Scribd
Upload
79 views14 pages

Income From Salary (Part-2)

These allowances are fixed monetary payments made by an employer to an employee for meeting personal or official expenses. They are predetermined amounts irrespective of actual spending. Allowances are always paid in cash, not in kind. Common allowances include dearness allowance, house rent allowance, travel allowance, and medical allowance. The tax treatment of allowances varies with some fully taxable, some partly taxable, and some exempt.

Uploaded by

Saumya Singh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
79 views14 pages

Income From Salary (Part-2)

These allowances are fixed monetary payments made by an employer to an employee for meeting personal or official expenses. They are predetermined amounts irrespective of actual spending. Allowances are always paid in cash, not in kind. Common allowances include dearness allowance, house rent allowance, travel allowance, and medical allowance. The tax treatment of allowances varies with some fully taxable, some partly taxable, and some exempt.

Uploaded by

Saumya Singh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 14

These are fixed monetary payment, paid by the employer to

the employee for meeting some particular expenses, whether


personal or for the performance of his official duties.

These are fixed, pre-determined and irrespective of actual


expenditure.

It is always paid in Cash and not in kind

Asha Rani
S. No. Forms of Allowances Section Taxability
1. Dearness Allowance 15 Taxable
2 City Compensatory Allowance 15 Taxable
3 Foreign Allowance to govt. employee outside India 10(7) Sub. to Exempt
4 House Rent Allowance 10(13A) Sub. to Exempt
5 Special Allowances notified by govt. 10(14) Sub. to Exempt
6 Entertainment Allowance to govt. employee 16(ii) Sub. to Exempt
7 Fixed Medical Allowance 15 Taxable
8 Servant Allowance 15 Taxable
9 Tiffin Allowance 15 Taxable
10 Allowances received from UNOs Not Taxable
11 Allowances received by High court Judges Not Taxable
12 Any other allowances 15 Taxable
Asha Rani
TAX TREATMENT OF ALLOWANCES

Allowance
Fully Partly which are
Taxable exempt in
Taxable case of
allowances. allowances
certain
persons.
Asha Rani
Dearness allowance
Tiffin allowance
Fixed medical allowance
Servant allowance
City compensatory allowance
Deputation allowance
Lunch/ meal/ dinner/ refreshment allowance
Overtime allowance
Family allowance
Non practicing allowance
Warden allowance
Asha Rani
Entertainment Allowances Sec.16(ii).

House rent allowance Sec. 10(13A).

Special allowances prescribed as exempt


under Sec.10(14).
Asha Rani
Employees

Government Employees Non-Government


(CG or SG) Employees

20 per cent Entertainment Fully


Rs.5,000 of basic allowance
salary received Taxable
Asha Rani
ILLUSTRATIONS:
▪ X, an employee of central Govt. , gets Rs. 30000 p.m. as basic
salary and is entitled to Rs.1500 p.m. as entertainment
allowance. Compute the deduction under section 16(ii) from
gross salary in respect of entertainment allowance.
▪ During the previous year 2019-20, X has Basic salary Rs. 24000
p.a., D/A 12000 p.a. (forming part of salary), E A Rs. 8000 p.a.,
Bonus Rs.6000 p.a. Find out the salary chargeable to tax for the
Assessment year 2020-21 assuming that (A) he is state govt.
employee, (B) he is an employee of RBI.

Asha Rani
HOUSE RENT ALLOWANCE

Least of the following is exempt

50% of Salary where


the Assessee lives in
Excess of rent paid Mumbai, Delhi,
Actual HRA received over 10% of Salary Chennai & Kolkata
and 40% in other
cases.
Asha Rani
▪ Salary for HRA means Basic Salary, Commission if based on fixed
percentage of sale & DP/DA, if it is part of salary for computing all
retirement benefits (gratuity, leave encashment, PF, etc).
▪ Salary shall be determined on DUE basis.
▪ Exemption is denied where an employee lives in his own house or in a
house for which he does not pay any rent or pays rent which does not
exceed 10% of salary.
▪ The amount of exemption in respect of HRA received by an employee
depends upon the following:
a. “salary” of the employee; DA/DP shall be considered
only when it is part of salary
b. House rent allowance; for computing all
retirement benefits i.e.
c. Rent paid; gratuity, LE, Pension, PF, etc.
d. The place where house is taken on rent.
Asha Rani
Whenever, ‘Salary’ of the employee, HRA, Rent paid or
Place of rental accommodation is not same throughout
the PY, exemption shall be worked out on monthly
basis.

Asha Rani
1) A is entitled to a basic salary of Rs. 50000 p.m. and dearness allowance
of Rs. 10000 per month, 40% of which forms part of retirement
benefits. He is also entitled to HRA of Rs. 20000 p.m. He actually pays
Rs. 20,000 p.m. as rent for a house in Delhi. Compute the taxable HRA.
2) Z is an employee of AB Insurance Co. Ltd. During the PY 2019-20 he
gets Rs. 80,000 p.m. as salary and Rs. 10,000 p.m. as DA (40% of it is
considered for calculating provident fund but only 30% is considered for
calculating gratuity). He gets Rs. 55,000 p.m. as HRA. Z resides with his
joint family upto June 30, 2019 for which no rent is paid. From July 1,
2019 he takes a house on rent (monthly rent being Rs. 10,000) at
Noida. However, he shifts to Delhi with effect from January 1, 2020
(monthly rent being Rs. 53,000). Find out the HRA chargeable to tax
for the AY 2020-21.
Asha Rani
3) A is employed with XYZ Ltd. on a basic salary of Rs. 30,000 p.m. He is also
entitled to a DA of 20% of basic salary. 70% of DA is included in salary for
retirement benefits. The company gives him HRA of Rs. 15,000 p.m.
With effect from 1.1.2020 he receives an increment of Rs. 5,000 in his basic salary.
During the PY 2019-20 he has received arrears of salary pertaining to earlier years
amounting to Rs. 40,000.
A was staying with his parents till 31.10.2019. From 1.11.2019 he takes an
accommodation on rent in Delhi and pays Rs. 12,500 p.m. as rent for the
accommodation.
Compute his gross salary for the AY 2020-21.

Asha Rani

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy