PROJECT REPORT ON

INCOME FROM SALARY

MASTERS OF COMMERCE DEGREE

SEMESTER- III

ACADEMIC YEAR:2016-17

SUBMITTED BY
MISS. CHITRA VELMURUGAN
ROLL NO: 25

N.E.S. RATNAM COLLEGE OF ARTS, SCIENCE AND COMMERCE,

N.E.S. MARG, BHANDUP (WEST), MUMBAI-400078

[1]
 CERTIFICATE

This is to certify that the project report on INCOME FROM SALARY is

bonafide record of project worked done by MISS. CHITRA VELMURUGAN
submitted in partual fulfillment of the requirement of the award of the Master of
Commerce Degree University of Mumbai during the period of his/her study in the
academic year 2016-17

INTERNAL EXAMINER:

EXTERNAL EXAMINER:

Principal
Mrs. Rina Saha

[2]
 DECLARATION

I hereby declare that this Project Report entitled INCOME FROM SALARY
submitted by me for the the award of Masters Of Commerce Degree; University
of Mumbai is a record of Project work done by me during the year 2016-17. This
is entirely my own work.

NAME: CHITRA VELMURUGAN

ROLL NO : 25
Signature

Place: Mumbai, Bhandup (W)

Date:

[3]
 ACKNOWLEDGEMENT

I owe a great many thanks to great many people who helped and
supported me doing the writing of this book.

My deepest thanks to lecturer, Prof. RAJIV MISHRA of the project for

guiding and correcting various documents of mine with attention and care. She/
he has taken pains to go through my project and make necessary corrections as
and when needed.

I extend my thanks to the principal of NES Ratnam College of Arts Science

and Commerce, Bhandup (w), for extending her support.

My deep sense of gratitude to Principal Mrs. Rina Saha of NES Ratnam

College of Art, Science and Commerce for support and guidance. Thanks and
appreciation to the helpful people at NES Ratnam College of Arts, Science and
Commerce , for their support.

I would also thank my institution and faculty members without whom this
project would have been a distant reality. I also extend my heartfelt thanks to my
family and well-wishers.

Candidate Name: CHITRA VELMURUGAN

[4]
 OBJECTIVES

After reading this lesson, you should be able to understand:

Classification of income into various heads.
Concept of salary income
Incomes forming part of salary
The computation of basic salary in grade system
Types of commission an employee can get
The concept of allowances
Various income tax provisions for computing taxable value of allowances
Computation of taxable value of allowances

RESEARCH METHODOLOGY

SECONDARY DATA

The secondary data has been collected from books, internet and research engine.
There has been immense and valuable data which put forth for the compulsion
of my project.

[5]
 Index

Sr. Title page no.

1 Introduction to salary 7-9

2 Allowances under salary 11-16

3 Perquisites under salary 17-20

4 Deductions under salary 21-22

5 Exemption under salary 23-29

7 Computation of salary 30-37

[6]
8 Conclusion 38

9 Bibliography

39

Chaper1

INCOME FROM
SALART (U/S 15-
17)

INCOME FROM
HOUSE PROPERTY
U/S 22-27

[7]
HEADS OF PROFIT AND AGAIN
FROM BUSINESS
INCOME
PROFESSINTON

U/S (28-44)

CAPTIAL GAINS

U/S (45-55)

INCOME FROM
OTHER SOURCE S

U/S (56-59)

[8]
 Meaning of salary

The term salary usually refers to a payment for services. It means remuneration
for services rendered to another person.

Basic elements of salary

Payer and payee must have employer and employee relationship.

Any payment received by an individual from a person other than his

employer cannot be termed as salary.

Basis of charge

[9]
 Salary is chargeable to tax on due or on receipt basis whichever is earlier;

Salary received in advance is taxable in the year of receipt. Such salary

not be included again in the total income when it become due;

Outstanding salary is taxable on due basis i.e. salary is taxable in the year
in which it falls due.

