allowances

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allowances

Seminar on

Salary - Taxation

CA CHANDRASHEKHAR V.

CHITALE

Chairman, Direct Taxation

Committee, MCCIA

CA Chandrashekhar V. Chitale


Salary - Taxation

ALLOWANCES

CA Chandrashekhar V. Chitale


Allowances

Fixed money or substance or

compensation given regularly in addition

to salary salary.

Allowances form part of salary salary.

Taxable in hands of EMPLOYEE if no

specific exemption provided under the

Income Tax Act, 1961 1961.

CA Chandrashekhar V. Chitale


Three types :

COVERAGE

1. Fully exempted allowances allowances.

2. Partly exempted allowances allowances.

3. Fully taxable allowances allowances.

CA Chandrashekhar V. Chitale


Fully Exempted Allowances

Allowances are fully exempt from tax tax.

Examples – foreign allowance, sumptuary

allowance to High Court / Supreme Court

Judges, allowances from U.N.O.

CA Chandrashekhar V. Chitale


Rule 2BB

Tax Free Allowances

For the purposes of sub sub-clause clause ( (i) ) of

clause ( (14 14) ) of section 10, prescribed

allowances, by whatever name called,

shall be the following, namely : :—

(a) to (f) – as per the list

CA Chandrashekhar V. Chitale


TAX FREE ALLOWANCES

(a) any allowance granted to meet the cost

of travel on tour or on transfer;

For the purpose

“allowance granted to meet the cost of

travel on transfer” includes any sum paid

in connection with transfer, packing and

transport

CA Chandrashekhar V. Chitale


TAX FREE ALLOWANCES

(b) allowance granted on tour or journey in

connection with transfer, to meet the

ordinary daily charges incurred on account

of absence from his normal place of duty;

(c) allowance granted for conveyance in

performance of duties of an office

Provided that free conveyance is not

provided by the employer;

CA Chandrashekhar V. Chitale


TAX FREE ALLOWANCES

(d) any allowance granted to meet the

expenditure incurred on a helper where

such helper is engaged for the

performance of the duties of an office or

employment of profit;

(e) allowance granted for encouraging the

academic, research and training pursuits

in educational and research institutions;

CA Chandrashekhar V. Chitale


TAX FREE ALLOWANCES

(f) allowance granted for the purchase or

maintenance of uniform for wear during

the performance of the duties of an office

or employment of profit.

CA Chandrashekhar V. Chitale


Partly Exempted Allowances

Basis –

amount of

allowance spent

Partly

Exempted Allowances

Basis –

up to a fixed amount

Eg. house rent allowance,

Eg. special allowances to

special allowances to meet official

meet personal expenses, etc

expenditure, etc CA Chandrashekhar V. Chitale


Fully Taxable Allowances

Includes all allowances not included in

fully exempt or partially exempt category

by whatever name called called.

Examples – city compensatory allowance,

tiffin allowance, dearness allowance, fixed

medical allowance etc etc.

CA Chandrashekhar V. Chitale


House Rent Allowance

Least of following exempt from Tax Tax:

1. Residential house in Metro city -

50 % of Salary

Residential house at other place -

40 40% of Salary

2. House rent allowance received received.

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

CA Chandrashekhar V. Chitale


House Rent Allowance

Salary for this purpose =

Basic salary +

Dearness allowance (if terms of

employment so provide) +

Commission payable (if paid as a fixed

percentage of turnover) turnover).

CA Chandrashekhar V. Chitale


Special Allowances For

Meeting Official Expenditure

Given to employees to meet expenses

exclusively in performance of official

duties duties.

Are exempt to the extent amount actually

incurred for the purpose for which it is

given given.

CA Chandrashekhar V. Chitale


Special Allowances For

Meeting Official Expenditure

Examples – traveling allowance, daily

allowance, conveyance allowance, helper

allowance, research allowance and

uniform allowance allowance.

CA Chandrashekhar V. Chitale


Transport Allowance

Provided to an employee for commuting

between his residence and the place of his

duty duty.

Exempt up to Rs Rs. 800 per month and in

case blind or handicapped employee's

Rs Rs. 1,600 600 per month month.

CA Chandrashekhar V. Chitale


Children Education Allowance

Paid for education of employee’s children children.

Exempt up to Rs 100 per month per child

up to maximum of two child if expenses

made in India India.

CA Chandrashekhar V. Chitale


Children Hostel Allowance

Paid for education of employee’s children children.

Exempt up to Rs 300 per month per child

up to maximum of two child if expenses

made in India India.

CA Chandrashekhar V. Chitale


THANK YOU

Any Questions ?

CA Chandrashekhar V. Chitale

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