Share |

Computation of "Net Salary" Income

1.2.      WHAT IS ‘NET SALARY INCOME’ ACCORDING TO INCOME-TAX ACT.?

Gross Salary reduced by exemptions u/s 10 and deductions u/s 16, constitute ‘Net Salary Income’ i.e. the income chargeable to tax under the head “Income from Salaries”.

 EXEMPTIONS ... at a Glance
Income-Tax Act provides certain exemptions from the Gross  Income. Some of the popular exemptions provided under the act (subject to eligibility & fulfillment of conditions specified in the    relevant provisions of the act ) are :

SL.NO.

I.T.  Section

Exempted, Allowance, Perks

Amount of Exemption

Categories of Assesses Entitled

 

1

 

10(5)

 

Leave Travel

Actual Amount spent in respect of 2 journeys in a block of 4 calendar years (Current Block is 2006-2009)

 

All Employees

 

2

 

10(10)(i)

 

Retirement/ Death Gratuity

 
Actual Amount

 

Govt. employees

 

3

 

10(10)(ii)

Gratuity Received under Payment of Gratuity Act, 1972

Least of : 15 days salary or 3.5 lakh or Gratuity Received

 

Non-Govt. employees

 

4

 

10(10)(iii)

 

Any other Gratuity

Least of : 15 days average salary or 3.5 lakh or Gratuity Received

 

Non-Govt. employees

 

5

 

10(10A)(i)

 

Commuted Pension

    Full Amount

State/Central Govt. ,Defense & Civil Service Employees

 

6

 

10(10A)(ii)a

Commuted Pension   (where employee is eligible for Gratuity)

33.33% of the Commuted Value of Pension

Employees    excluding as  mentioned at SL.No.5

 

7

10(10A)(ii)b

Commuted Pension   (where employee is Not eligible for Gratuity)

50% of the Commuted Value of Pension

Other Employees not covered at SL.No-5

 

Exemptions mentioned at SL. No. 2 to 7 are allowed once in the life time service of an employee.

8

10(10B)

Any compensation received by a workman under the Industrial Disputes Atc, 1947 at the time of retrenchment.

Compensation as computed in accordance with Sec.25F(b) of Industrial Disputes Act or Rs. 5 Lakhs whichever  ls less.

Individual

9

10 (10C)

Voluntary Retirement Benefits [if Voluntary Retirement Scheme is approved by IT Dept.)

Max. limit Rs. 5 Lakhs.

All Employees

10

10 (13A)

House Rent      Allowance

Under Rule 2A (See HRA)

All Employees

 

11

 

10 (10D)

Maturity Value including Bonus received from Life Insurance Cos. expect **

 

Full Amount

 

Any Assessee

 

 12

 

10 (11)

Amount received from Provident Fund & Public Fund & Public Provident Fund

Full Amount

Individual / H.U.F.

**  Sum received under Key-man Insurance, Jeevan Aadhar, Jeevan Dhara, Jeevan Akshay, New Jeevan Dhara, New Jeevan Akshay Policies & Dhanraksha LIC Mutual Fund, From the F/Y 2003-2004, Premiums exceeding 20% of the S.A., in any year, will not enjoy tax free returns u/s 10(10D) (expect on death).

TOTALLY TAX-FREE

Apart from the exemptions mentioned earlier, the following income are also Tax FREE :


Section

Categories

10(1)
10(2)
10(2A)
10(10AA)
10(16)
10(18)
10(32)
10(34)
10(35)

Agricultural Income
Received from HUF
Partner’s share of profit from partnership firm
Leave Encashment on retirement subject to limits
Scholarship granted to meet the cost of education
Pension/family pension received by the Gratuity awardees
Income of Minor child up to Rs. 1,500 p.a.
Dividend income from a company
Dividend income from a Mutual Fund

 DEDUCTIONS    ... at a Glance

The following deductions are allowed from salary :

       (i)  Professional Tax - Actual paid by the employee.