Arrear salary is taxable on receipt basis.

Definition of salary

As per section 17 (1) of the Income Tax, Salary includes:

i) wages;

(ii) Any annuity or pension

(iii) Any gratuity;

(iv) Any fees, commissions, perquisites or profits in lieu of or in addition to

any salary or wages;

(v) Any advance of salary

(vi) Any payment received by an employee in respect of any period of leave

not availed of by him;

(vi) The annual accretion to the balance at the credit of an employee

participating in a recognized provident fund, to the extent to which it is
chargeable to tax under rule 6 of Part A of the Fourth Schedule; and

(vii) The aggregate of all sums that are comprised in the transferred balance as
referred to in sub-rule (2) of rule 11 of Part A of the Fourth Schedule of an

[10]
employee participating in a recognized provident fund, to the extent to which it
is chargeable to tax under sub-rule (4) thereof;

(viii) The contribution made by the Central Government [or any other
employer] in the previous year, to the account of an employee under a pension
scheme referred to in section 80CCD;

Characteristics of Salary

1. The relationship of payer and payee must be of employer and employee

for an income to be categorized as salary income. For example: Salary
income of a Member of Parliament cannot be specified as salary, since it is
received from Government of India which is not his employer.

2. The Act makes no distinction between salary and wages, though generally
salary is paid for non-manual work and wages are paid for manual work.

3. Salary received from employer, whether one or more than one is included in
this head.

4. Salary is taxable either on due basis or receipt basis which ever matures
earlier:
I) Due basis when it is earned even if it is not received in the previous
year.

ii) Receipt basis when it is received even if it is not earned in the previous
year.

iii) Arrears of salary- which were not due and received earlier are taxable
when due or received, whichever is earlier.

[11]
 Chapter 2

Allowances

Extra compensation paid by the employer, apart from salary, due to presence of
some unusual conditions in rendering the service is called allowance.
Allowances by whatever name called is taxable. However following allowance
are exempt to certain extent.

Some common allowance, which are exempt to the extent of amount received or
the received other limit specified, whichever is less;

sr limit specified (amount up to

Nature of Allowance
no which exempt)

Maximum of Rs. 100 p.m. per

1 Children Education Allowance
Hostel Expenditure Allowance for
2 month per up to maximum of 2
the children
Transport Allowance to meet the
expenditure for the purpose of
3
commuting between the place of
residence and the place of work
child up to maximum of 2
children
Maximum of Rs. 300 p.m. per
children
Maximum of Rs. 800 p.m. (Rs.
1600 p.m. if the employment is
blind or orthopedically
handicapped).

[12]
Fully Exempt from tax
1. Allowances to Govt. employees
outside India
2. Allowances to high court
&Supreme Court judges.
3. Allowance from United Nations
Organizations.
4. Special allowance
Other Special Allowances
Fully Taxable Allowance
1. Dearness Allowance
2. City Compensatory
Allowance
3. Rural Allowance
4. Proctorship Allowance
5. Warden ship Allowance
6. Project Allowance
7. Deputation Allowance
8. overtime Allowance
9. Interim Allowance
10.Tiffin Allowance
11.Fixed Medical Allowance
12.Servant Allowance

Children Education Allowance

Tribal Area Allowance
Hostel Expenditure Allowance
Remote Area Allowance
Compensatory Field Area Allowance
Counter Insurgency Allowance
Border Area Allowance
Hilly Area Allowance

Entertainment Allowance

It is the amount paid by employer for availing entertainment services. Under

section 16(ii) of Income Tax Act, 1961 it is entitled to deduction in tax from is
salary. But in this case deduction is given to his gross salary which also includes

[13]
entertainment allowance. Deduction in tax against this allowance can be divided
into two parts :
In case of Government employee entitled to minimum deduction of

