquisite shall be the actual cost to the employer by the employer. The actual cost in such a case shall be the total amount of salary paid or payable by the employer or any other person on his behalf for such services reduced by any amount paid by the employee for such services.

 

86.
My employer has provided me with an interest free loan for purchase of house. Will it amount to a perquisite?

In respect of interest free loan granted by the employer, value of perquisite will be the amount of interest on such loan. The value of perquisite arising on account of interest free loan or concessional loan granted by the employer will be computed on the basis of the rate of interest on such loans charged by the State Bank of India as on the 1st day of the relevant previous year, in respect of loans for the same purpose advanced by it (i.e., State Bank of India). The value of perquisite will be determined as follows :

 

Particulars

Interest free loan

Concessional loan

Interest on the respective loan computed on the basis of rate of interest on such loan charged by the State Bank of India prevailing on the first day of the previous year

XXXXXX

XXXXXX

Less: Amount recovered from the employee for the respective loan

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

XXXXXX

Perquisite in respect of interest free or concessional loans

XXXXXX

XXXXXX

 

Interest shall be computed on a monthly basis by considering maximum outstanding monthly balance

87.
My employer has provided me with an interest free loan for medical treatment of specified diseases. Will it amount to a perquisite?

Nothing is charged to tax in respect of perquisite arising on account of interest free or concessional loan granted by the employer for treatment of specified diseases. Exemption is not applicable to so much of the loan as has been reimbursed to the employee under any medical insurance scheme.

88.
My employer has provided me with an interest free loan for medical treatment of specified diseases. Will it amount to a perquisite?

Nothing is charged to tax in respect of perquisite arising on account of interest free or concessional loan granted by the employer for treatment of specified diseases. Exemption is not applicable to so much of the loan as has been reimbursed to the employee under any medical insurance scheme.

89.
During the relevant year I worked with two different employers and they have not deducted any tax from salary paid to me. If salary from both employers is clubbed together my income will exceed the minimum exemption limit. Do I have to pay taxes on my own?

Yes, you will have to pay tax on your total income and file the return of income.

90.
During the relevant year I worked with two different employers and they have not deducted any tax from salary paid to me. If salary from both employers is clubbed together my income will exceed the minimum exemption limit. Do I have to pay taxes on my own?

Yes, you will have to pay tax on your total income and file the return of income.

91.
During the relevant year I worked with two different employers and they have not deducted any tax from salary paid to me. If salary from both employers is clubbed together my income will exceed the minimum exemption limit. Do I have to pay taxes on my own?

Yes, you will have to pay tax on your total income and file the return of income.

92.
Even if no taxes have been deducted from salary, is there any need for my employer to issue Form-16 to me?

Form-16 is a certificate of TDS. In your case it will not apply. However, your employer must issue a salary statement.

93.
Even if no taxes have been deducted from salary, is there any need for my employer to issue Form-16 to me?

Form-16 is a certificate of TDS. In your case it will not apply. However, your employer must issue a salary statement.

94.
Even if no taxes have been deducted from salary, is there any need for my employer to issue Form-16 to me?

Form-16 is a certificate of TDS. In your case it will not apply. However, your employer must issue a salary statement.

95.
My employer has provided me with a free laptop for use; the same is to be returned on termination of my job, what will be the value of perquisite in this case?

There will be no perquisite in respect of computer or laptops provided by the employer to the employee.

96.
My employer has provided me with a free laptop for use; the same is to be returned on termination of my job, what will be the value of perquisite in this case?

There will be no perquisite in respect of computer or laptops provided by the employer to the employee.

97.
I purchased a laptop from by employer at a very low price as compared to its market value. What will be the value of perquisite in this case?

 When a movable asset owned by the employer is transferred to the employee, either free of cost or at a concessional rate, the benefit accruing to the employee from such transfer will result in a perquisite in the hands of the employee. Value of perquisite in this case will be excess of WDV (i.e., cost less normal wear and tear) of the asset over the amount recovered from the employee in respect of such transfer. In above case, WDV is determined as follows:

  (a)  In case of electronic items (i.e., computer and related items only), WDV shall be computed on reducing balance method by deducting 50% depreciation for each completed year. In case of motor car, rate of depreciation will be at 20% for each completed year.

  (b)  In case of any other asset, WDV is to be computed by deducting 10% of actual cost (i.e., as per straight line method) for each completed year.

Laptop comes under the category of electronics items and, hence, WDV shall be computed by applying 50% depreciation.

98.
Can I claim deduction under section 80C to 80U from income by way of long-term capital gains?

No, you cannot claim deduction under section 80C to 80U from income by way of long-term capital gains. 

99.
Can I claim deduction under section 80C to 80U from income by way of long-term capital gains?

No, you cannot claim deduction under section 80C to 80U from income by way of long-term capital gains. 

100.
I purchased goods from another State and paid freight of Rs. 30,000 to the driver in cash. Will it be disallowed?

 As per section 40A(3), any expenditure exceeding Rs. 20,000, which is otherwise deductible under any provision of the Act, is disallowed, if the payment of such expenditure is made otherwise than by an account-payee cheque or an account-payee demand draft (i.e., by cash or bearer cheque or crossed cheque or bearer demand draft). In your case payment exceeds Rs. 20,000 and the same will be paid by cash and, hence the same will be disallowed. 

