Table of Contents Income From Salary 2 Income From House Property 4 Income From Business of Profession Income From

Capital Gains 8 Orther Sources Income 10 Deductions 11 Retirement Benefits 12 Rebates 19 Perquisites 20 Salary Structure 22 Section 10 24 Form 16 28

A. Income from Salary Important Concepts: Income under the head salaries covers all possible remuneration due/paid to a pe rson in respect of services rendered by him in an express or implied contract of employment Payment received by an individual other than an employer cannot be termed as sal ary and consequently cannot be taxed under this head Salary is taxed on due basis or receipt basis whichever is earlier If the employer pays the salary tax free the employee has to include in his taxa ble income not only the salary but also the amount of tax paid by the employer Salary includes the following items: Wages Any annuity or pension Any gratuity Any fees, commission, perquisite or profits in lieu of or in addition to any sal ary or wages Any advance salary Any payment received for any leave not availed by him Transferred balance in a RPF to the extent it is taxable Format of Computation of Taxable Salary. 1 Basic Salary p.m 2 Dearness Allowance p.m 3 Commission 4 Advance Salary 5 Arrears of Salary Fully Taxable Allowances 1 City Compensatory Allowance 2 Fees 3 Bonus 4 Lunch/Tiffin Allowance 5 Overtime Allowance 6 Servant Allowance 7 Warden Allowance 8 Family Allowance

9 Medical Allowance 10 Hill Allowance Partly Taxable Allowances 1 House Rest Allowance 2 Children Education Allowance 3 Children Hostel Allowance 4 Transport Allowance 5 Travelling Allowance 6 Conveyance Allowance 7 Helper Allowance 8 Academic Allowance 9 Uniform Allowance 10 Entertainment Allowance Other payments received 1 Gratuity 2 Uncommuted Pension (taken periodically) 3 Commutation of Pension 4 Retrenchment Compensation 5 Leave encashment during service 6 Leave encashment upon retirement 7 Voluntary retirement compensation 8 Leave travel concession 9 Employer's contribution to RPF 10 Interest on RPF received Perquisites 1 Service of Sweeper, Gardener, Watchman etc. 2 Supply of Water, Gas, Electricity for household purposes 3 Educational facilities to the members of household of employee 4 Transportation of Goods/Passengers 5 Housing/Vehicle Loan (not for repairs) 6 Total Salary 7 (Less) Professional tax Taxable Salary B. Income from House Property Tax is on the annual value of the house property after allowing certain deductio ns. House Property consists of any building, flat, shop etc., and the land attac hed to the building. Computation of income from Self Occupied property Income is computed after giving certain deductions from the annual value of the property. A) Computation of annual value of self-occupied property The annual value of Self occupied property is taken as NIL if the property is fu lly utilized for own residential stay during the year or if the property is not actually occupied as owner and is also not let out. If a property is let out for only a part of the year, proportionate annual value will be calculated. B) Entitled deductions for self-occupied property The only entitled deduction is interest, if any payable, on loan taken for the p urchase or construction of the house property. The maximum deduction on this acc ount is Rs.30,000/-; However, for properties acquired or constructed between the 1st April 1999 and the 1st April 2003 out of borrowed funds, maximum limit is R s. 1,50,000/Computation of income from let out property Income is computed after giving certain deductions from the net annual value of the let out property. A) Computation of net value of let out property For let out properties the gross annual value will be the greater of the followi ng three amounts: Municipal value of the property;

 Actual rent received during the year; Fair rent i.e. rent of similar properties in the same or similar locality. Out of the gross annual value, municipal taxes actually paid during the year has to be deducted to arrive at the net annual value. B) Entitled deductions for let out property The deductions available for computing House Property Income are: 30% of the net annual value for repair and maintenance and rent collection expen ses for the property Interest on money borrowed to build, buy or repair the property; Ownership of property Besides owning property in own name, a person is deemed as owner in following th ree cases: As transferor of the property to spouse or minor child for inadequate or no cons ideration; As holder of an impartible estate or a property in part performance of a contrac t under the Transfer of Property Act; As shareholder of a co-operative society or a company, which entitles to hold an y property Fundamental conditions for taxing income under this head: The property should consist of any buildings or lands. The assessee should be the owner of the property. The property should not be used by the owner for the purpose of carrying on any business or profession the profits of which are chargeable to tax. Format for computation of House property income: Gross annual value (-) Municipal taxes NET ANNUAL VALUE (-) Repairs (-) Interest TAXABLE ANNUAL VALUE. Computation of GROSS ANNUAL VALUE (GAV): Step 1: Select higher of fair rent or municipal rent. Step 2: Select higher of standard rent or amount derived in Step 1. Step 3: Select higher of actual rent received/receivable or amount derived in St ep 2. However it should be noted that GAV for self-occupied property & let out vacant house should be taken as NIL. Municipal taxes paid by the owner would be deductible. 30% of Net Annual Value will be the standard deduction for repairs. Full amount of interest on housing loan paid would be deductible. For self-occupied property , interest would be deductible only to the extent of Rs. 1.50 lakhs only.

