Hi all, as per my knowledge, different heads of salary receive different slabs for tax deduction. For example, Medical Allowance comes under tax deduction, but reimbursement of medical expenses is tax-free. Similarly, there are other heads that are taxable.
Understanding Salary Heads and Taxation
Please help me understand the different heads in salary, the tax rates applicable to these heads, and identify which heads are not taxable.
Regards,
Sandeep Singh
From India, Delhi
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Understanding Salary Heads and Taxation
Please help me understand the different heads in salary, the tax rates applicable to these heads, and identify which heads are not taxable.
Regards,
Sandeep Singh
From India, Delhi
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Income Tax Calculation for Financial Year 2010-11 (Assessment Year 2011-12)
On gross salary, the following deductions are applicable:
- Professional Tax
- House Rent in excess of 1/10th of salary, subject to a ceiling equivalent to HRA
- Interest on Housing loan, subject to a ceiling of Rs. 1,50,000
- Refund on Housing loan, savings, tuition fee for 2 children, etc., altogether subject to a ceiling of Rs. 100,000
- In addition, savings on infrastructure bonds up to Rs. 20,000
- Other than the above one lakh, Rs. 15,000 to Rs. 20,000 towards mediclaim premium, Rs. 40,000 to Rs. 60,000 towards treatment of specified diseases like Motor Neuron disease, Rs. 75,000 to Rs. 100,000 towards disability, etc., are also admissible for deduction.
Calculating Taxable Income
Taxable income can be calculated as follows:
Gross salary - total deductions = Taxable income
Taxpayer Categories
Taxpayers can be categorized into three groups:
1. Non-Seniors - Male
2. Non-Seniors - Female
3. Senior Citizens (65 years old and above)
If the taxable income is Rs. 2,40,000, a Senior Citizen is fully exempted from paying tax. Non-Senior Females have to pay in excess of Rs. 1,90,000, and Non-Senior Males in excess of Rs. 1,60,000.
Beyond the above income, one has to pay 10% up to Rs. 5,00,000, 20% thereafter up to Rs. 8,00,000, and 30% in excess of Rs. 8,00,000. Additionally, an education cess at 3% will be charged on the Total Tax.
Example Calculation
Gross income of a Non-Senior Male - Rs. 12,00,000
Deductions (actual): Professional Tax - 12,000, Housing loan interest - 2,00,000, Total savings/deductions - 2,50,000, Savings on Infrastructure bond - 25,000, other deductions over 1,00,000 - 50,000.
Admissible total deductions (subject to ceiling limits) - 12,000 + 1,50,000 + 1,00,000 + 20,000 + 50,000 = 3,32,000
Taxable income, 12,00,000 - 3,32,000 = 8,68,000
For Non-Senior Males:
Rs. 1,60,000 is exempted.
For the next 3,40,000 (5,00,000-1,60,000), 3,40,000 x 10% = 34,000 -(1)
For the next 3,00,000 (8,00,000-5,00,000), 3,00,000 x 20% = 60,000 -(2)
For the next 68,000 (8,68,000-8,00,000), 68,000 x 30% = 20,400 -(3)
Tax - (1) + (2) + (3) = 1,14,400
Also, for Non-Senior Females, Tax is 1,14,400 - 3,000 = 1,10,400
and for Senior Citizens, Tax is 1,14,400 - 8,000 = 1,06,400
Education Cess, 1,14,400 * 3% = 3,432
Total Tax - Rs. 1,17,832
Your Details
HRA up to 50% may be exempted. The balance salary is 11,400 + 800 + 3,650 + 1,250 = 17,100 p.m., i.e., Annual income 2,05,200. EPF will be 1,368 x 12 = 16,416 (This may vary subject to your organizational policies). The balance taxable income is 1,88,784.00 (You may also deduct professional tax, etc., which I don't know).
