Checklist under income tax act.
Chandan Garg
(Querist) 07 June 2008
This query is : Resolved
Can any one please give me a check list to verify that sums are deducted from employees and paid to govt. by company in acc. with income tax act
Manish Singh
(Expert) 09 June 2008
you check out that these incomes are exemted from the tax thing :
Exempted income means incomes that are not to be included in the total income of the assessee for computation of the taxable income. Following are some of the incomes that are exempt in the hands of the individual resident.
Agricultural Income
Agricultural Income is generally tax exempted. But in some cases it will be taken into consideration to find out the tax on normal income.
Income received by a member of HUF
Income received by member of HUF is exempted from tax. This is because the income of HUF is chargeable to tax in the hands of HUF.So to avoid tax on the same income twice the share of income from the HUF by the member will be exempted from tax.
Share of profit from partnership firm
The income received by the partner from the firm will be exempted from tax as the income has already taxed in the hands of the partnership firm.
Tax on perquisite paid by the employer.
A new clause 10CC in section 10 of the income tax Act has been inserted in the finance Act 2002 for any income by way of tax paid for the employee by the employer on the non-monetary perquisites is exempt from tax.
Allowances of members of parliament
Daily allowance received by the members of parliament and state legislature or any allowance under the members of parliament Rule 1986 is fully exempt from Tax. Any allowance received by the members of state legislature or any committee there of to the extent of Rs 2500 per month is fully exempted from tax.
Awards
Awards received from the central Govt or state Govt in the benefit of public interest is exempted from tax.
Pension to gallantry award winners
Pension received by an employee of state or central Govt who has received gallantry award (paramvirchark Mahavir chakra Vir chakra)is exempt from tax.
Compensation received as victims of Bhopal gas leak disaster
To give relief to the people of Bhopal gas disaster income received as compensation is fully exempted from tax.
Amount received on LIC policy
Any some received under life insurance policy including bonus on such policy is exempted from tax. But the following incomes are not exempted.
1. Sum received on a policy taken for maintenance of handicapped dependent.
2. Sum received on a key man insurance policy.
3. Sum received on an insurance policy where the premium paid is more than 20%of the sum assured.
Income of a mutual Fund
Incomes of the following mutual fund are exempted from tax.
A mutual fund registered under the Security & Exchange board of India Act and a notified mutual fund set up by a public sector bank or a public financial institution or authorised by RBI.
these provisions are meant to be co-related with other provisions of the i.t. act.
Manish Singh
(Expert) 09 June 2008
also go carefully through the following:
Salary is the remuneration received by or accruing to an individual periodically for service rendered as a result of an express or implied contract. The actual receipt of salary in the previous year is not material as far as its taxability is concerned. The existence of employer-employee relationship is the sine-qua-non for taxing a particular receipt under the head "salaries."For instance, the salary received by a partner from his partnership firm carrying on a business is not chargeable as " Salaries" but as "Profits & Gains from Business & Profession". Similarly, salary received by a person as MP or MLA is taxable as " Income from other sources"., but if a person receives salary as Minister of State/Central Government, the same shall be charged to tax under the head"Salaries". Pension received by an assessee from his former employer is taxable as "Salaries" whereas pension received on his death by members of his family(Family Pension) is taxed as " Income from other sources".
What Does 'Salary' include
Section 17(1) of the Income tax Act gives an inclusive and not exhaustive definition of " Salaries" including therein,(i) Wages(ii) Annuity or pension(iii) Gratuity(iv) Fees,Commision,perquisites or profits in lieu of salary(v) Advance of Salary(vi) Receipt from Provident Fund(vii) Contribution of employer to a Recognised Provident Fund in excess of the prescribed limit(viii) Leave Encashment (ix) Compensation as a result of variation in Service contract etc.
Deduction From Salary Income
The following three deductions from salary income are admissible as per section 16 of the Income-tax Act.
(i) Standard Deduction: From assessment year 2002-2003, standard deduction is to be allowed at the following rates:-
(a)Where gross income under the head"Salaries" os less than Rs. 1.5 Lacs Rs. 30,000/- or 1/3 of the salary, whichever is less
(b)Where gross income under more than Rs. 1.5 Lacs but less than Rs. 3 lacs Rs. 25,000/-
(c)Where gross income under the head " salaries: is more than Rs. 3 lacs but less than Rs. 5 lacs Rs.20,000/-
(d)Where gross income under the head"salaries" is more than Rs. 5 lacs NIL
As introduced by the Finance Act 2003, the standard deduction shall be allowed at the following rates w.e.f. 01.04.2004 :-
(a) Where the gross income under the head "Salaries" is less than Rs. 5 lacs. Rs.30,000/- or 40% of the salary, whichever is less.
(b) Where the gross income under the head "Salaries" exceeds Rs. 5 lacs. Rs.20,000/-.
(ii) Professional/Employment tax levied by the State Govt.
(iii) Entertainment Allowance- Deduction in respect of this is available to a government employee to the extent of Rs. 5000/- or 20% of his salary, whichever is less.
Perquisites
"Perquisite" may be defined as any casual emolument or benefit attached to an office or position in addition to salary or wages.
"Perquisite" is defined in the section17(2) of the Income tax Act as including:
Value of rent-free/concessional rent accommodation provided by the employer.
Any sum paid by employer in respect of an obligation which was actually payable by the assessee.
Value of any benefit/amenity granted free or at concessional rate to specified employees etc.
Valuation of Perquisites
As a general rule, the taxable value of perquisites in the hands of the employees is its cost to the employer. However, specific rules for valuation of certain perquisites have been laid down in Rule 3 of the I.T. Rules. These, as revised by CBDT notification dated 25.9.2001, are briefly given below. It may be noted that while the revised rule 3 relating to valuation of perquisites shall be deemed to have come into force on 1.4.2001, however, the employee may, at his option, compute the value of all perquisites made available to him for the period from 1.4.2001 to 30.9.2001, in accordance with the rule 3 as it stood before this amendment.
Chandan Garg
(Querist) 09 June 2008
thanks for this information but what i required is the check list for a registered company .. in which the finance deptt. deduct certain sums from the employees and submit to govt. like service tax , income tax. and others
Manish Singh
(Expert) 09 June 2008
go through the above mentioned note
Chandan Garg
(Querist) 21 August 2008
if some body have some more suggestion are welcom