C. Income from Business of Profession Format for computation of business income: Profit as per Profit & Loss a/c (less) other admissible expenses (add) inadmissible expenses Taxable business or professional income The following types of income are chargeable to tax under the head Business of P rofession: Profits and gains from any business of profession Income derived from any trade or profession Any salary, interest, bonus received by a partner of a firm from such a firm

 Sum received under Key Man insurance policy Income from a speculative transaction Value of any benefit or any perquisite whether convertible into money or not ari sing from business or the exercise of a profession Basic principles governing the admissibility of deductions under Income from Bus iness of Profession: Onus to prove the admissibility of the expenditure should lie on the assesse Allowances are cumulative Expenditure should relate to the previous year Business should be carried on in the previous year Expenditure should have been incurred in relation to the assessee's own business Benefit of expenditure may extend beyond the previous year No allowance in respect of a non-existent liability: Expenditure tainted with illegality cannot be allowed as a deduction No allowance in respect of anticipated losses. Anticipated loss cannot be deduct ed even though the loss is certain. In other words loss which is neither suffere d not incurred during the previous year is not deductible. No deduction in respect of depreciation of investment i.e. deduction in respect of depreciation of investment in shares and other securities is not available. Deductions expressly allowed: Rent, rates, taxes, repairs and insurance of building Depreciation Deduction is possible under Tea Development account Deduction possible under investment deposit scheme Site restoration fund Reserve for shipping business Revenue expenditure incurred by an assessee who carries on scientific business Deduction in respect of patents and copyrights Deduction in respect of expenditure of know how D. Income from Capital Gains Capital Gains If any Capital Asset is sold or transferred, the profits arising out of such sal e are taxable as capital gains in the year in which the transfer takes place. Definition of capital asset Capital Asset means all moveable or immovable property except trading goods, per sonal effects, agricultural land other than within municipal areas or within 8 k ilometers from it wherever notified and gold bonds. Jewelry and ornament are not personal effects and their sale will attract capital gains. Distinction between short term and long-term asset Capital Assets are of two types i.e., long term and short term. Long-term capita l assets are assets held for more than 36 months before they are sold or transfe rred. In case of shares, debentures and mutual fund units the period of holding required is only 12 months. Different rates of tax apply for gains on transfer of the long term and short-term capital assets. Gains on short-term capital asse t are taxed as regular income. Computation of Capital Gains Capital gains are to be computed by deducting the following three amounts from t he consideration money received on transfer of the asset. i) The actual cost of the asset or its estimated market value as on 1.4 .81, if acquired earlier; ii) The cost of improvement, if any, for the asset; iii) Expenses incurred on transfer of the asset; and In case of a long-term capital asset, the costs are increased as per a Cost infl ation index for the year. Exemptions from Capital Gains In case of Individuals and HUF, long-term capital gains are exempt if the sale p roceeds are reinvested in certain assets. Some examples:

A) Profits on sale of residential house is reinvested in a new residentia l house. B) Long term capital gains are invested in notified bonds These exemptions are subject to certain conditions and the reinvestment has to b e made within the prescribed time. Format for computation of Capital gains: Consideration received on sale (less) Expenses incurred in relation to sale NET CONSIDERATION (less) Cost / Indexed cost of acquisition Long term / Short term capital gain (less) Exemption u/s 54 of the I.T act TAXABLE LONG / SHORT TERM CAPITAL GAIN / LOSS E. Other Sources Income Any income other than (a) salary, (b) house property income (c) Income from busi ness or profession, or (d) Capital Gains income, will be taxed as Income from Ot her Sources. Examples are interest from deposits, winnings from lotteries, races , income from the hiring out of machinery, or machinery compositely with buildin g, royalty, copyright fees, family pension, dividends other than from domestic c ompanies and mutual funds etc. Allowable Deductions In case of winnings from lotteries and races no deduction is allowable. For family pension, the allowable deduction is 1/3rd of the pension or Rs. 15,00 0/- whichever is lower. For other cases, any revenue expenditure, exclusively incurred for earning such income is allowed as deduction. In case of income from hiring of machinery, depreciation on such machinery is al so allowable as deduction. (A + B + C + D + E) = Gross total income

Deductions Deduction is the amount, which is reduced from the gross total income before com puting tax. There are other deductions such as for donations, for repayment of loans taken f or educational purposes etc. Deductions from Salary income Certain deductions are available while determining the taxable salary income. A) Standard Deduction Income Tax Slabs 2009/2010 for Men Income: upto 1.6 lacs NO TAX Income : 1.6 lacs to 3 lacs 10 % Income : 3 lacs to 5 lacs 20 % Income : above 5 lacs 30 % Income Income Income Income Income Tax Slabs 2009/2010 or Women : upto 1.9 lacs NO TAX : 1.9 lacs to 3 lacs 10 % : 3 lacs to 5 lacs 20 % : above 5 lacs 30 %