However Standard Deduction has been abolished.

What are the permissible deductions an assessee can claim under I.T.Act ?


Important  Deductions that can be claimed under Chapter VI A of I.T. Act are :

SL.NO.

I.T. Section

Allowance, Perks, Allowed

Amount of Exemption

Categories of Assesses entitled

1.
a.

 

 

b.

 

c.

 

 

80C

 

 

80 CCC

 

80 CCD

 

Life Insurance Premia, Provident Fund**,NSC, ELSS, Tuition Fees (max. 2 Children) Repayment of principal of House Loan, Bank Deposit of 5 Yrs period etc.

Premium paid towards approved Pension Fund(like LIC’sJeevan Suraksha) max. 1 Lakh.

Contribution to Central Government pension Schemes. Upto 10% of Salary with matching contribution from Govt.

 

Maximum  
overall
Deductions
allowed
under
section
80C,
80CCC &
80CCD is
Rs. 1 lakh.

 

Individual / HUF

 

 

Individual / HUF

 

Central Govt. Employees / Non-Govt. Employees

 

2.

 

 

 

 

 

80D

 

 

 

 

 

(a) Medical Insurance Premium paid by cheque for policies taken from GIC/ other IRDA approved insurers.

(b) For Senior Citizen

 

 

1. Rs.15,000 for Self / Spouse / Children. Addl. 15000 for Parents. If Parents are Sr. Citizens Rs. 20000.

2. For Senior Citizen Rs.20,000

 

 

 

 

Individual / HUF

 

3.

 

80 DD

 

(A) Any expenditure for Medical, Nursing & Rehabilitation incurred on dependent relative suffering from permanent Physical Disability * AND

(B) Deposit under LIC, UTI’s Scheme & other IRDA approved Insurers for the benefit of Physically Handicapped dependent ( e.g. LIC’s Jeevan Aadhar)

 

Rs.50,000 with an additional Rs.25,000 if the disability is severe exceeding 80%

 

Individual / HUF

* Individuals suffering from permanent disability including blindness, mental retardation, autism, cerebral palsy or multiple disabilities.

 

4.

 

80 DDB

 

 

(A) Actual expenditure incurred on Medical treatment of Self or dependent relative or a member of HUF suffering from terminal disease like, Cancer, AIDS, Renal failure, etc.

(B)  For Senior Citizens

 

Upto   Rs. 40,000

 

 

Upto Rs. 60,000

 

 

Individual / HUF

 

5.

 

80 E

 

Interest on Loan taken from Financial/Charitable Institution for Self, for Higher Education (for a max. period of 8 years)

 

Any amount

 

Resident Individual

 

6a.

 

 

 

6b.

 

80 G

 

 

 

80 G

 

 

Donation made to National Defense Fund, P.M.’s Relief Fund, approved
Funds of Univ. or Educational institutions of National Fame, National Trust for welfare of persons with Autism, Cerebral Palsy etc.

 

Donation made to Jawaharlal Memorial Fund, PM’s Drought Relief Fund, Any Charitable Institutions, A corporation established by the Government for promoting interest of the members of a Minority Community.

 

 

100% Donation

 

50% of Donation. In some cases donation is restricted to 10% of gross total income. 100% in some cases like National Defense Bond

 

All Assessee

 

 

All Assesses

 

 

 

7.

 

 

 

80 GG

 

 

 

Deduction in respect of rents paid, provided no house is owned by self, spouse, minor child or HUF in the place of work and is residing in any of the specified cities and subject to filing of declaration in Form No. 10BA.

 

25 % of Income or
rent paid in excess of 10% of income or ceiling of Rs. 24,000 p.a. whichever is less.

 

Individuals

[no exemption is allowed to those who are in receipt of HRA & claiming deduction u/s 10(13A)]

 

8,

 

80 U

 

Person suffering from Permanent Physical Disability as specified in Rule 11D.

