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When a new employee joins the organisation during mid of the tax year say August/Sept, he gives a form 12B that includes the previous income and tax deducted details in it. How do i work out tax when i compute the salary for this employee in the new organization. How do i calculate the HRA exemptions since his eligibility would change from one organization to other. Please reply. Your response will be highly appreciated.

From India, Bangalore
Hi Chandrika,

You have to combine the total salary from April 2008 to March 2009 from his previous earnings and current earnings and do the net taxable income. For example if he has earned 3 lakh until August in his previous company and 3 lakh from the current company, then you have to do the calculation for 6 lakh and also need to make sure if there is any tax deducted at source from his previous company and pending tax has to be deducted from you.

Regarding HRA exemptions irrespecitve of his eligibility the Income tax department will consider whichever is the least on the below mentioned points.
1. 40% of Basic
2. HRA Paid (previous + current)
3. Rent Receipts provided - 10% of basic.
whicheve is low will be considered by the income tax department. For example if an employee is getting 5000 as HRA in his previous company for 6 months and the remaining 6 months if he is getting 6000 then HRA paid is Rs 66,000 per annum. If the 1 and 3 point is higher than the 2 point then Income tax department will consider Rs 66,000/ for tax rebate.

Hope I have cleared the point.



From India, Bangalore
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