Income Tax slabs 2009/2010 for Senior Citizen Income : upto 2.4 lacs NO TAX Income : 2.4 lacs to 3 lacs 10 %

Income : 3 lacs to 5 lacs Income : above 5 lacs 30 %

20 %

B) Professional Tax Professional tax, which is paid, is allowed as deduction. C) Arrears salary If salary is received in arrears or in advance, it can be spread over the years to which it relates and be taxed accordingly as per section 89(1) of the Income tax Act. Retirement Benefits These benefits are provided by the employer to the employee for his future, eith er while in service or on his retirement. These have different tax treatment. T hey include: a) Pension Pension is a payment made by the employer after the retirement or death of emplo yee as a reward for past service. It is normally paid as a periodical payment on monthly basis but certain employers may allow an employee to forgo a portion of pension in lieu of lumpsum amount. This is known as commutation of pension. The treatment of these two kinds of pension is as under: (i) Periodical pension (or uncommuted pension). It is fully taxable in the hands of all employee, whereas government or nongover nment. (ii) Commuted pension For employees of government organisations, local authorities and statutory corpo rations, it is fully exempted from tax, hence not included in gross salary. For other employees, commuted value of half of the total value of pension is exe mpted from tax. Any amount received over and above this amount is taxable, so in cluded in gross salary. If, however, the employee is also receiving gratuity (another retirement benefit ) along with pension, then one third of the total value of pension is exempted f rom tax. Amount received in excess of this is taxable, so included in gross sala ry. b) Gratuity Gratuity is the payment made by the employer to an employee in appreciation of p ast services rendered by the employee. It is received by the employee on his ret irement. Gratuity is exempted upto certain limit depending upon the category of employee. For the purpose of exemption, employees are divided into 3 categories: (i) Government employees and employees of local authority: In case of such employees, the entire amount of gratuity received by then is exe mpted from tax. Nothing will be added to gross salary. (ii) Employees covered under Payment of Gratuity Act, 1972. 55 In case of employees who are covered under Payment of Gratuity Act, the minimum of the following amounts are exempted from tax: Amount of gratuity actually received 15 days of salary for every completed years of service or part thereof in excess of six months. (15 / 26 x [basic salary + Dearness Allowance] x No. of years of service+1 [if fraction > 6 months]). Rs.3, 50,000 (amount specified by government). (iii) Other employees. In case of employees not falling in the above two categories, gratuity received from the employers is exempt to the extent of minimum of following amounts: Actual amount of gratuity received. Half month average salary for every completed year of service (1/2 x average salary of last 10 months x completed years of service). Rs.3, 50,000 (amount specified by government). c) Leave Salary

Employees are entitled to various types of leave. The leave generally can be tak en (casual leave/medical leave) or it lapses. Earned leave is a kind of leave wh ich an employee is said to have earned every year after working for some time. T his leave can either be availed every year, or get encashment for it. If leave i s not availed or encashed, it is allowed to be carried forward. This leave keeps getting accumulated and is encashed by employee on his retirement. The tax trea tment of leave encashment is as under: (i) Encashment of leave while in service. This is fully taxable and so is added to gross salary. (ii) Encashment of leave on retirement. For the purpose of exemption of accumula ted leave encashment, the employees are divided into two categories: State or Central Government employees. Leave encashment received by government employees is fully exempted from tax. No thing is to be included in gross salary. Other employees Leave encashment of accumulated leave at the time of retirement received by othe r employees is exempted to the extent of minimum of four amounts. - Amount specified by Central Government (3, 00,000). - Leave encashment actually received. - 10 months average salary (10 x average salary of 10 months preceeding retire ment). Cash equivalent of unavailed leave. (Leave entitlement is calculated on the basis of maximum 30 days leave every ye ar, cash equivalent is based on average salary of last 10 months). d) Provident Fund Provident Fund Scheme is a welfare scheme for the benefit of employees. Under th is scheme, certain amount is deducted by the employer from the employees salary a s his contribution to Provident Fund every month. The employer also contributes certain percentage of the salary of the employee to the Fund. The contributions are invested outside in securities. The interest earned on it is also credited to the Provident Fund Account. At the time of retirement, the accumulated balanc e is given to the employee. Tax treatment of provident fund depends upon the typ e of provident fund being maintained by the employer. Employees provident fund ma y be of the following 3 types: (i) Statutory Provident Fund This is set up under the provisions of Provident Fund Act, 1925 and is maintaine d by Government and Semi-Government organisations, local authorities, railways, universities and recognised educational institutions. (ii) Recognised Provident Fund This is set up under the Employees Provident Fund and Miscellaneous Provisions Ac t, 1952 (PF Act, 1952) and is maintained by private sector employees. The establ ishments covered under PF Act, 1952 have two options; either to follow the same scheme at by the Government under the PF Act or draft their own scheme of PF but get recognition from Commissioner of Income Tax. (iii) Unrecognized Provident Fund If a provident fund is not recognized by the Commissioner of Income Tax, it is k nown as unrecognized PF. Besides these 3 funds, a person can also become a membe r of Public Provident Fund. (iv) Public Provident Fund The Central Government has established the Public Provident Fund for the benefit s of general public to mobilize personal savings. Any member of general public ( whether salaried or self employed) can participate in this fund by opening a Pro vident Fund Account at the State Bank of India or its subsidiaries or other nati onalised banks. A salaried employee can simultaneously become member of employee s provident fund (whether statutory, recognized or unreconised) and public provi dent fund. Any amount may be deposited (subject to minimum of 57Rs.500 and maxi mum of Rs.70, 000 per annum) under this account. The accumulated sum is repayabl e after 15 years. At present, it carries an interest rate of 8% per annum which is credited every year but payable only the time of maturity. Tax treatment of these provident funds (i.e. the exemption and deduction availab

