Minraj Gyawali (CA student) (39 Points)
31 August 2014
Deepak Gupta
(CA Student)
(15922 Points)
Replied 31 August 2014
| Originally posted by : Minraj Gyawali | ||
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is it real that whatever amount is paid as "profession tax",deduction is limited up to the extent 2500 only.?? for example ,if profession tax is paid out Rs.3000(out of which 2000 is paid by employer). then how much is deductible- 2500 or 3000?? need some explanation please |
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As per Sec. 16(iii) of the Income Tax Act, 1961, “a deduction of any sum paid by the assessee on account of a tax on employment within the meaning of clause (2) of article 276 of the Constitution, leviable by or under any law” shall be allowed as deduction.
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Sec. 16(iii) does not prescribe any statutory limit. Maximum levy of professional tax of Rs. 2,500/- has been given in Article 276(2) of the Constitution of India, as under,
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“The total amount payable in respect of any one person to the State or to any one municipality, district board, local board or other local authority in the State by way of taxes on professions, trades, callings and employments shall not exceed two thousand and five hundred rupees per annum.”
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Deduction u/s 16(iii) - Professional tax
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-> If reimbursed/paid by employer on employees behalf:
- first add in salary, then allow as deduction.
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-> If paid by employee:
- allow deduction (not to be added first).
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Under income tax act there is no limit of deduction. Deduction shall be allowed only on paid basis (irrespective of the year and amount).
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In case of your query, first add Rs. 2,000/- in gross salary, then allow deduction of Rs. 3,000/- u/s 16(iii).
CA TSR
(Aaki & Co.,)
(254 Points)
Replied 31 August 2014
If Rs. 2000 is recovered from employee then employee is eligible to claim Rs. 3000 as deduction from INcome Under Salries other wise employee is eligible to cliam only Rs. 1000 as deduction U/s. 16(iii). Employer is paid on behalf of employee and claimed as their business expenditure under the head salaries and wages to employees. Then the employee eligible to claim only Rs. 1000 as deduction what is paid by him in his own hands.
Minraj Gyawali
(CA student)
(39 Points)
Replied 01 September 2014
CAclubindia
