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Meaning of salary for different purposes at a glance

Valuation of rent-free house

HRA, gratuity, tax-free contribution to RPF

Entertainme nt allowance

Determination of salary of Rs 50,000 regarding taxability of perquisites u/s 17(2)(iii)(c)


Basic salary, DA, all other allowances, bonus, comm., etc. & all monetary payments included in gross salary after allowing deductions u/s 16. for this purpose salary will not include perquisites as they are not received in cash.

Basic salary DA( computed) Bonus, fees, comm. & other cash allowances to the extent they are taxable

Basic salary DA( computed) Commission based on fixed % of turnover achieved by the employee & given under terms of employment

Basic salary only

Pension
Pension received by the employee is taxable Family pension received by a nominee on the death of employee is taxable under the head Income from. Commutation of pension lump sum payment in lieu of periodical payment. Where the employee receives any gratuity: commuted value of 1/3rd of the pension Where he does not receives gratuity: commuted value of of such pension

Numerical

Leave encashment
Cash equivalent of leave salary ( calculated on the basis of avg. salary drawn during the 10 months preceding retirement) for the period of earned leave standing to the credit of the employee at the time of his retirement or otherwise ( such leave entitlement not to exceed 30 days leave for every year of actual service) 10 months avg. salary, Rs 3,00,000, Amount actually received

Specified Employees
A director employee Employee having substantial interest in the employer company ( beneficial owner of equity shares carrying 20% or more voting power in the employer-company Any other employee whose monetary income under the head Salary exceeds Rs 50,000

Treatment of PF
During Job
Employees contribution SPF URPF Taxable Taxable Employers contribution Not taxable Not taxable Interest Not taxable Not taxable

On Retirement
Payment from the fund Fully exempt Employers contribution taxable Interest there on taxable as salary Employees contribution Not taxable Interest thereon taxable

RPF

Taxable

In excess of 12% of salary

In excess of 9.5% p.a.

Nothing shall be taxable if: 1.Employee left the job after at least 5 yrs of services, or 2.Due to ill health, discontinuance of employers business or reasons beyond his control, or 3.The balance is transferred to RPF with new employer

Employees under RPF & SPF can claim deduction of their own contribution & employers contribution from gross total income u/s 80C

Value of Interest Free Loan


Interest shall be calculated on the maximum O/S monthly balance, i.e., aggregate O/S balance for each loan as on the last day of each month Exempt if: 1. loans in aggregate do not exceed Rs 20,000, or 2. loan is provided for the treatment of specified diseases. But if reimbursed under medical insurance scheme, then taxable

Use of movable assets


Laptop & computers: Nil Other assets: 10% p.a. of the actual cost or actual hire charges

Transfer of movable assets


Computer & electronic items: 50% on the basis of WDV Motor cars: 20% on the basis of WDV Any other assets: 10% on the basis of SLM

Medical facilities
In India Expenditure incurred or reimbursed on any medical treatment provided to an employee or any member of his family is fully exempt without limit for treatment in any hospital Maintained by the employer Maintained by the govt. or local authority Approved by govt. for its employees Approved for a specified disease Health insurance premium reimbursed for insurance on the health of employees or any member of his family is fully exempt Reimbursement by the employer of any amt actually spent by the employees for obtaining his or his family treatment in any hospital other than specified above, up to maximum of Rs. 15,000 p.a.

Outside India
Such medical expenses shall be tax free to the extent permitted by RBI Expenses on stay abroad of the employees or any member of his family for medical treatment with 1 attendant, to the extent permitted by RBI Travel expenses of patient & 1 attendant if gross total income (before including such travel expenses) does not exceed Rs. 2,00,000

Children Education
Education facility is owned & maintained by the employer Free education is provided in any other educational inst. The value shall be fees charged by a similar school in a similar locality Nothing shall be taxable if value per child does not exceed Rs 1,000 In any other case, value shall be actual expenditure