le in respect of contributions to and payment from these funds) is summarised as follows: S.No Particulars Statutory PF Recognised PF Unrecognised PF Public PF 1 Employees Contribution to PF Exempted from tax Exempted up to 1 2% of salary excess of employers contribution in included in gross salary Exempted from tax Employer does not contribute 2 Deduction under Section 80C on employees contribution Available Available Not Available Available 3 Interest credited to PF Exempted from tax Exemption up to notified rate (9.50%) per annum) Excess of interest included in gross salary Exempted from tax Exempted from tax 4 Lump sum payment given to employee on retirement Exempted from ta x Exempted from tax (if rendered continuous service of more than 5 years Lumpsum includes : a) Own Contribution- Exempt b) Interest on own contribution - taxable as income from other sources c) Employers contribution and interest there on taxable so included in gross sala ry Exempted from tax

Particulars Taxable/Non-Taxable Exemption/Rebate Limit Transport Allowance Partially Taxable Rebate Maximum upto Rs.800 PM a nd for physical handicapped upto Rs. 1600 PM Children Education Allowance Partially Taxable Rebate Maximum upto Rs. 100 PM Children Hostel Allowance Partially Taxable Rebate Maximum upto Rs. 300 PM House Rent Allowance Partially Taxable 1) 50 % of salary i n case the house is situated in metros (delhi, Mumbai, chennai, calcutta) and 40 % in other cases 2) Actual rent received 3) Actual rent paid 10% of salary Whichever is less would be taxable (Fully taxable if the employee lives in his own house for which no rent is paid. ) Entertainment Allowance Partially Taxable In case of gover nment employees 1) 5000 p.a 2) 1/5 of salary 3) Actual amount received Whichever is less would be taxable (In case of any other employee it is fully taxable) Leave encashment Partially Taxable Leave encashment and enc ashment of sick leave at the time of service is fully taxable. Leave encashment received at the time of retirement is fully exempt in case of g overnment employees. In case of other employees at the time of retirement is exempted upto 1) Rs. 300000 2) Average salary * 10 mon 3) Actual amount received 4) Average salary * number of months leave due Whichever is less is taxable

Gratuity Gratuity received is fully exempt in case of gov ernment employees In case of other employees A. For employees covered under Payment of Gratuity Act. Exempt up to least of following : (a) Notified limit = Rs. 3,50,000 (b) 15 days Average Salary for every one completed year of service (period exce eding 6 months =1 year) 1/2 months salary = (Average monthly salary or wages x 15 /26 (c) Actual amount received. B. Other Employees -- Exempted up to least of following provided service is mor e than 5 years or employee has not left service of his own : (a) Notified limit = Rs. 3,50,000 (b) 1/2 months average salary for every one year of completed service (months to be ignored.) (c) Actual amount received Average Salary = Salary for 10 months preceding the month of retirement divided by 10. Pension Pension received is fully exempt in case of government e mployees For other employees: (a) If other employee who receive gratuity also -Lump sum amount is exempted upto commuted value of 1/3rd of Pension. (b) If other employee who does not get gratuity -- Lump sum amount is exempt ed upto commuted value of 1/2 of pension. VRS Compensation Compensation received at the time of voluntary retiremen t is exempt up to Rs 5 lakhs under certain conditions. Deductions: Less-Allowance U/S 10(13A) Actual Rent Paid Exempt Actual amount of HRA received or Expenditure on rent in excess of 1/10th of the salary or 50% of Salary, whichever is less Interest on HBA U/S 24 Deduction Maximum Rs.1,50,000 Reimbursement of Medical Exp. U/S 17(2)V Deduction Maximum Rs.15,000 U/S 80C Deduction Maximum Rs.1,00,000 Refund of loan taken for the construction of House Deduction Maximum Rs.1,00,000 C.P.F / G.P.F Deduction Maximum Rs.1,00,000 G.I.S Deduction Actual LIC Premium Deduction Maximum Rs.1,00,000 Subscription of N.S.C. / P.P.F Deduction Maximum Rs.1,00,000 Interest Occurred on investment in N.S.C. Deduction Maximum Rs.15,000 C.T.D. / L.I.P. / ULIP (Mutual Fund) Deduction Maximum Rs.1,00, 000 Unit Linked Plan Deduction Maximum Rs.1,00,000 Tuition Fee (Limited to 2 children) & (After XII th full time course) Deduction Maximum Rs.1,00,000 5 Years Fixed deposit & 5 years time deposit scheme Deduction Maximum Rs.1,00,000 80CCC Payment of premium for annuity plan of LIC or any other insurer Deduction is available upto a maximum of Rs. 100,000/80CCD Deduction Maximum 10% of BP & DA Medi Claim Premium U/S 80D Deduction Maximum Rs.15,000 & for senior citizens upto Rs. 20000 (Other than above Rs.1,00,000) Premium paid for Self, Spouse & Children Deduction Maximum Rs.15,000 (other than above Rs.1,00,000)