Entertainment allowance received

20% of basic salary excluding any other allowance
Rs. 5000 In case of other employee entitled to minimum deduction of
(a) Entertainment allowance received
20% of basic salary excluding any other allowance
Rs. 7500
Entertainment allowance received during 1954-1955

Specific allowances that are fully exempt in the hands of employees

Allowance Conditions to claim full exemption

Travelling allowance Should be provided by the employer
and spent by the employee to meet the
cost of official tour or transfer
expenses. Cost of travel or transfer
includes payments for transfer,
packing and transportation of personal
effects.
Daily Allowance Should be spent by the employee for
meeting the daily charges incurred on
a tour or transfer.
Conveyance allowance Should be used by the employee to
meet the expenditure on
conveyance in performance of official
duties
Helper allowance Should be used by an employee to

[14]
 meet the expenditure on a helper who
assists him in the performance of
official duties
Academic allowance Should be used by the employee for
his academic research and training
pursuits.
Uniform allowance Should be spent by the employee for
purchasing/maintaining office uniform
for official duties.

HOUSE RENT ALLOWANCE [Sec. 10(13A) Rule 2A]

Conditions for claiming exemption:

Assessed is in receipt of HRA

Pays rent

Rent paid is more than 10% of salary.

Very Important:

The exemption shall be calculated on the basis of where the accommodation is

situated.

If the place of employment is the same for the whole year, then exemption

shall be calculated for the whole year.

If there is a change in place during the previous year, then it will be calculated

on a monthly basis

Exemption should be calculated in respect of the period during which rental

accommodation is occupied by the employee during the previous year.

[15]
 Salary for the period during which rental accommodation is not occupied shall

not be considered.

Salary for HRA= Basic Pay + DA(considered for retirement benefits) +

Commission ( if received as a fixed percentage on turnover as per terms of

employment)

CALCULATION OF TAXABLE HRA

PARTICULAR AMOUN AMOUN

T T
Amount received during the financial year for HRA XXX
Less: Exemption u/s 10(13A) Rule 2A Least of the

followings: xxx

(a) Actual amount received xxx

(b) 50% of the salary if house is placed at Delhi,
Mumbai, Kolkata, and Chennai
xxx
OR
40% of the salary in it is placed in any other city

(c) Rent paid less 10% of Salary

TAXABLE HRA XXX

GRATUITY

1. Government Employee: Fully exempted from tax u/s 10(10)(i).

2. Non-Govt. Employee:

(a) Employee covered by Payment of Gratuity Act,1972

[16]
Computation of Taxable Gratuity:

PARTICULAR AMOUN AMOUN

T T
Amount received as Gratuity XXX
Less: Exemption u/s 10(10)(ii)

Least of the followings:

(i) Actual amount received xxx

(ii) 15/26 Last drawn salary No. of years of

completed
xxx
service or part thereof in excess of 6 months
10,00,000
(iii) Maximum Limit
Taxable Gratuity XXX

PENSION

Taxability of Commuted Pension:

(a) Pension is received in lump sum as per the terms of the employment on

retirement or superannuation.

(b) Full Value of Commuted Pension = Amount received on commutation /

percentage of commutation.

Recipient Amount Taxable

Government employee Fully exempted u/s 10(10A)(i)
( Central/State/Local
Authority or Statutory Corporation)
Non-Govt. employee who has also Amount Received
received Less: 1/3 of Full Value of Commuted
Gratuity u/s 10(10A)(ii) Pension
[17]
Non-Govt. employee who has not Amount Received
received Less:1/2 of Full Value of Commuted
Gratuity u/s 10(10A)(iii) Pension

[18]
 Chapter 3

Perquisite
Under section 17(2) of Income Tax Act, 1961 perquisite is defined as:

Amount paid for the rent-free accommodation provided to the assessed by

his employer
Any concession in the matter of rent respecting any accommodation
provided to the assesses by his employer
Any benefit or amenity granted or provided free of cost or at concessional
rate in any of the following cases:

