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Fully Taxable Allowance fro Computing Salary Income

 

1. Dearness Allowance/Additional Dearness Allowance/High cost of living allowance/Interim Relief.

Employees having fixed income suffer the most due to rise in prices and to compensate their loss, they are paid such allowances. So D.A. is nothing but an additional salary and it is fully taxable.

Some times it is mentioned that

  1. D.A. enters into pay for service benefits; or

  2. D.A. enters into pay for retirement benefits; or

  3. D.A. is given under the terms of employment; or

  4. Dearness pay,

It is treated as part of salary for calculation of all benefits such as provident fund, value of rent free house, house rent allowance, bonus, gratuity, leave encashment and all other retirement benefits.

In case any part of D.A. enters salary for calculation of only some of the retirement benefits (not all) then that part of D.A. will not form part of salary for the calculation of any retirement benefit.

2.         City/Capital compensatory Allowance.

These are given to compensate for the high cost of living in a particular big city of India or any other capital city. These are also fully taxable.

3.         Lunch / Tiffin / Marriage / FamiLy / Deputation / Wardenship / Non-practising / Project / Overtime / Fixed Medical Allowance.

These allowances are fully taxable.

4. Entertainment Allowance :.

This allowance is fully taxable irrespective of any expenditure incurred on entertainment of guests or customers. But in case any amount is reimbursed against any expenditure incurred by employee on entertainment of guests or customers it shall be fully exempted.

U/s 16(u) a deduction is allowed to those persons who receive this allowance. Till assessment year 2001-02 this deduction was admissible both to Government as well as private sector emplo’ees. But with effect from assessment year 2003-04 this deduction is admissible only to Government employees for an amount equal to least of following :

  1. Statutory Limit 5,000 ;

  2. 1/5 th of basic salary only ; or

  3. Actual entertainment allowance received during the previous year.

Important Note: The actual expenditure incurred by a government employee on entertainment of customers is not relevant for claiming deduction u/s 16(u).

 
More.. Topics ... @ ' SALARY'
Salary-Definition & Meaning

Computation of Salary Income

Definition of Word ‘Salary’ [ Section 17(1)]

Section-15 : List of Incomes Chargeable to Income Tax under the head ‘ SALARIES’

Important Points / Characteristics for Computing Salary Income

Provident Fund

Treatment of Provident Funds (PF) for Computing Salary Income

Taxable Portion of annual accretion to RPF [Section 17(1)(vii)]. for Computing Salary Income

Transferred Balance from URPF to RPF [Section 17(1)(vii] for Computing Salary Income

Refund from Provident Fund [Section 17(3)(ii)] for Computing Salary Income

New Pension Scheme [ NPS] for Central Government and other Employees joining new jobs on or after 1-1-2004 for Computing Salary Income

 
Allowance [ Section 17(3)]

Allowance [ Section 17(3)] – for Computing ‘Salary’ Income

Fully Exempted Allowances for Computing ‘Salary’ Income

Fully Taxable Allowances for Computing ‘Salary’ Income

House Rent Allowance (HRA) for Computing ‘Salary’ Income

Allowances covered u/s 10 (14) for Computing ‘Salary’ Income

Meaning Of Salary For Different Purposes
PERQUISITES [Section 17(2)]

Meaning and Types of Perquisites [ Section 17(2)]

Taxability of Perquisites for Computing Salary Income

Perks Exempted From Tax for all Employees and not added in Salary Income

Rent Free House [Section 17(2)(i) Rule 3(1)]

Rules Regarding Calculation Of Value Of Rent Free House

Valuation Of Rent Free Accomodation (Unfurnished & Furnished)

Valuation of Rent Free Accommodation Provided as Concessional Rent [Sec. 17(2)ii)]

Obligation of Employee of Rent Free House met by Employer [Section 17(2)(iv)]

Sum payable by the Employer directly or through a fund to effect an assurance / an annuity [Section 17(2)(v)]

Any specified security or sweat equity shares allotted or transferred to employee [Section 17(2)(vi)] [ w.e.f. 1-4-2009]

Contribution to an Approved Superannuation Fund by the Employer [Sec. 17(2)(vii)]

Interest free or Concessional loan from employer [Rule 3(7)(i)]

Valuation of Perk in respect of Travelling, Touring, Accommodation

Food or Beverages Facility by Employer to Employee

Valuation of Perquisite in respect of Gift Voucher or Token

Valuation of Perquisite in respect of Credit Card

Valuation of Perquisite in respect of Club Facility

Use of Moveable Assets by Employer to Employee

Transfer Of Moveable Assets to the employee

Meaning of Specified Employee for Taxable Perquisites [Section 17(2)(iii) Rule 3]

Valuation of Perquisite of Motor Car or any Other Automotive Conveyance [Rule 3(2)]

Perquisite of Free domestic servants [Rule 3(3)]

Perquisite in respect of free supply of gas, electric energy, water supply [Rule 3(4)]

Free Educational Facilities to Children of Employee’s Household [Rule 3(5)]

Facility of Free or Concessional Private Journey to an employee by the employer engaged in the carriage of passengers or goods [Rule 3(6)]
PROFITS IN LIEU OF SALARY [17(3)]

Receipts treated as Profit in Lieu of Salary [ Section 17(3)]

Leave Travel Concessional (LTC) Assistance [Section 10(5)]

Death-Cum-Retirement Gratuity [Section 10(10)]

Non-Government employees receiving gratuity under payment of Gratuity Act, 1972 [POGA]

Non-Government Employees receiving gratuity (Not covered under payment of Gratuity Act)

PENSION [Monthly and Commuted] for Computing Salary Income

Leave Encashment [Section 10(10AA)] for Computing Salary Income

Any amount received as compensation on termination of employment [Section-10B]

Any amount received on voluntary retirement [Section 10(10C)]

Payment received from Recognised Provident Fund [Section 10(12)]

Any payment from Superannuation Fund [Section 10(13)]

 
DEDUCTIONS OUT OF GROSS SALARY [ Section-16]

Entertainment Allowance to Government Employees [Section-16(ii)]

Tax on Employment Under Section - 16(iii)

 
DEDUCTIONS U/S 80C OUT OF GROSS TOTAL INCOME

Section - 80C : Deductions from Gross Total Income (GTI) in case of Individual and HUF

Qualifying Amount ( Q.A.) for Deduction U/s 80C

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