Premium paid for Parents (If parent is not senior citizen) Deductio n Maximum Rs.20,000 (Other than above Rs.1,00,000) Premium paid for Parents (If parent is senior citizen) Deduction Maximum Rs.20,000 (Other than above Rs.1,00,000) U/S 80DD Deduction Handicapped dependents :spouse, son / da ughter, parents and brother / sister - Deduction Rs.75,000 to Rs.1,00,000 U/S 80DDB Deduction Maximum Rs.40,000 & for senior citizens upto Rs.60,000 (other than above Rs.1,00,000) U/S 80L Deduction If interest is earned on Govt. Securities, Bank deposits, Post Office deposits, debentures, National Savings Certificates etc., deduction up to Rs. 12,000/- is allowable from the net income after deducting t he expenditure incurred in earning it. Further, an additional deduction up to R s. 3,000/- will be allowable on interest from Govt. Securities, if not already c overed in the Rs. 12,000/- limit. 80E Entire amount (Interest on higher Education/Study loans) 80G Deduction for contribution to charitable organization 80GG Deduction in respect of house rent paid 80U Disability Deduction Rs.75,000 to Rs.1,00,000 Rebates For the assessment year 2003-04, the amount of rebate is as follows 1. Tax rebate under section 88 is available at 30% of the net qualifying amount if the following two conditions are satisfied. a. income chargeable under the head "Salaries" (before giving deduction under se ction 16) does not exceed Rs. 1,00,000; and b. income chargeable under the head "Salaries" is not less than 90% of gross tot al income. 2. If gross total income does not exceed Rs. 1,50,000 ,tax rebate is available a t 20% of the net qualifying amount. 3. If gross total income exceeds Rs. 1,50,000 but does not exceed Rs. 5,00,000, tax rebate is available at 15% of the net qualifying amount. 4. If gross total income exceeds Rs. 5,00,000 tax rebate under section 88 is not available. Rebate for senior citizens Taxpayers of the age of sixty-five and above, at any time during the relevant pr evious year, will get an additional rebate from tax payable up to a maximum of R s 20,000/-. Rebate for women taxpayers All women resident in India get a special rebate up to Rs. 5,000/- out of the ta x payable by them. This rebate will not be allowable for women tax payers above sixty five at any time during the relevant previous year, who will get senior c itizen rebate of Rs. 20,000/-. TAXABLE VALUE OF PERQUISITES Perquisites are defined as any casual emolument or benefit attached to an office or position in addition to salary or wages. It denotes something that benefits a man by going into his pocket; it does not cover mere reimbursement of necessa ry disbursements. Such benefits are normally given in kind but should be capabl e of being measurable in money terms. Perquisites are taxable and included in g ross salary only if they are (i) allowed by an employer to an employee, (ii) All owed during the continuation of employment, (iii) directly dependent on service, (iv) resulting in the nature of personal advantage to the employee and (v) deri ved by virtue of employers authority. As per Section 17 (2) of the Act, perquisites include: 1. Value of rent free accommodation provided to the employee by the employer. 2. Value of concession in the matter of rent in respect of accommodation provide d to the employee by his employer. 3. Value of any benefit or amenity granted free of cost or at a concessional rat e in any of the following cases: a) By a company to an employee who is a director thereof