1. Employer may provide accommodation facility to the employee with or

with furniture. Such accommodation may be rent free at a concessional
rent.

a) For Rent free Accommodation

The amount taxable for such perquisite is as follows:

Type of Taxable amt for Taxable amt to be Taxable amt for

employee unfurnished added if furniture furnished
accommodation is provided accommodation
(1) (2) (3)
a. Amt payable as per 10% per annum (1) Plus (2)
Government Govt. rules of cost of
employees furniture or rent
payable
b. Non - Government employees:

If house is 15% of salary if 10% per annum (1) Plus (2)

owned by population of cost of
the employer exceeds 25 furniture or rent
lakhs. payable.

[19]
 10% of salary if
population is
between 10 to
25 lakhs.

7.5% of salary
if population is
below 10 lakhs.
If house is 10% per annum (1) Plus (2)
not owned 15% of salary or lease of cost of
by the rent, whichever is furniture or rent
employed lower payable
Note: Salary for the purpose of above includes basis, D.A, bonus, commission,
free and all taxable allowance by whatever name called, but doesnt include
allowance which are exempt or doesnt form part of salary for the calculation of
retirement benefit and also does not include the employers contribution to PF.

[20]
2. Car Facility

Motor car facility provided by an employer is taxable in the hands of the

employee on the following basis.

Car is Car is Used by Person

Taxable Value
owned by maintained by employees for chargeable
Official Not
Not a Perquisite
purpose applicable
Maintenance +
Personal Specified
Employer 10%
Purpose Employee
Depreciation
Rs. 1,800 /Rs.
Both Purpose
2,400 p.m
Official Not
Not a Perquisite
purpose applicable
Hire charges of
Employer Employee Personal
the car /10% Specified
Purpose
depreciation Employee
Both Purpose Rs.600/900 p.m
Official Not
Not a Perquisite
purpose applicable
Personal
Maintenance
Purpose
Employee Employer Actual
expenditure Specified
incurred - Rs Employee
Both Purpose
1,800 /2,400+
(Rs 900p.m. for
driver, if any)
Not
Employee Any Purpose Not a Perquisite
applicable
# depends on the cubic capacity of the car whether it exceeds 1.6 liters or not.

3. Gas, Electricity or Water Supply

[21]
 Employer may also provide gas, electricity or water supply to the employee
either free of cost or at concessional price.

Following will be the taxable amount.

Situations (1) If employer provides the If employer provides the

above free of cost (2) above at a concessional rate
(3)
If the employer Cost incurred by the Column (2) - amount
purchases it from employer to provide the recovered from the
outside: same employee.

if the employer Manufacturing cost per Column (2) - amount

provides it from its own unit recovered from the
source: employee.

Insurance paid by the employer

Any premium borne by the employer to run an assurance on the life of the
employees taxable in the hands of the employee.

Chapter 4

[22]
DEDUCTION FROM SALARY

The following two deductions from Gross salary are allowed vide section 16

(1) Entertainment allowance

(2) Professional tax

ENTERTAINMENT ALLOWANCE

ONLY TO GOVERNMENT EMPLOYEE

It is initially included in gross taxable salary. Thereafter, section

16(ii) allows a deduction from Salaries only to the Government

employees to the least of the following:

a. 1/5th of the Basic Salary.
b. Rs. 5000
c. Amount of entertainment allowances actually received.
NON GOVERNMENT EMPLOYEE

It is not entitled to any deduction for entertainment allowances.

BASIC SALARY above would include Dearness Allowance if it forms part of

salary but exclude bonus, allowances, benefits and perquisites.

PROFESSIONAL TAX

Section 16(iii) allows a deduction from salaries of the amount of tax on

employment imposed by or under any law by the State Government under

Article 276 of the constitution.

COMPUTING DEDUCTIONS UNDER CHAPTER VI A

ASSESSEE:
PREEVIOUS YEAR: ASSESSMENT YEAR:
PARTICULARS Rs.

