Central Government Employees News, 7th Pay Commission, MACP, LTC, CGHS, Railways, Bank News, CPSE, NPS, Pension, DOPT and More

Calculation of Income Tax to be Deducted from Salary

Calculation of Income Tax to be Deducted from Salary under Section 192 of Income Tax Act 1961 – Income Tax Circular No. 17/2014 dated 10.12.2014

Want to Calculate your Income Tax for the year 2014-15 (A.Year 2015-16) ? Click here to reach GConnect Income Tax Calculator 2014-15

Also click here to check the most visited Income Tax Article this month in GConnect – What are all the Income Tax exemptions available to Salaried Employees in the year 2014-15 ?

Salary income for the purpose of section 192 shall be computed as  follows

(a)   First compute the gross salary as mentioned in para 5.1 (Definition of Salary) of Circular 17/2014 dated 10.12.2014, including all the incomes mentioned in para 5.2 ( Perquisites covered under Income Tax) and excluding the income mentioned in para 5.3 (Income Not included under the head Salaries as per Income Tax Circular 17/2014 dated 10.12.2014

(b)    Allow deductions mentioned in para 5.4 of Income Tax Circular 17/2014 dated 10.12.2014 (Deductions from Salary under Section 16 of Income Tax Act 1961) from the figure arrived at (a) above and compute the amount to arrive at Net salary of the employee

(c)  Add income from all other heads- House property, Profits & gains of Business or Profession, Capital gains and Income from other Sources  to arrive at the Gross Total Income as shown in the form of simple statement mentioned para 3.5. However it may be remembered that no loss under any such head is allowable by DDO other than loss under the Head ―Income from House property

(d) Allow deductions mentioned in para 5.5 of Income Tax Circular 17/2014 dated 10.12.2014 (Deductions allowed under Chapter VI A of Income Tax Act 1961) from the figure   arrived at (c)   above ensuring that the relevant conditions are satisfied. The aggregate of the deductions subject to the threshold limits mentioned in para 5.5 shall not exceed the amount at (b) above and if it exceeds, it should be restricted to that amount.

This will be the amount of total income of the employee on which income tax would be required to be deducted.  This income should be rounded off to the nearest multiple of ten rupees.

Income-tax on such income shall be calculated at the rates given in para 2.1 of Income Tax Circular 17/2014 dated 10.12.2014 keeping in view the age of the employee and subject to the provisions of sec. 206AA, as discussed in para 4.8.

Rebate as per Section 87A upto Rs 2000/- to eligible persons (see para 6 Income Tax Circular 17/2014 dated 10.12.2014) may be given.  Surcharge shall be calculated in cases where applicable (see para 2.2 Income Tax Circular 17/2014 dated 10.12.2014).

The amount of tax  payable  so arrived at shall be increased by education cess as applicable (2% for primary and 1% for secondary education) to arrive at the total tax payable.

SOME ILLUSTRATIONS

Example  1

For Assessment Year 2015-16

(A) Calculation of Income tax in the case of an employee (Male or Female) below the age of sixty years and having gross salary income of:

i)         Rs.2,50,000/- , ii)        Rs.5,00,000/- , iii)       Rs.10,00,000/-

iv)       Rs.20,00,000/-. and v)        Rs. 1,10,00,000/-

(B) What will be the amount of TDS in case of above employees, if PAN is not submitted by them to their DDOs/Offices:

Particulars

Rupees

(i)

Rupees

(ii)

Rupees

(iii)

Rupees

(iv)

Rupees

(v)

Gross Salary Income(including allowances) 2,50,000 5,00,000 10,00,000 20,00,000 1,10,00,000
Contribution of G.P.F. 45,000 50,000 1,00,000 1,00,000 1,00,000

 

Computation of Total Income and tax payable thereon

Particulars

Rupees

(i)

Rupees

(ii)

Rupees

(iii)

Rupees

(iv)

Rupees

(v)

Gross Salary 2,50,000 5,00,000 10,00,000 20,00,000 1,10,00,000
Less: Deduction U/s 80C 45,000 50,000 1,00,000 1,00,000 1,00,000
Taxable Income 2,05,000 4,50,000 9,00,000 19,00,000 1,09,00,000
(A)            Tax thereon Nil 18,000* 1,05,000 3,95,000 3095000

Surcharge

309500
Add:(i) Education Cess @ 2%. (ii) Secondary and Higher Education Cess  @1% Nil

Nil

360

180

2100

1050

7,900

3950

68090

34045

Total tax payable Nil 18,540 1,08,150 406850 3506635
(B) TDS  under  sec.  206AA  incase    where    PAN    is    not furnished by the employee Nil 90,000 1,30,000 406850 3506635

* includes Rebate of Rs 2000 u/s 87A

Example – 2

For Assessment Year 2015-16

Calculation of Income Tax in the case of an employee below the age of sixty years having a handicapped dependent (With valid PAN furnished to employer).

S.No.

Particulars

Rupees

1

Gross Salary 4,00,000

2

Amount spent on treatment of a dependant, being person withdisability (but not severe disability)

7000

3

Amount paid to LIC with regard to annuity for the maintenance ofa  dependant,   being   person  with   disability(  but  not   severe disability) 60,000

4

GPF Contribution 25,000

5

LIP Paid 10,000

6

Interest Income on Savings Account 12,000

Computation of Tax

S.No.

