Part Two:- How
to calculate salary and total Income for the purpose of tax deduction. -
1) Income from Salary head and other head of
income.
As per Section 192(2B) :- The employer can consider income from any other head based on a
declaration statement duly verified and filled by the employee but should not
consider any loss other than loss under
the head “House Property”
In simple meaning:-
a. Employee may by declaration
provide details of any income/loss other than salary head to employer.
b. Employer will add such income/loss
to the salary income of the employee and deduct tax
c. Employer should consider only one
loss i.e. Loss from House Property while calculating total income for the
purpose of tax deduction and no other loss will be considered.
For example:-
Particulars
|
Details
|
Salary Income
|
Rs 7,00,000 per annum
|
Loss from house property
|
(Rs 3,00,000 per annum)
|
Interest Income
|
Rs 6,50,000 per annum
|
Loss from Securities
|
(Rs 50,000 per annum)
|
Solution:-
Particulars
|
Details
|
Amount
|
Salary
Income
|
---
|
7,00,000
|
Loss
from House Property
|
Only
House Property loss should be considered
|
(3,00,000)
|
Interest
Income
|
Employee
can provide details of other heads of income
|
6,50,000
|
Loss
from Securities
|
Employee
can provide details of other heads of income
But
Loss from House property should only be considered
|
---
|
Total
Income
|
10,50,000
|
|
Tax Calculation
|
||
Particulars
|
Details
|
Tax
|
Exceeds
Rs 10,00,000
|
Rs
1,30,000 + 30% of income Exceeding Rs 10,00,000
10,50,000
– 10,00,000 = 50,000
Hence
1,30,000 + 50,000*30%
|
1,45,000
|
Less:
Tax Credit
|
Only
if total income is below Rs 5,00,000
|
0
|
Income Tax
|
1,45,000
|
|
Add:
Surcharge @10%
|
Only
if total income exceeds Rs 1 Crore
|
0
|
Income Tax + Net Surcharge
|
1,45,000
|
|
Add:
Education Cess @ 2%
|
1,45,000*2%
|
2,900
|
Add:
Senior Higher Education Cess @ 1%
|
1,45,000*1%
|
1,450
|
Gross Tax Liability
|
149350
|
2) Salary Income from more than 1 Employer
Where, during the
financial year, an assessee is employed simultaneously under more than one
employer, or where he has held successively employment under more than one
employer, he may furnish to the person responsible for making the payment
referred to in sub-section (1) (being one of the said employers as the assessee
may, having regard to the circumstances of his case, choose), such details of
the income under the head "Salaries" due or received by him from the
other employer or employers, the tax deducted at source there from and such
other particulars, in such form and verified in such manner as may be
prescribed, and thereupon the person responsible for making the payment
referred to above shall take into account the details so furnished for the
purposes of making the deduction under sub-section (1).]
Applicability:-
a. Employee is employed under two or
more employers simultaneously.
b. Employee previously employed under
other employer during the same financial year
Meaning:-
a. Employee may furnish the details
of salary income of one employer to other employer (to whom he wants to deduct
tax)
b. The other employer will add such
salary income to the salary income which he is provided and deduct tax.
For example:-
Particulars
|
Details
|
Salary Income From employer - 1
|
Rs 5,00,000 per annum
|
Salary Income From employer - 2
|
Rs 2,00,000 per annum
|
Loss from house property
|
(Rs 3,00,000 per annum)
|
Interest Income
|
Rs 6,50,000 per annum
|
Loss from Securities
|
(Rs 50,000 per annum)
|
Employee provides the details of salary income of employer
2 to employer 1
Solution:-
Particulars
|
Details
|
Amount
|
Salary
Income
|
---
|
5,00,000
|
Salary
Income
|
From
other Employer
|
2,00,000
|
Total Salary Income
|
7,00,000
|
|
Loss
from House Property
|
Only
House Property loss should be considered
|
(3,00,000)
|
Interest
Income
|
Employee
can provide details of other heads of income
|
6,50,000
|
Loss
from Securities
|
Employee
can provide details of other heads of income
But
Loss from House property should only be considered
|
---
|
Total
Salary Income
|
10,50,000
|
|
Tax Calculation
|
||
Particulars
|
Details
|
Tax
|
Exceeds
Rs 10,00,000
|
Rs
1,30,000 + 30% of income Exceeding Rs 10,00,000
10,50,000
– 10,00,000 = 50,000
Hence
1,30,000 + 50,000*30%
|
1,45,000
|
Less:
Tax Credit
|
Only
if total income is below Rs 5,00,000
|
0
|
Income Tax
|
1,45,000
|
|
Add:
Surcharge @10%
|
Only
if total income exceeds Rs 1 Crore
|
0
|
Income Tax + Net Surcharge
|
1,45,000
|
|
Add:
Education Cess @ 2%
|
1,45,000*2%
|
2,900
|
Add:
Senior Higher Education Cess @ 1%
|
1,45,000*1%
|
1,450
|
Gross Tax Liability
|
149350
|
3) Relief from salary – when salary received
in advance or arrears
As per Section 192 (2A) :- Where the employee is entitled to relief under section 89(1) he may
furnish the particulars to the employer in prescribed format in prescribed
manner to compute the relief on the basis of such particular and take into
account to make deductions while calculating the income for the purpose of tax
deduction.