[23]
DEDUCTIONS UNDER CHAPTER VI A
1. SECTION 80C
Life insurance premium
Deferred annuity
Deferred annuity by government
Contribution to statutory P.F
Contribution to P.P.F
Contribution to recognized P.F
National saving scheme
National savings certificates
Unit linked insurance plan
P.O cumulative time deposits
Pension fund of UTI xxxxx
Housing finance deposits
New house
Tuition fees xxxxx
Infrastructure debentures xxxxx
Bank fixed deposits xxxxx
NABARD bonds xxxxx
P.O. 5 year time deposit____________________ XXXXX

2. Section 80D : medical insurance

Self, spouse, dependent children 15000
Parents 15000
Additional ( senior citizen) 5000______

3. Section 80DD maintenance of handicapped ( Rs.

50000 to Rs. 100000)
4. Section 80DDB medical treatment (40000 to 60000)
5. Section 80E interest on higher education loan
6. Section 80U blind/handicapped/retarded ( lump sum)
( 50000 or 100000)

TOTAL DEDUCTIONS

Chapter 5

[24]
 Exemption from salary

LEAVE ENCASHMENT
1. Leave encashment while in service is fully taxable as income of previous year

in which it is enchased.

2. Leave encashment on retirement: if

(a) an individual receives leave encashment on his retirement, then the amount

received will be eligible for exemption. The amount of exemption is based on

his employment:

(b) Government employee: fully exempted from tax

(c) Non-Govt. employee: An individual who is not a Government employee is

also entitled for exemption in respect of Leave Encashment compensation

received by him.

3. Computation of exemption from Leave Encashment:

Step 1 : Computation of Salary = 10 months average salary preceeding the

month of retirement.

Step 2 : Salary = Basic Pay + Dearness Allowance (forming a part of salary for

retirement benefits) + Commission

(if received as a fixed percentage on turnover)

[25]
Step3 : This calculation is only applicable where the employer has sanctioned

leave to the employee in excess of 30 days for every completed year of service.

Particulars Amount

(i) Leave credit available on the date xxx

of retirement
Less: Excess leave sanctioned by the xxx
employer
(Leave sanctioned by the employer per
year 30 days per year) No. of
completed years of service)

Leave credit on the basis of 30 days xxx

credit for completed years of service
(ii) Leave salary on the basis of 30 xxx
days credit = Step 3(i) x Step 1

[26]
Taxable Leave Salary on Retirement:

Particulars Amount Amount

Amount Received on Leave Encashment xxx

Less: Exemption u/s 10(10AA)

Least of the followings:

(i) Actual amount of Leave encashment received xxx

(ii) Average salary of the individual for the past 10

months 10 months xxx

(iii) Maximum Limit xxx

(iv) Leave at credit at the rate of 30 days p.a. for every

Completed xxx xxx

year of service as calculated in Step 3(ii)

Taxable Value of Leave Encashment xxx

PROVIDENT FUND

[27]
 Provident fund scheme provides for monthly contributions from the

employees as well as the employer to a Provident fund account. The balance to

the credit of such accounts also earns interest. The entire balance is paid to an

employee on his retirement. The taxability of employers contribution, interest

credited annually and balance paid on retirement depends upon the type of

Provident fund. There are different types of provident fund such as

1. Statutory provident fund

2. Recognizes provident fund
3. Unrecognized provident fund.

Particulars Statutory Recognized Unrecognized

Contribution Employers and Employers and Employers and
by employees employees employees
Assessors Deduction u/s Deduction u/s 80c No income tax
contribution 80c benefit
Employers Not taxable Amount exceeding Not taxable at the
contribution 12% of salary is time of
taxable contribution
Interest Fully exempted Exempt up to 9.5% On Employees
credited p.a. any excess is contribution
taxable. taxable under the
head Other
Sources
On Employers
contribution
not taxable at the
time of credit.