Up to 1,60,000, no tax. 10% will be charged as tax on 1,88,784 - 1,60,000 = 28,784 i.e., 2,878 & cess at 3% is 86. Total tax = 2,878 + 86 = Rs. 2,964.00
See Excel Sheet. Enter gross salary and deductions/savings applicable in the green color column. Results will be shown in the yellow color. The red color is used for static data.
Regards,
ABBAS.P.S.
From India, Bangalore
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530On gross salary, the following deductions are applicable:
- Professional Tax
- House Rent in excess of 1/10th of salary, subject to a ceiling equivalent to HRA
- Interest on Housing loan, subject to a ceiling of Rs. 1,50,000
- Refund on Housing loan, savings, tuition fee for 2 children, etc., altogether subject to a ceiling of Rs. 100,000
- In addition, savings on infrastructure bonds up to Rs. 20,000
- Other than the above one lakh, Rs. 15,000 to Rs. 20,000 towards mediclaim premium, Rs. 40,000 to Rs. 60,000 towards treatment of specified diseases like Motor Neuron disease, Rs. 75,000 to Rs. 100,000 towards disability, etc., are also admissible for deduction.
Calculating Taxable Income
Taxable income can be calculated as follows:
Gross salary - total deductions = Taxable income
Taxpayer Categories
Taxpayers can be categorized into three groups:
1. Non-Seniors - Male
2. Non-Seniors - Female
3. Senior Citizens (65 years old and above)
If the taxable income is Rs. 2,40,000, a Senior Citizen is fully exempted from paying tax. Non-Senior Females have to pay in excess of Rs. 1,90,000, and Non-Senior Males in excess of Rs. 1,60,000.
Beyond the above income, one has to pay 10% up to Rs. 5,00,000, 20% thereafter up to Rs. 8,00,000, and 30% in excess of Rs. 8,00,000. Additionally, an education cess at 3% will be charged on the Total Tax.
Example Calculation
Gross income of a Non-Senior Male - Rs. 12,00,000
Deductions (actual): Professional Tax - 12,000, Housing loan interest - 2,00,000, Total savings/deductions - 2,50,000, Savings on Infrastructure bond - 25,000, other deductions over 1,00,000 - 50,000.
Admissible total deductions (subject to ceiling limits) - 12,000 + 1,50,000 + 1,00,000 + 20,000 + 50,000 = 3,32,000
Taxable income, 12,00,000 - 3,32,000 = 8,68,000
For Non-Senior Males:
Rs. 1,60,000 is exempted.
For the next 3,40,000 (5,00,000-1,60,000), 3,40,000 x 10% = 34,000 -(1)
For the next 3,00,000 (8,00,000-5,00,000), 3,00,000 x 20% = 60,000 -(2)
For the next 68,000 (8,68,000-8,00,000), 68,000 x 30% = 20,400 -(3)
Tax - (1) + (2) + (3) = 1,14,400
Also, for Non-Senior Females, Tax is 1,14,400 - 3,000 = 1,10,400
and for Senior Citizens, Tax is 1,14,400 - 8,000 = 1,06,400
Education Cess, 1,14,400 * 3% = 3,432
Total Tax - Rs. 1,17,832
Your Details
HRA up to 50% may be exempted. The balance salary is 11,400 + 800 + 3,650 + 1,250 = 17,100 p.m., i.e., Annual income 2,05,200. EPF will be 1,368 x 12 = 16,416 (This may vary subject to your organizational policies). The balance taxable income is 1,88,784.00 (You may also deduct professional tax, etc., which I don't know).
Up to 1,60,000, no tax. 10% will be charged as tax on 1,88,784 - 1,60,000 = 28,784 i.e., 2,878 & cess at 3% is 86. Total tax = 2,878 + 86 = Rs. 2,964.00
See Excel Sheet. Enter gross salary and deductions/savings applicable in the green color column. Results will be shown in the yellow color. The red color is used for static data.
Regards,
ABBAS.P.S.
From India, Bangalore
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