b) By a company to an employee who has substantial interest in the company c) By any employer to an employee who is neither a director, nor has substantial interest in the company, but his monetary emoluments under the head Salaries exce eds Rs.50, 000. 4. Any sum paid by the employer towards any obligation of the employee. 5. Any sum payable by employer to effect an assurance on the life of assessee. 6. The value of any other fringe benefit given to the employee as may be prescri bed. I. CLASSIFICATION OF PERQUISITES For tax purposes, perquisites specified under Section 17 (2) of the Act may be c lassified as follows: (1) Perquisites that are taxable in case of every employee, whether specified or not (2) Perquisites that are taxable in case of specified employees only (3) Perquisites that are exempt from tax for all employees (1) Perquisites Taxable in case of All Employees (1) The following perquisites are taxable in case of every employee, whether spe cified or not: 1. Rent free house provided by employer 2. House provided at concessional rate 3. Any obligation of employee discharged by employer e.g. payment of club or hot el bills of employee, salary to domestic servants engaged by employee, payment o f school fees of employees children etc. 4. Any sum paid by employer in respect of insurance premium on the life of emplo yee 5. Notified fringe benefits (on which fringe benefit tax is not applicable) it i ncludes interest free or concessional loans to employees, use of movable assets, transfer of moveable assets. (2) Perquisites taxable in case of Specified Employees only The following perquisites are taxable in case of such employees: 1. Free supply of gas, electricity or water supply for household consumption 2. Free or concessional educational facilities to the members of employees house hold 3. Free or concessional transport facilities 4. Sweeper, watchman, gardener and personal attendant 5. Any other benefit or amenity Specified employee is an employee who is either a director or has substantial interest in the company where he is employed or is drawing monetary salary of more than Rs.50, 000 during the previous year. (3) Perquisites which are tax free for all the employees This category includes perquisites which are tax free for the employees and also other perquisites on which employer has to pay a tax (called Fringe Benefit Tax ) if they are given to the employees and so are not taxable for them. 1. Medical benefits (provided within or out of India) subject to limits. 2. Value of Leave Travel Concession in India. 3. Free meals provided to the employees during working hours. 4. Amount spent by the employer as its contribution to staff welfare schemes. 5. Laptops and computers provided for personal use. 6. Rent free official accommodation provided to a Judge of High Court or Supreme Court or an official of Parliament including Minister and Leader of Opposition in Parliament. 7. Health Insurance Premium of employee or member of household paid by the emplo yer. 8. All such facilities (like motor car, lunch refreshments, travelling, touring, gift, credit cards, club etc.) provided by employer on which employer has to pa y Fringe Benefit Tax.

Salary Structure Particulars Amount Amount Basic Salary Fees Commission Bonus Gratuity Leave Encashment Pension Retrenchment Compensation Compensation Received Under Voluntary Retirement Scheme Allowances Dearness Allowance House Rent Allowance Children Education Allowance Hostel Expenditure Allowance Entertainment Allowance Medical Allowance Conveyance Allowance City Compensatory Allowance Uniform Allowance Professional Development Allowance Transport Allowance Other Allowances Perquisites Any obligation of employee paid by employer Accommodation Shares and Securities issued under ESOP Employers Contribution to Superannuation Fund in excess of Rs. 100000 Insurance Premium Medical Facility Other Fringe Benefits Leave Travel Concession Contribution of Employer to Provident Fund Interest on Recognised Provident Fund Any Other Item Gross Salary Less: Deduction u/s 16 a) Entertainment Allowance b) Tax on Employment/Profession Tax Taxable Salary Section 10 Section 10 of income tax act defines that some income are exempted from income t ax means there is no income tax on these income. Some of these incomes are fully exempted from income tax and some are some exemption limit. Like agriculture income is fully exempted from income tax whereas minor income c lubbed with individual has the exemption limit of 1500. So it is necessary to re member all these exemptions before calculating somebody income tax. Section Nature of Income Exemption limit, if any 10(1) Agricultural income

10(2) Share from income of HUF 10(2A) Share of profit from firm 10(3) Casual and non-recurring receipts Winnings from races Rs.2500/- ot her receipts Rs.5000/10(10D) Receipts from life Insurance Policy 10(16) Scholarships to meet cost of education 10(17) Allowances of MP and MLA. For MLA not exceeding Rs. 600/- per mont h 10(17A) Awards and rewards (i) from awards by Central/State Government (ii) from approved awards by others (iii) Approved rewards from Central & State Governments 10(26) Income of Members of scheduled tribes residing in certain areas in North Eastern States or in the Ladakh region. Only on income arising in those areas or interest on securities or dividends 10(26A) Income of resident of Ladakh On income arising in Ladakh or outside I ndia 10(30) (i) Subsidy from Tea Board under approved scheme of replantation 10(31) (ii) Subsidy from concerned Board under approved Scheme of replantation 10(32) Minor s income clubbed with individual Upto Rs. 1,500/10(33) Dividend from Indian Companies, Income from units of Unit Trust of India and mutual funds and income from Venture Capital Company/fund. 10(A) Profit of newly established undertaking in free trade zones electronic h ardware technology park on software technology park for 10 years (net beyond 10 year from 2000-01) 10(B) Profit of 100% export oriented undertakings manufacturing articles or th ings or computer software for 10 years (not beyond 10 years from 2000-01) 10(C) Profit of newly established undertaking in I.I.D.C or I.G.C. in North-Ea stern Region for 10 years Income from interest 10(15)(i)(iib)(iic) Interest, premium on redemption or other payments from n otified securities, bonds, Capital investment bonds, Relief bonds etc. To the e xtent mentioned in notification 10(15)(iv)(h) Income from interest payable by a Public Sector Company on notif ied bonds or debentures 10(15)(iv)(i) Interest payable by Government on deposits made by employees of Central or State Government or Public Sector Company of money due on retirement under a notified scheme 10(15)(vi) Interest on notified Gold Deposit bonds 10(15)(vii) Interest on notified bonds of local authorities Income from Salary 10(5) Leave Travel assistance/ concession Not to exceed the amount payable by Central Government to its employees 10(5B) Remuneration of technicians having specialised knowledge and experience in specified fields (not resident in any of the four preceding financial years) whose services commence after 31.3.93 and tax on whose remuneration is paid by t he employer Exemption in respect of income in the form of tax paid by employ er for a period upto 48 months 10(7) Allowances and perquisites by the government to citizens of India for se rvices abroad 10(8) Remuneration from foreign governments for duties in India under Cooperat ive technical assistance programmes. Exemption is provided also in respect of an y other income arising outside India provided tax on such income is payable to t hat Government. 10(10) Death-cum-retirement Gratuity(i) from Government (ii) Under payment of Gratuity Act 1972 Amount as per Sub-sections (2),