Meaning:-
a. Employee received any salary in
advance or salary in arrears.( if employee
is in receipt of salary of more than 12 months due to arrears or advance during
any financial year)
b. He is entitled to relief under
section 89(1)
c. He provide his particulars in
prescribed format ( Form 10 E)
d. Employer will give him relief (calculated as per law) from taxable
salary income calculated for the purpose of tax deduction
Some points on relief:-
a. Employer is duty bound to allow
relief once true particulars are furnished in prescribed format by the employee
b. When an assesse claims exemption
under section 10(10C) under voluntary retirement scheme for VRS compensation,
he is not eligible for relief under section 89(1)
For
example:-
Financial Year
|
Salary Income without arrear
|
Arrear Received
|
2011-12
|
215000
|
|
2012-13
|
245000
|
|
2013-14
|
513000
|
37000
(18000
out of Rs 37000 belongs to year 2011-12)
(19000
out of Rs 37000 belongs to year 2012-13)
|
Solution: - For financial year 2013-14
S.no
|
Particular
|
Amount
|
1
|
Total
Income (without arrear)
|
513000
|
2
|
Salary
received in arrear
|
37000
|
3
|
Total Income (1+2) (including
arrear)
|
550000
|
4
|
Tax on
total income (including arrear)
|
41200
|
5
|
Tax on
total income (without arrear)
|
33578
|
6
|
Tax on salary received in
advance
(difference of 4 – 5)
|
7622
|
7
|
Tax
computed as table A (below)
|
3811
|
8
|
Relief
under section 89(1)
|
3811
|
Table 1
Previous
Year
|
Total
income (without arrears)
|
Arrears
of Advance salary
|
Total
income (including arrears)
|
Tax on
total income (without arrears)
|
Tax on
total income (including arrears)
|
Difference
|
2011-12
|
220000
|
18000
|
238000
|
4120
|
5974
|
1854
|
2012-13
|
260000
|
19000
|
279000
|
6180
|
8137
|
1957
|
Total
|
480000
|
37000
|
517000
|
10300
|
14111
|
3811
|
4) Claim of Deduction of Interest on Borrowed
Capital for Computation of income From House Property Section 24(b): -
As per
Section 24(b): - where the property has
been acquired, constructed, repaired, renewed or reconstructed with borrowed
capital, the amount of any interest payable on such capital shall be allowed as
deduction while calculating income from house property subject to provisions as
prescribed under the law.
Applicability:
-
a.
An
employee owned a house property (let out
or self occupied)
b.
The
property is not in use for any business activity by the employee
c.
An
employee has taken loan for the purpose of acquisition, construction,
repairment, renewal or reconstruction of such owned house property
Limits
of maximum interest allowed as deduction under section 24(b): -
Loan Taken
|
Self Occupied
|
Let Out
|
For Repair or Renewal
|
Rs 30,000 p.a
|
Rs 30,000 p.a
|
For Acquisition or construction of the house
|
Before 1.4.99 – Rs 30,000 p.a
After 1.4.99 – Rs 1,50,000
|
No maximum limit is provide under the law
|
Note: -
a) The
acquisition or constructing of the house should be completed within 3 years from
the end of the FY in which the capital was borrowed. Hence it is necessary
for the DDO to have the completion certificate of the house property against which
deduction is claimed either from the builder or through self-declaration from
the employee.
b) Further
any prior period interest for the FYs upto the FY in which the property was acquired
and constructed shall be deducted in equal installments for the FY in question
and subsequent four FYs.
c) The employee has to furnish before the DDO a
certificate from the person to whom any interest is payable on the borrowed
capital specifying the amount of interest payable. In case a new loan is
taken to repay the earlier loan, then the certificate should also show the
details of Principal and Interest of the loan so repaid.
|
5) Adjustment of
Excess or shortfall deduction
The
provisions of Section 192(3) allow the deductor to make adjustments for any
excess or shortfall in the deduction of tax already made during the financial
year, in subsequent deductions for that employee within that financial year
itself.
By CA Ashish
Barthwal
For any query: - feel free
to contact ca_ashishbarthwal@yahoo.com
0 comments