Confused About Medical Allowance and Professional Tax Calculations? Need Quick Help!

Hi All,

I do have a doubt. If the CTC is between Rs. 1,00,000 to Rs. 2,00,000/-, how much would be the Medical allowance? Will it be 750 or 1250, or does it not depend on CTC?

I also want to know how to calculate Professional Tax. Is it calculated on Gross Salary or on Net Salary? If we calculate it on Net Salary, what problems can an employer face while filing the tax?

Please clarify the above-mentioned doubts. I need a quick response as I have to process the payroll.

Waiting for the response.

Thanks,
Neha

Dear Friends,

Medical allowance has nothing to do with the CTC. Whatever amount you fix for the medical allowance to ensure the total gross salary to be paid to the employees is valid and okay. Rs. 1250 per month is considered for the purpose of Income Tax Exemption, which is exempt under the IT tax when calculating the employee's income tax. Please note that if it is paid along with the salary and the term "Medical Allowance" is used in the salary slip, it is taxable in all cases. Only Medical Reimbursement, which is paid Rs. 15000 per year, is exempt as per the IT Act.

Thus, if Medical Allowance is fixed - Taxable.
If variable and reimbursement - Tax-free up to Rs. 15000 in a year.
Above that, taxable in all cases.
Whatever is fixed with the salary, it's okay.

Professional Tax is based on Gross Salary. If it is paid by the Employer and not deducted from the employee's salary, it is treated as a perquisite and added to his total salary. However, under section 16(iii), it is deducted from the salary as a standard deduction. Thus, if paid by the employer, it will be added first and then the deduction will be given. If paid by the employee, neither added nor deducted.