Dheerej Kumar (None) (121 Points)
06 December 2010Dear members,
I want to ask, while computing exemption etc under the head Salaries, why salary for the purpose differ in differrent cases?
e.g; it is in the case of leave encashment.
Basic salary+ D.A. (if provided)+ Commission at fixed %.
whereas, in the case of employees covered under payment of gratuity act (exemption for gratuity)
Basic salary + DA.
etc. etc.
please specify.
waiting in anticipation.
Thanks in advance.
Sunshine
(Helping All)
(10575 Points)
Replied 06 December 2010
salary for different purpose differ...this is according to the Income tax act and amendments made time to time...as u said in case of gratuity , provident fund, leave salary , VRS calculation , perquisite valuation , etc. we use different salary...
do u want explaination on this salary concept in detail??
Dheerej Kumar
(None)
(121 Points)
Replied 06 December 2010
I only want to know what is the reason behind this.
Why there is not uniformity in salry for the purpose.
Manmohan ACA, CS
(Chartered Accountant )
(14243 Points)
Replied 06 December 2010
In the case of employees covered under payment of gratuity act exemption for gratuity is computed as described in Payment of gratuity Act, 1972 which defines salary as Basic + DA.
but for leave encashment, employees NOT covered under payment of gratuity act, VRC etc. there is no law which defines the term salary neither the Income Tax Act defines salary so we have to refer juridical ruling and it was decided in Gesterner Duplicators (p) Ltd. vs. CIT (1979) SC, that salary means Basic + DA(is terms of retirement provide so) + Commission (as a fixed % of profit).
Regards...........!
CA PARAS BAFNA
(Practising CA )
(33423 Points)
Replied 06 December 2010
Dear Dhiraj Kumar,
Please read patiencely....
Manmohan has tried to give the best possible answer, however, Pranav Da might not be knowing all these.
In brief- Govt wants to give lesser tax free exemptions-
That's why definitions of salary are smaller.
Govt wants to tax the allowances and perquisietes on the basis of Salary
That's why definitions of salary are quite larger in comparison.
Simpler definitions will facilitate us- to whom ? Students, Teachers, Tax Experts including CAs and , taxpayers of course
Complications are being created by the Govt Authorities in the name of simplifications so as to benefit themselves.
A unique definition is impossible. Even if we make any of us as the PM or FM.
These will be defined by our bureaucrats. (I have to refer Dictionary to write the correct spelling of bureaucrats.
CAclubindia