(3) and (4) of the Act. (iii) Any other Upto one-half months salary for each year of completed s ervice. 10(10A) Commutation of Pension(i) from government, statutory Corporation etc. (ii) from other employers Where gratuity is payable - value of 1/3 pension. Where gratuity is not payable - value of 1/2 pension. (iii) from fund set up by LIC u/s 10(23AAB) 10(10AA) Encashment of unutilised earned leave (i) from Central or State government (ii) from other employers Upto an amount equal to 10 months salary or Rs. 1,35,360/- whichever is less 10(10B) Retrenchment compensation Amount u/s. 25F(b) of Industrial Dispute Act 1947 or the amount notified by the government, whichever is less. 10(10C) Amount received on voluntary retirement or termination of service or vol untary separation under the schemes prepared as per Rule 2BA from public sector companies, statutory authorities, local authorities, Indian Institute of Technol ogy, specified institutes of management or under any scheme of a company or Co-o perative Society Amount as per the Scheme subject to maximum of Rs. 5 lak h 10(11) Payment under Provident Fund Act 1925 or other notified funds of Central Government 10(12) Payment under recognised provident funds To the extent provided i n rule 8 of Part A of Fourth Schedule 10(13) Payment from approved Superannuation Fund 10(13A) House rent allowance least of(i) actual allowance (ii) actual rent in excess of 10% of salary (iii) 50% of salary in Mumbai, Chennai, Delhi and Calcutta and 4 0% in other places 10(14) Prescribed [See Rule 2BB (1)] special allowances or benefits specificall y granted to meet expenses wholly necessarily and exclusively incurred in the pe rformance of duties To the extent such expenses are actually incurred. 10(18) Pension including family pension of recipients of notified gallantry awa rds Exemptions to Non-citizens only 10(6)(i)(a) and (b) (i) passage money from employer for the employee and his family for home leave outside India (ii) Passage money for the employee and his family to Home country aft er retirement/termination of service in India. 10(6)(ii) Remuneration of members of diplomatic missions in India and thei r staff, provided the members of staff are not engaged in any business or profes sion or another employment in India. 10(6)(vi) Remuneration of employee of foreign enterprise for services rend ered during his stay in India in specified circumstances provided the stay does not exceed 90 days in that previous year. 10(6)(xi) Remuneration of foreign Government employee on training in certa in establishments in India. Exemptions to funds, institutions, etc. 10(14A) Public Financial Institution from exchange risk premium received from pe rson borrowing in foreign currency if the amount of such premium is credited to a fund specified in section 10(23E) 10(15)(iii) Central Bank of Ceylon from interest on securities 10(15)(v) Securities held by Welfare Commissioners Bhopal Gas Victims, Bho pal from Interest on securities held in Reserve Bank s SGL Account No. SL/DH-048 10(20) any local Authority (a) Business income derived from Supply of water or electricity anywhere. Supply of other commodities or service within its own jurisdictional area. (b) Income from house property, other sources and capital gains.