Rs. 50,000 (Rs. 75,000 in case of Severe Disability)

 

 

9.

 

 

 24

 

Int. on Housing Loan :
Taken upto 31-3-99 max. of
Taken after 01-04-99 max. of

 

Rs. 30,000
Rs. 1.5 lakh

 

Assesses having Self Occupied House Property.

No limit in respect of Let-out property.

Note : All the above deductions will be allowed only on satisfying the conditions specified in the relevant sections of the Income Tax Act.j Deduction u/s 80 C to 80 U cannot exceed Gross Total Income.

Deduction u/s 80C to 80U cannot exceed Gross Total Income.

MORE TOPICS ...
Allowances Under Section-10 & 17(3) under Head 'Salary' Income
Chart Showing Computation of 'Salary' Income
Computation of 'Gross Salary' Income
Computation of 'Net Salary' Income :
Deduction under Chapter VI-A

Retirement Benefits

1.       Major Retirement benefits gets by the Employee

2.       Tax Treatment of ‘Leave Encashment’

3.       Tax Treatment of ‘Gratuity’

4.       Tax Treatment of ‘Pension’
Other Benefits & Facilities gets by the Salaried Employees
Arrear of Salary and relief under section 89(1)
Deduction Under Section 80 C ( How to Find Out)
Exemption Specified in Income Tax Rules in 'Salary' Income
'Perquisies' and 'Income Tax - ( Taxable and Exempted) - Salary :
Computation of 'Profit in Lieu of Salary' (Sec-17(3)
Computation of Income Under Head 'Salaries' under Income Tax
 

 
Get Updated ....
Tax Tutorials
E-Payment Of Direct Taxes
Filing Of Return Of Income
Interest for Delay in Filing the Return of Income [Section 234 A]
Interest for default in Payment of Advance Tax [Section 234B]
Provisions Of 'Income-Tax Law' Useful For Non-Residents
MAT (Minimum Alternate Tax)
AMT ( Alternative Minimum Tax)
Tax On Long-Term Capital Gains (LTCG)
Tax On Short-Term Capital Gains (STCG)
Exemption[ Section-54] For Capital Gains Arising On Transfer Of Residential House Property
Tax Treatment Of Gifts Received By An Individual Or HUF
Set Off And Carry Forward Of Loss Under The Income-Tax Act
Interest For Delay In Payment of TDS/TCS And For Non-Payment Of Tax Demanded
Tax Deduction/Collection Account Number (TAN)
How to apply for PAN ?
Refund Of Excess Tax Paid By The Taxpayer (Sections - 237 to 245 )
Presumptive Taxation Scheme of Section 44AD
Presumptive Taxation Scheme of Section 44ADA
Presumptive Taxation Scheme of Section 44AE
Deduction in respect of Life Insurance Premium, PPF, NSC, etc. [Section 80C]
Deduction in respect of Medical Insurance Premium [Section 80D]
Tax Deducted at Source (TDS) from Interest, other than Interest on Securities (Section-194A)
Tax Deducted at Source (TDS) from Interest on Securities (Section 193)
Late Filing Fees And Penalty For Failure To Furnish/Delay In Furnishing The TDS/TCS Statements
 
GST (India)
F.A.Q. on GST
GST Forms Download
GST Compensation Law
GST Enrollment Process
GST Law & Act.
GST Rules
GST Schedule ( I to V )
IGST Law & Act.
GST A Practical Knowledgebase
Filing GST Return
Enroll & Registration with GST
GST Office Tool to File GST Return
 