NORMAL RATE OF TAXES

FOR THE ASSESSMENT YEAR 2013-14 AND PREVIOUS YEAR 2012-13

[28]
SR NO. TOTAL INCOME RATE OF TAX
1. Where the total income Nil

does not exceed Rs.

200000
2. Where the total income 10 % of the amount by

exceeds Rs. 200000 but which the total income

does not exceed Rs. exceeds Rs. 200000

500000
3. Where the total income Rs. 30000 plus 20% of

exceeds Rs. 500000 but the amount by which the

does not exceed Rs. total income exceeds Rs.

1000000. 500000
4. Where the total income Rs. 130000 plus 30% of

exceeds Rs. 1000000 the amount by which the

total income exceeds Rs.

1000000.

Rates of tax for every individual, resident in India, who is of the age of sixty
years or more but less than eighty years at any time during the financial
year.

SR NO. TOTAL INCOME RATE OF TAX

1. Where the total income Nil

does not exceed Rs.

250000

[29]
2. Where the total income 10 % of the amount by

exceeds Rs. 250000 but which the total income

does not exceed Rs. exceeds Rs. 250000

500000
3. Where the total income Rs. 25000 plus 20% of

exceeds Rs. 500000 but the amount by which the

does not exceed Rs. total income exceeds Rs.

1000000. 500000
4. Where the total income Rs. 125000 plus 30% of

exceeds Rs. 1000000 the amount by which the

total income exceeds Rs.

1000000.

In case of every individual being a resident in India, who is of the age of

eighty years or more at any time during the financial year.
SR NO. TOTAL INCOME RATE OF TAX
1. Where the total income Nil

does not exceed Rs.

500000
2. Where the total income 20 % of the amount by

exceeds Rs. 500000 but which the total income

does not exceed Rs. exceeds Rs. 500000

1000000
3. Where the total income Rs. 100000 plus 30% of

[30]
 exceed Rs. 1000000. the amount by which the

total income exceeds Rs.

1000000

COMPUTATION OF INCOME FROM SALARY.

Name of assesses

Previous year 1-4-2012 to 31-3-2013

[31]
Assessment year 2013-14

Particular Amount
Income from salary

1. salary
gross- net + deductions
due/ deemed to accrue in India
advance/ arrears received
voluntary payments

less:- exempt u/s 10

2. allowances
dearness allowances
entertainment allowances
leave travel allowances( less

exempt u/s10(10) )
house rent allowances ( less
XXXXX
exempt u/s 10(13) )
expenses allowances ( less

exempt u/s 10(14) )

3. Annuity ( less : exempt u/s

10(13))
4. Pension
uncommented (monthly)
commuted
less:- commuter pension exempt u/s

10(10A)
govt employee fully

exempt
non govt :-
a. gratuity, 1/3 of full
XXXXX
commuted value

[32]
 b. otherwise, of full XXXXX

commuted value
5. Gratuity (gross loss: exempt u\s

10(10)
govt employee fully exempt
employee under payment of

gratuity act least of

a) Salary p.m x 15/26 x completed

year of service.
b) Rs. 10,00,000
c) Gratuity actually received.

Other employee:- lower of

a. Average salary of last 10

months x 3/2 x no. of years

of service XXXXX
b. Rs. 10,00,000
c. Gratuity actually received.
6. Fees and Commissions
7. Perquisites
Perquisites taxable for all

employees
Perquisites not taxable at all.