101.
I purchased goods from another State and paid freight of Rs. 30,000 to the driver in cash. Will it be disallowed?

 As per section 40A(3), any expenditure exceeding Rs. 20,000, which is otherwise deductible under any provision of the Act, is disallowed, if the payment of such expenditure is made otherwise than by an account-payee cheque or an account-payee demand draft (i.e., by cash or bearer cheque or crossed cheque or bearer demand draft). In your case payment exceeds Rs. 20,000 and the same will be paid by cash and, hence the same will be disallowed. 

102.
In which year advance salary is charged to tax?

As per section 15, salary is taxed on due or receipt basis, whichever is earlier. Hence advance salary is charged to tax in the year or receipt.

103.
Is gratuity received by Government employees exempt from tax?

Section 10(10)(i) grants exemption to gratuity received by Government employee (i.e., Central Government or State Government or local authority). Hence, gratuity received by Government employee i.e. employees of Central Government or State Government or local authority is exempt from tax.

104.
What is the tax treatment of gratuity received by a non-Government employee (covered by Payment of Gratuity Act, 1972)?

For the purpose of computation of exemption in respect of gratuity, non-Government employees are classified into two categories i.e. employees covered by Payment of Gratuity Act, 1972 and employees not covered by Payment of Gratuity Act, 1972. As per section 10(10)(ii), exemption in respect of gratuity in case of employees covered by the Payment of Gratuity Act, 1972 will be lower of following :

  • 15 days’ salary × years of service.
  • Maximum amount specified, i.e., Rs. 10,00,000.
  • Gratuity actually received.

    Note:

    1)      Instead of 15 days’ salary, only 7 days salary will be taken into consideration in case of employees of seasonal establishment.

    2)      15 days’ salary = Salary last drawn × 15/26

    3)      Salary for this purpose will include basic salary and dearness allowance only. Items other than basic salary and dearness allowance are not to be considered.

    4)      In case of piece rated employee, 15 days’ salary will be computed on the basis of average of total wages (excluding overtime wages) received for a period of three months immediately preceding the termination of his service.

    Part of the year, in excess of 6 months, shall be taken as one full year.

  • 105.
    What is the tax treatment of gratuity received by a non-Government employee (not covered by Payment of Gratuity Act, 1972)?

    For the purpose of computation of exemption in respect of gratuity, non-Government employees are classified into two categories i.e. employees covered by Payment of Gratuity Act, 1972 and employees not covered by Payment of Gratuity Act, 1972. As per section 10(10)(iii), exemption in respect of gratuity in case of employees not covered by the Payment of Gratuity Act, 1972 will be lower of following :

  • Half month’s salary for each completed year of service, i.e.,

                 [Average monthly salary × ½] × Completed years of service. .

  • Rs. 10,00,000.
  • Gratuity actually received.

    Note:

    1)      Average monthly salary is to be computed on the basis of average of salary for 10 months immediately preceding the month of retirement.

    2)      Salary for this purpose will include basic salary, dearness allowance, if the terms of service so provide and commission based on fixed percentage of turnover achieved by the employee.

     

    While computing years of service, any fraction of a year is to be ignored.

  • 106.
    I am a Government employee, is my monthly pension taxable?

    Monthly pension received after retirement is taxable in the hands of Government as well as non-Government employees.

    107.
    I accumulated pension and receive Rs., 8,40,000 as accumulated pension. Is my accumulated pension taxable (I am a non-Government employee)?

    As per section 10(10A), any commuted pension, i.e., accumulated pension in lieu of monthly pension received by a Government employee is fully exempt from tax. Exemption in respect of commuted pension in case of a non-Government employee will be as follows:

    ·         If the employee receives gratuity, one third of full value of commuted pension will be exempt from tax under section 10(10A).

    ·         If the employee does not receive gratuity, one half of full value of commuted pension will be exempt from tax under section 10(10A).

    Note : Exemption is available only in respect of commuted pension and not in respect of un-commuted, i.e., monthly pension. Thus, monthly pension received by Government as well as non-Government employees is fully taxable. 

    108.
    In the month of March 2014, I got the salary of April 2014, do I need to pay tax on salary of April 2014 in the year 2013-14?

    Salary is charged to tax on due or receipt basis whichever is earlier and hence salary of April 2014 (which will become due in April) but received in March will be charged to tax in March on receipt basis.

    109.
    Is payment for extra work (over time) taxable?

    Payment for extra work received by an employee from his employer is charged to tax under the head “Salaries”. In other words, remuneration received for extra work will be charged to tax as salary income.

    110.
    I am a partner is a partnership firm and receive salary from the firm, under which head the salary received by me from the firm will be tax?

    Salary received by partner from the firm is charged to tax under the head “Profits and gains of business or profession”. Hence, your salary will be charged to tax under the head “Profits and gains of business or profession”.

    111.
    I am working on a project of UNO and am being paid by UNO, is salary received from UNO taxable?

    Salary received from the United Nations Organisation is exempt from tax as per section 2 of the United Nations (Privileges and Immunities) Act, 1947.

    112.
    I receive commission from my employer, is commission charged to tax as salary income?

    Fees or commission received by the employee from the employer are charged to tax as salary income. Commission will be taxed as salary income, irrespective of the fact that it is received as fixed monthly amount or is received as a percentage of any particular item like turnover achieved by the employee.

    113.
    I received salary in lieu of notice period, is it taxable?

    Salary in lieu of notice period is charged to tax on receipt basis, i.e., it is charged to tax in the year of receipt.