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  • INCOME TAX COMPUTATION-Salaries

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    Ninad Raut
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    1. Mr. A earns a total income of Rs. 5,23,700 from various allowances as a government employee. As a private employee, his total income would be Rs. 5,23,700 plus rent free accommodation of Rs. 1,00,000. 2. For Mr. A, the HRA exemption amount is Rs. 900 per month as the rent paid is Rs. 1,000 per month and HRA received is Rs. 900 per month. 3. Taxable gratuity for Mr. A ranges from Rs. 0 if a government employee to Rs. 3,60,000 if a non-government employee not covered by Payment of Gratuity Act.

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    Income Tax computation Section - Income from Salaries

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    1. Mr. A earns a total income of Rs. 5,23,700 from various allowances as a government employee. As a private employee, his total income would be Rs. 5,23,700 plus rent free accommodation of Rs. 1,00,000. 2. For Mr. A, the HRA exemption amount is Rs. 900 per month as the rent paid is Rs. 1,000 per month and HRA received is Rs. 900 per month. 3. Taxable gratuity for Mr. A ranges from Rs. 0 if a government employee to Rs. 3,60,000 if a non-government employee not covered by Payment of Gratuity Act.

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    40 views3 pages

    INCOME TAX COMPUTATION-Salaries

    Uploaded by

    Ninad Raut
    1. Mr. A earns a total income of Rs. 5,23,700 from various allowances as a government employee. As a private employee, his total income would be Rs. 5,23,700 plus rent free accommodation of Rs. 1,00,000. 2. For Mr. A, the HRA exemption amount is Rs. 900 per month as the rent paid is Rs. 1,000 per month and HRA received is Rs. 900 per month. 3. Taxable gratuity for Mr. A ranges from Rs. 0 if a government employee to Rs. 3,60,000 if a non-government employee not covered by Payment of Gratuity Act.

    Copyright:

    © All Rights Reserved
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    of 3

    Salaries

    1. Mr. A, earns the following income :

    Rs.
    Basic salary 20,000 p.m.
    Dearness allowance (D.A.) 10,000 p.m.
    Bonus in respect of an earlier year 5,000
    Arrears of salary for earlier year received during the year as per 2,500
    Labour Tribunal decision
    Advance salary on account of marriage in the family 3,000
    Loan 5,000
    Overtime 1,000
    Commission 2,000
    Travelling allowance for meeting expenses on travelling for official 3,500
    purposes (amount spent Rs.2,000)
    Conveyance reimbursement 500
    Uniform allowance (amount spent Rs.3,000) 2,000
    Entertainment allowance 4,500
    House rent allowance (HRA) (exempt amount Rs.1,500) 3,700
    City compensatory allowance 4,000
    Children’s education allowance @ Rs.300 p.m. for 3 children 10,800
    Children’s hostel allowance @ Rs.500 p.m. for 3 children 18,000
    Conveyance allowance between home and office 12,000
    Rent free accommodation – perquisite value 1,00,000
    LIC premium paid by the employer 5,000
    Employer’s Contribution to approved superannuation fund 1,20,000
    Medical reimbursement 17,000
    Expenses incurred by employer for training programme 3,000
    Telephone reimbursement 1,000
    Gratuity on retirement 2,00,000

    Mr. A has incurred the following expenses during the year

    a. Books and periodicals required for employment purposes Rs.500.

    b. Profession tax paid Rs.2,500.

    c. Fees paid for membership of a professional body Rs.1,000.

    Compute Mr. A’s income from salaries, assuming –

    1. He is a Government employee
    2. He is employed in a private company

    House Rent Allowance


    2. Mr. A has the following receipts from his employer –
    Basic pay Rs.3,000 p.m.
    Dearness allowance Rs. 600 p.m.
    Commission Rs. 6,000 p.a.
    Motor car for personal use (expenditure met by employer Rs. 500 p.m.
    House rent allowance Rs. 900 p.m.
    Find out the amount of HRA eligible for exemption assuming that Mr. A paid a rent of
    Rs.1,000 p.m. for his accomodation at Kanpur. DA forms part of the salary for
    retirement benefits.

    Gratuity

    3. Mr. A retired on 15-6-2018 after completion of 26 years 8 months of service and


    received gratuity of Rs.6,00,000. At the time of retirement his salary was :
    Basic salary : Rs.5,000 p.m.
    Dearness allowance : Rs.3,000 p.m. (60% of which is for retirement benefits)
    Commission : 1% of turnover (turnover in the last 12 months was
    Rs.12,00,000
    Bonus : Rs.12,000 p.a.
    Compute his taxable gratuity assuming :
    a. He is a non-government employee and covered by the Payment of Gratuity Act,
    1972.
    b. He is a non-government employee and not covered by the Payment of Gratuity Act,
    1972.
    c. He is a Government employee.

    Pension

    4. Mr. A retired on 1-10-2018 receiving Rs.5,000 p.m. as pension. On 1-2-2019, he


    commuted 60% of his pension and received Rs.3,00,000 as commuted pension.
    Compute his taxable pension assuming –
    a. He is a government employee
    b. He is a non-government employee receiving gratuity of Rs.5,00,000 at the time of
    retirement
    c. He is a non-government employee and is in receipt of no gratuity at the time of
    retirement.

    Voluntary Retirement

    5. Mr. X received voluntary retirement compensation of Rs.7,00,000 after 30 years 4


    months of service. He still has 6 years of service left. At the time of voluntary
    retirement, he was drawing basic salary Rs.20,000 p.m.; dearness allowance (which
    forms part of pay) Rs.5,000 p.m.. Compute his taxable voluntary retirement
    compensation.

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