14 November 2014
I am having trouble understanding the following example relating to Sec 192(1A) and 192 (1B):
Example: An employee gets a salary of Rs. 3,20,000 from his employer. Apart from the salary he also gets a non monetary perquisite of Rs. 80,000.The employee invested Rs. 60,000 in PPF. Calculate the monthly tax required to be deducted by the employer under section 192.
Answer: Computation of TDS Shall be made as under:
Annual Salary 3,20,000 Add: Non monetary perquisite 80,000 Gross Salary 4,00,000 Less: Deduction under Ch VIA 60,000 Total taxable income 3,40,000
Tax on total taxable income 14,000 Less: Rebate under Sec 87A 2,000 Add: Education cess @ 3% 360 Total tax 12,360 Monthly TDS (12360/12) 1,030
If in the above example the employer wants to exercise the option referred to in Sec 192(1A) what would be the consequences of the same?
Ans: In terms of Sec 192(1B) the average rate of tax on the income under the head "Salaries" shall be calculated as under:
Gross Salary 4,00,000 Tax on above 18, 540 Average rate of tax 4.635%
Tax on perquisites at an average rate of tax shall be 4.635% of 80,000= Rs. 3708. Employer has an option of paying this amount from his own pocket @ 309 per month as per Sec 192(1A)
Now my question is, how is the amount of tax 18,540 arrived at? I understand from back calculation that 18,540 is the amount of tax on 3,80,000. In relation to this question 3,80,000 can be arrived at by adding 3,20,000( amount of salary excluding non monetary perquisites)and 60,000 (amount of deduction under Ch. VIA for PPF). But what is the logic behind adding these two when I had not made any deduction from 3,20,000 to begin with?
Can someone please explain the reason behind this with respect to the provisions of 192(1A) and (1B)?
Any help in this regard will be highly appreciated.
CAclubindia