10(20A) Housing or other Development authorities 10(21) Approved Scientific Research Association 10(23) Notified Sports Association/ Institution for control of cricket, hockey, football, tennis or other notified games. 10(23A) Notified professional association/institution All income except from h ouse property, interest or dividends on investments and rendering of any specifi c services 10(23AA) Regimental fund or Non-public fund 10(23AAA) Fund for welfare of employees or their dependents. 10(23AAB) Fund set up by LIC of India under a pension scheme 10(23B) Public charitable trusts or registered societies approved by Khadi or Vi llage Industries commission 10(23BB) Any authority for development of khadi or village industries 10(23BBA) Societies for administration of public, religious or charitable trusts or endowments or of registered religious or charitable Societies. 10(23BBB) European Economic Community from Income from interest, dividend or capital gains 10(23BBC) SAARC Fund 10(23C) Certain funds for relief, charitable and promotional purposes, certain e ducational or medical institutions 10(23D) Notified Mutual Funds 10(23E) Notified Exchange Risk Administration Funds 10(23EA) Notified Investors Protection Funds set up by recognised Stock E xchanges 10(23FB) Venture capital Fund/ company set up to raise funds for investmen t in venture Capital undertaking Income from investment in venture capital undertaking 10(23G) Infrastructure capital fund, or infrastructure capital company Income f rom dividend, interest and long term capital gains from investment in approved i nfrastructure enterprise 10(24) Registered Trade Unions Income from house property and other sources 10(25)(i) Provident Funds Interest on securities and capital gains from tr ansfer of such securities 10(25)(ii) Recognised Provident Funds 10(25)(iii) Approved Superannuation Funds 10(25)(iv) Approved Gratuity Funds 10(25)(v) Deposit linked insurance funds 10(25A) Employees State Insurance Fund 10(26B)(26BB) and (27) Corporation or any other body set up or financed by and government for welfare of scheduled caste/ scheduled tribes/backward classes or minorities communities 10(29) Marketing authorities Income from letting of godown and warehouses 10(29A) Certain Boards such as coffee Board and others and specified Authorities

Form 16 If you are salaried employee in an organization, then you will get the salary af ter deducting tax by the employer. This process is called as Tax Deduction at So urce (TDS). Every company has to get the TIN. TIN is Tax Identification Number. This number is issued to person who is responsible to deduct Tax on payments mad e to employees. At the end of financial year, company must issue a form 16 which contains the de tails about the salary earned by that employee and how much tax deducted. It wil l have details on each month. In simple terms Form 16 is details about the tax d educted by the employer in behalf of employee. The same will be paid to governme nt by the company. Many people thing that getting the Form 16 alone is enough fo

r the tax filing. Tax payer has to use the Form 16 to file the IT return every f inancial year end.

Format of Form 16 Name and address of the Employer Name and designation of the Employee PAN/GIR NO. TAN PAN/GIR NO. TDS Circle where Annual Return /statement under section 206 is to be filed Period Assessment year 19 FROM TO DETAILS OF SALARY PAID AND ANY OTHER INCOME AND TAX DEDUCTED 1. Gross salary Rs.__________ 2. Less : Allowance to the extent exempt under section 10 Rs._____ _____ 3. Balance (1-2) 4. Deductions: a) Standard deduction Rs._______ b) Entertainment allowance Rs._______ c) Tax on Employment Rs. ______ 5. Aggregate of 4 (a to c) Rs.________ 6. INCOME CHARGEABLE UNDER THE HEAD SALARIED (3-5) Rs._________ 7. Add : Any other income reported by the employee Rs.__________ 8. GROSS TOTAL INCOME (6+7) Rs.__________ 9. DEDUCTIONS UNDER CHAPTER VI-A GROSS AMOUNT QUALIFYING AMOUNT DEDUCTIBLE AMOUNT a) Rs.________ Rs.________ Rs._____ ___ b) Rs.________ Rs.________ Rs._____ ___ c) Rs.________ Rs.________ Rs._____ ___ d) Rs.________ Rs.________ Rs.________ 10. Aggregate of deductible amounts under Chapter VI-A Rs._____________ 11. TOTAL INCOME (8-10) Rs._____ ________ 12. TAX ON TOTAL INCOME Rs._____________ REBATE AND RELIEF UNDER CHAPTER VIII I. T a) b) c) d) e) f) II. T a) Under section 88 (please specify) TAX REBATE/ RELIEF Rs._______ Rs________ Rs_________ Rs_________ Rs_________ Total[(a) to (e)] Rs_________ Under section 88A (please specify) Rs.__________ GROSS AMOUNT Rs._______ Rs._______ Rs._______ Rs._______ Rs._______ Rs._______ GROSS AMOUNT QUALIFYING AMOUN

Rs._______ QUALIFYING AMOUN

b) Rs.__________ c) Total [(a)+(b)] Rs.__________ Rs.________ Rs._________ III. Under section 89(attach details) 14. AGGREGATE OF TAX REBATES AND RELIEF AT 13 ABOVE [I(F)+II( C)+III] Rs.____________ 15. TAX PAYABLE (12-14) AND SURCHARGE THEREON Rs.____________ 16. LESS : TAX DEDUCTED AT SOURCE Rs.__________ 17. TAX PAYABLE/REFUNDABLE (15-16) Rs._________ DETAILS OF TAX DEDUCTED AND DEPOSITED INTO CENTRAL GOVERNMENT ACCOUNT AMOUNT DATE OF PAYMENT NAME OF BANK AND BRANCH WHERE TAX DEPOSITED

Certified that a sum of Rs.(in words) has been deducted at source and paid to the credit of the Central Government. Further certified that the above information is true and correct as per records. Place Signature of the person responsible for deduction of tax Date Full Name Designation

See sections 15 and 17 and rule 3. Furnish separate details of value of the perq uisites and profits in lieu of or in addition to salary or wages.