LIBRARY @ Tax Management
TAX & INVESTMENT GUIDE FOR "NRI"- Non-Resident Indians !
GUIDE & FAQ @ TAX
GRAPHICAL PRESENTATION @ TAX
TIPS & TRICKS @ TAX
MANAGERIAL & FINANCIAL DECISIONS @ TAX
5 GOLDEN RULES OF TAX PLANNING
FAMILY TAX PLANNING
DEDUCTIONS FROM YOUR INCOME
EXEMPTED INCOMES
HUF - FORMATION, MANAGEMENT & TAX PLANNING
COMPUTATION OF GROSS TOAL INCOME
INCOME TAX @ GLANCE
MULTIPLE KNOWLEDGEBASE ON TAX
51 TIPS ON TAX PLANNING
APPEALS UNDER INCOME TAX
ASSESSMENTS
PENALTIES UNDER IT DEPATMENTS
TAX SAVING SCHEMES
TAX READY RECKONER
TAX RATES
PROSECUTIONS UNDER INCOME TAX DEPARTMENT
TAXATION SYSTEM IN INDIA
CHARITABLE & RELIGIOUS TRUST - TAXATION
PRESCRIBED FORMS WITH with Section / Rules
KNOWLEDGE BASE !
New Topics @ Tax KnowledgeBase...
 
 

Most Popular Topics :

Corporate Tax ( Taxation in Companies)
FAQ on TDS on Salaries
FAQ on Taxable Income
FAQ on Filing of Income Tax Return
Graphical Chat Presentation of Provision of Motor Car / Other Vehicles [Rule 3(2)(A)&(B)]
'Appeals' Under Income Tax Act. 1961.
'Assessments' Under Income Tax Act. 1961.
List of Exempted Incomes (Tax-Free) Under Section-10
Income Under the Head ' Business and Professions' [Section 28 to 44]
Income Under the Head ' Capital Gain'
Income Under the Head ' House Property '[Section- 22 - 25 ]
Income Under the Head "Salary"
[Section 15-17]
Income Tax on 'Partnership Firms'
PENALTIES Under Income Tax Act. 1961.
Tax Saving Schemes for Individual -Instant Guide
New Tax Rates For FY 2017-18 & AY 2018-19
"Exempted Incomes" under Income Tax Act.
Charitable & Religious Trust :Formation, Registration, & Taxation
Hindu Undivided Family [HUF] - Formation, Management and Taxation
 

Most Popular Links :

Clubing of Income Deduction U/s 80C
Allowances Us-17(3) Exemption-Salary
Tax Amendment-2015 Taxable Income
Clubing of Income Tax Deductions
HUF Deduction HUF Investment
Gift by HUF HUF Tax Planning Tips
Tax Saving Schemes Tax Planning Tips
Refund of Tax Fringe Benefit Tax-FBT
Return Filing Assessment / Scrutiny
Notice from I.T. Dept. Incomes Types @ TDS
Exemptions-Tax Returns “Summon” U/s 131
'Black Money' @ I.Tax Big Gifts To Be Taxed
'Appeals' under I.Tax Assessment @ I.Tax
Exempted Incomes Capital Gain
Business & Professions House Property
Salaries @ I.Tax Partnership Firm
'Penalty' under I.Tax Act. Tax Ready Reckoner
Charitable Trust Useful Links @ I.Tax
 
Guide & FAQ on Tax Knowledgebase @ Taxation Income Tax @ Glance HUF - Formation, Planning & Taxation
Charitable & Religious TRUST NRI (Tax Planning,Saving,Investemnt) Budget 2017-2018 GST (FAQ, Law, Act. Rules, Schedule, Enrollment)
FAQs - Income Tax India Tax Tutorials    

Disclaimer:
All efforts are made to keep the content of this site correct and up-to-date. But, this site does not make any claim regarding the information provided on its pages as correct and up-to-date. The contents of this site cannot be treated or interpreted as a statement of law. In case, any loss or damage is caused to any person due to his/her treating or interpreting the contents of this site or any part thereof as correct, complete and up-to-date statement of law out of ignorance or otherwise, this site will not be liable in any manner whatsoever for such loss or damage.

The visitors may click here to visit the web site of Income Tax Department for resolving their doubts or for clarifications