8. Profit in lieu of salary

Compensation for

termination of employment
Compensation for

modification of terms of

[33]
 employment
Employers contribution to

PF + interest thereon

Less:-
XXXXX
Compensation to
XXXXX
workman/ VRS
Payment from statutory

P.F
Payment from

superannuation fund.
XXXXX
9. Leave encashment ( gross less

exempt u/s 10(10AA)

Government employees , fully

exempt
Non govt employee least of
Encashment of earned leave
10 x average salary for last

10 months
Rs. 300000
Amount actually received

GROSS TAXABLE SALARY

Less :- deduction under section 16

Entertainment allowances
Govt.Empolyee least of
a. 1/5th of Basic salary
b. Rs.5,000
c. Actual allowance

[34]
 Professional tax XXXXX

NET TAXABLE SALARY ( GROSS

LESS DEDUCTION)

XXXXX

XXXXX

XXXXX

XXXXX

XXXXX

[35]
IIIustration 1(Retiring Employee)

Mr. X retired from the services of M/s Y ltd. On 31.01.2013 after completing
service of 30 years and one month. He had joined the company in 1982 at the
age of 30 years and received the following on his retirement:

1) Gratuity Rs.6, 00,000. He was covered under the payment of gratuity act,
1972.
2) Leave encashment of Rs. 3, 30,000 for 330 day leave balance in his
account. He was credited 30 days leave for each completed year of
service.
3) As per the scheme of the company, he was offered a car which was
purchased on 01.02.2010 by the company for Rs. 5, 00,000. Company has
recovered 2,00,000 from him for the car. Company depreciated vehicles
at the rate of15% on straight line method.
4) An amount of Rs. 3, 00,000 as commutation of 2/3 of his pension.
5) Company presented him a gift voucher worth Rs.6,000 on his retirement.
6) His colleagues also gifted him a television ( LCD) worth 50,000 form
their own contribution.

[36]
Following are the other particulars;

1) He has drawn a Basis salary of Rs. 20,000 and 50% Dearness allowance
per allowance per month for the period from 01.04.2012 to 31.01.2013.
2) Received pension of 5,000 per month for the period 01.02.2013 to
31.03.2013 after commutation of pension.

Compute his total income from the above for Assessment Year 2013-14.

Solution:

Computation of Gross total Income

Particular Rs.
Basic Salary (20,000 *10) 2,00,000
DA (2,00,000*50%) 1,00,000
Gift voucher (6000-5000) 1000
Motor car ( WN) 56,000
Uncommitted Pension (Sec 17(1)( (5,000*2) 10,000
Commuted pension (Sec10(10A)) 1,50,000
Gratuity (Sec10(10)) 80,789
Leave salary ( Sec 10(10A)) 1,30,000

Gross Salary 7,27,769

Working notes:

1.

[37]
 Motor car ( 17(2)(viii)rule3(7)(viii) cost 5,00,0000
Less: Depreciation @20%
01.02.2010-31.01.2011 1,00,000
01.02.2011-31.01.2012 80,000
01.022013-31.01.2013 64,000
WDV 2,56,000
Less: Amount Recovered 2,00,000
Perquisite value of Car 56,000

2.

commuted pension {Sec 10(10)}

Amount received 3,00,000
(Less) Exempted (3,00,000*3/2*1/3) 1,50,000
Taxable 1,50,000

3. Gratuity {Sec10 (10)}

Least of the following is exempt

1. Gratuity received-Rs.6, 00,000

2. Rs. 10, 00,000
3. 15/26*30,000*30=5, 19,231
Received =6, 00,000
Exempt =5, 19,231
Taxable = 80,769

4. Leave Salary {Sec 10(10A)}

Least of the following is exempt

1. Rs.3,30,000
2. Rs. 10*20,0000 =2,20,000
3. Rs.3,00,000
4.

[38]
5. 330/30*20,000 =2,20,000
Received = Rs. 3, 30,000
Exempt = Rs. 2, 00,000
Taxable = Rs. 1, 30,000

CONCLUSION

1. The employee or individual who earn salary has to pay tax on income of
previous year in the assessment year.
2. They can also get benefits of deduction which help them to reduce tax
liability.
3. The individual has to pay tax in advance if his tax liability is more than
Rs. 10000 in previous year through assumption .

[39]
 Bibliography

www.google.com
www.scribd.com
www.icami.co.in
Tax text book (MCOM).

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