Dear Students,
In my endeavour to support the Aspirant IPCC students - I will try to be regular in continuing the post . I will make sure to write atleast 2 post a week relevant to the knowledge and examinations.
As we prepare for the exams - income tax is considered as vast subject and more often we landup before the exam days with lots of doubts and confused in a way to represent the sections,concept & case laws. So how do we simplify this learning as we refer the Best authors /teachers who help you in classes . It start with equal committment from your side that you decide to "Love" the subject you are learning during the CA course that way the committment and passion sets in.
Salaries :
1. Understand the Basis of charge. This is covered in Section 15
2. Definition of Salary : Section 17
Remember key words ...The definitions are "Inclusive Definitions" . Salary 17(i),Perquisites17(ii) & Profit in lieu of Salary (17(iii))
Always try to ask questions > What, Why, When, How<,
What is Salary - What can this include -- Talk to few of elders in your family as to understand from them what they have in thier payroll - This will be a good start for you to like this chapter. and you can become Tax consultant for salaried professional as you master this chapter :)
What is an Allowance ? What is difference between Allowance & Perquisite ? Does salary include Allowances, If so what ? What are taxable Allowances ? What are non taxable ? Are there limites to Taxable allowances
Remember allowances by and categorize them to Taxable & Limits( ex: children education - Rs 100 for max of 2 children.)
HRA - Section 10(13A)
What are allowance allowed under Section 10(14)
Special Allowances
Personal Allowances
Perquisite
Perquisite can be classified under - Provided, Paid & Payable. Provided - For ex - Rent free Accomodation, so if you read the dfinition of perquisite you can
Read in the order of Rules 3(1) to 3(7) - Income Tax rules. and master the Rules and understand the limits
Other exemptions for salaries
Gratuity Section 10(10) > This is given by employer to employee in Appreciation of your work <. There needs to be relation of employer/employee
Things to consider :
Government Employee, Employee covered under Payment of Gratuity Act 1972, Other employee
Government employee - Any receipt is tax free
Employee under payment of Gratuity act : Remember max limit Rs 10 lakhs, Days to consider 15/26, Salary ( Basic, DA,Commission). Salary definition is same as HRA
Other employee : Remember this has 15/30, Need to know Average salary - and this is computed for past 10 months
Gratuity if received by legal heir will be taxed under head Income from other sources
Pension Section 10(10A)> This is given as Reward for longe period of work <
First classification - Commuted or Uncommuted pension
Uncommuted pension received by any employee (Including government) is taxable
Commuted pension - Government employee not taxable
For others need to consider if he has received any payment under Payment of Gratuity Act, if so then only 1/3rd of total pension is exempt, else 1/2 or 50% of total pension received is exempt
Leave Salary Section 10(10AA)
This can be received while in continuity of service and also at the time of Retirement or death
I will continue the salary discussion in next thread later this week ...Keep watching this space and I will be happy to assist all of you any ways - You can write to me email at satmai45 @ gmail.com
About myself: 15+ Experience in Corporate industry, Now a part time passionate teacher,mentor & coach and plan to write finance blogs for students & exam oriented tips,
Bangalore Students who are looking for small batch support can reach out at satmai45 @ gmail.com Currently batch underway for May 12 exams.
Regards,
Satish
Tejas learning centre
hsr layout, Bangalore
CAclubindia
