what is Taxable Salary under Income Tax ?

By | November 8, 2016
(Last Updated On: November 8, 2016)

Taxable Salary under Income Tax

Yes, you will have to pay self-assessment tax and file the return of income.

Yes, however, losses other than losses under the head ‘Income from house property’ cannot be set-off while determining the TDS from salary.

  • Is leave encashment taxable as salary?

    It is taxable if received while in service. Leave encashment received at the time of retirement is exempt in the hands of the Government employee. In the hands of non-Government employee leave encashment will be exempt subject to the limit prescribed in this behalf under the Income-tax Law.

  • Are receipts from life insurance policies on maturity along with bonus taxable?

    As per section 10(10D), any amount received under a life insurance policy, including bonus is exempt from tax. However, following receipts would be subject to tax:

    1. Any sum received under sub-section (3) of section 80DD; or
    2. Any sum received under Keyman insurance policy; or
    3. Any sum received in respect of policies issued on or after April 1st, 2003, in respect of which the amount of premium paid on such policy in any financial year exceeds 20% (10% in respect of policy taken on or after 1st April, 2012) of the actual capital sum assured; or
    4. Any sum received for insurance on life of *specified person (issued on or after April 1st 2013) in respect of which the amount of premium exceeds 15% of the actual capital sum assured.* Any person who is –

      i)  A person with disability or severe disability specified under section 80U; or

      ii) suffering from disease or ailment  as specified in the rule made under section 80DDB.

      Following points should be noted in this regard:

    •  Exemption is available only in respect of amount received from life insurance policy.
    •  Exemption under section 10(10D) is unconditionally available in respect of sum received for a policy which is issued on or before March 31, 2003.
    • Amount received on the death of the person will continue to be exempt without any condition.

     

  • How Tax is deducted on Taxable Salary ?

For the purpose of making the payment of tax , tax is to be determined at the average of income tax computed on the basis of rate in force for the financial year, on the income chargeable under the head “salaries”, including the value of perquisites for which tax has been paid by the employer himself.

Illustration:

The income chargeable under the head “salaries” of an employee below sixty years of age for the year inclusive of all perquisites is Rs.4,50,000/-, out of which, Rs.50,000/- is on account of non-monetary perquisites and the employer opts to pay the tax on such perquisites as per the provisions discussed in para 3.2 above.

STEPS:

Income Chargeable under the head “Salaries” inclusive of all perquisitesRs. 4,50,000/-
Tax on Total Salary (including Cess)Rs. 20,600/-
Average Rate of Tax [(20,600/4,50,000) X 100]4.57%
Tax payable on Rs.50,000/= (4.57% of 50,000)Rs. 2285/-
Amount required to be deposited each monthRs. 190 ((Rs. 190.40) =2285/12)

The tax so paid by the employer shall be deemed to be TDS made from the salary of the employee.

  • Whether there ca be Adjustment for Excess or Shortfall of Deduction of Tax ?

    The provisions of Section 192(3) allow the deductor to make adjustments for any excess or shortfall in the deduction of tax already made during the financial year, in subsequent deductions for that employee within that financial year itself.

  • How tax is deducted in case of Salary received From More Than One Employer ?

Section 192(2) deals with situations where an individual is working under more than one employer or has changed from one employer to another. It provides for deduction of tax at source by such employer (as the tax payer may choose) from the aggregate salary of the employee, who is or has been in receipt of salary from more than one employer. The employee is now required to furnish to the present/chosen employer details of the income under the head “Salaries” due or received from the former/other employer and also tax deducted at source therefrom, in writing and duly verified by him and by the former/other employer. The present/chosen employer will be required to deduct tax at source on the aggregate amount of salary (including salary received from the former or other employer).

  • What is the Tax Relief When Salary Paid in Arrear or Advance:

Under section 192(2A) where the assessee, being a Government servant or an employee in a company, co-operative society, local authority, university, institution, association or body is entitled to the relief under Section 89(1) he may furnish to the person responsible for making the payment  such particulars in Form No. 10E duly verified by him, and thereupon the person responsible, shall compute the relief on the basis of such particulars and take the same into account in making the deduction.

Here “university” means a university established or incorporated by or under a Central, State or Provincial Act, and includes an institution declared under Section 3 of the University Grants Commission Act, 1956 to be a university for the purpose of that Act.

With effect from 1/04/2010 (AY 2010-11), no such relief shall be granted in respect of any amount received or receivable by an assessee on his voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of a public sector company referred to in section 10(10C)(i) (read with Rule 2BA), a scheme of voluntary separation, if an exemption in respect of any amount received or receivable on such voluntary retirement or termination of his service or voluntary separation has been claimed by the assessee under section 10(10C) in respect of such, or any other, assessment year.

  • How to furnish Information regarding Income under any other head (other then salary ) earned by Employee.

 

(i) Section 192(2B) enables a taxpayer to furnish particulars of income under any head other than “Salaries” (not being a loss under any such head other than the loss under the head ” Income from house property”) received by the taxpayer for the same financial year and of any tax deducted at source thereon. The particulars may now be furnished in a simple statement, which is properly signed and verified by the taxpayer in the manner as prescribed under Rule 26B(2) of the Rules and shall be annexed to the simple statement. The form of verification is reproduced as under:

I, …………………. (name of the assessee), do declare that what is stated above is true to the best of my information and belief.

It is reiterated that the DDO can take into account any loss only under the head “Income from house property”. Loss under any other head cannot be considered by the DDO for calculating the amount of tax to be deducted.

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