Particulars

Rupees

1

Gross Salary 4,00,000

2

Add: Income from Other SourcesInterest Income on Savings Account Rs 12,000

3

Gross Total Income

4,12,000

4

Less: Deduction U/s 80DD (Restricted to Rs.50,000/- only) 50,000

5

Less:  Deduction U/s 80C (i) GPF  Rs.25,000/-(ii) LIP  Rs.10,000/-     = Rs.35,000/- 35,000

6

Less: Deduction u/s 80TTA on Interest Income on savings account(restricted to Rs 10000/-) 10000

7

Total Income

3,17,000

8

Income Tax thereon/payable(includes Rebate of Rs 2000 as per Section 87A) 4,700

9

Add:(i).  Education Cess @2%

(ii).  Secondary and Higher Education Cess @1%

94

47

10

Total Income Tax payable 4,841

11

Rounded off to

4,840

 

Example -3

Calculation of Income Tax in the case of an employee below age of sixty years where medical treatment expenditure was borne by the employer (With valid PAN furnished to employer).

S.No. Particulars Rupees
1 Gross Salary 5,20,000
2 Medical Reimbursement by employer on the treatment of self anddependent family member 35,000
3 Contribution of GPF 20,000
4 LIC Premium 20,000
5 Repayment of House Building Advance 25,000
6 Tuition fees for two children 60,000
7 Investment in Unit-Linked Insurance Plan 30,000
8 Interest Income on Savings Account

8,000

9 Interest Income on Time Deposit 15,000

 

S.No.

Particulars

Rupees

1

Gross Salary 5,20,000

2

Add: Perquisite in respect of reimbursement of Medical ExpensesIn excess of Rs.15,000/- in view of Section 17(2)(v) 20,000

3

Income from Other Sourcesi)          Interest Income on Savings Account        Rs   8,000

ii)         Interest Income on Savings Account        Rs 15,000

23,000

4

Gross Total Income

5,63,000

5

a.Less:  Deduction U/s 80C(i) GPF                                                                  Rs.20,000/- (ii) LIC                                                                  Rs.20,000/- (iii) Repayment of House Building Advance      Rs.25,000/- (iv) Tuition fees for two children                        Rs.60,000/- (v) Investment in Unit-Linked Insurance Plan     Rs.30,000/- Total           =Rs.1,55,000/-

Restricted to Rs. 1,50,000/-

b. Less: Deduction u/s 80TTA on  Interest Income on savings account (restricted to Rs 8000/- available only on Savings account interest)                                                                    Rs     8,000/-

Total deduction available Rs 1,58,000/-

 

 

 

 

 

 

 

 

1,58,000

6

Total Income

4,05,000

7

Income Tax thereon/payable(includes Rebate of Rs 2000 as per Section 87A) 13,500

8

Add:(i).  Education Cess @2%

(ii).  Secondary and Higher Education Cess @1%

270

135

9

Total Income Tax payable 13,905

10

Rounded off to

13,910

 

Computation of Tax

S.No.

Particulars

Rupees

1

Gross Salary 5,20,000

2

Add: Perquisite in respect of reimbursement of Medical ExpensesIn excess of Rs.15,000/- in view of Section 17(2)(v) 20,000

3

Income from Other Sourcesi)          Interest Income on Savings Account        Rs   8,000

ii)         Interest Income on Savings Account        Rs 15,000

23,000

4

Gross Total Income

5,63,000

5

a.Less:  Deduction U/s 80C(i) GPF                                                                  Rs.20,000/- (ii) LIC                                                                  Rs.20,000/- (iii) Repayment of House Building Advance      Rs.25,000/- (iv) Tuition fees for two children                        Rs.60,000/- (v) Investment in Unit-Linked Insurance Plan     Rs.30,000/- Total           =Rs.1,55,000/-

Restricted to Rs. 1,50,000/-

b. Less: Deduction u/s 80TTA on  Interest Income on savings account (restricted to Rs 8000/- available only on Savings account interest)                                                                    Rs     8,000/-

Total deduction available Rs 1,58,000/-

 

 

 

 

 

 

 

 

1,58,000

6

Total Income

4,05,000

7

Income Tax thereon/payable(includes Rebate of Rs 2000 as per Section 87A) 13,500

8

Add:(i).  Education Cess @2%

(ii).  Secondary and Higher Education Cess @1%

270

135

9

Total Income Tax payable 13,905

10

Rounded off to

13,910

 

Example – 4

Illustrative calculation of House Rent Allowance U/s 10 (13A) in respect of residential accommodation situated in Delhi in case of an   employee below the age of sixty years (With valid PAN furnished to employer).

S.No. Particulars Rupees
1 Salary 3,50,000
2 Dearness Allowance 2,00,000
3 House Rent Allowance 1,40,000
4 House rent paid 1,44,000
5 General Provident Fund 60,000
6 Life Insurance Premium

4,000

7 Subscription to Unit-Linked Insurance Plan 50,000

Computation of total income and tax payable thereon

S.No.

Particulars

Rupees

1

Salary + Dearness Allowance + House Rent Allowance3,50,000+2,00,000+1,40,000 = 6,90,000 6,90,000

2

Total Salary Income

6,90,000

3

Less: House Rent allowance exempt U/s 10(13A):Least of:

(a). Actual amount of HRA received=                            1,40,000

(b). Expenditure of rent in excess of 10% of salary

(including D.A. presuming that D.A. is taken

for retirement benefit) (1,44,000-55,000)  =              89,000

(c). 50% of Salary(Basic+ DA)                           =          2,75,000

 

 

 

89,000

4

Gross Total Income

6,01,000

5

Less:  Deduction U/s 80C(i). GPF                                                                  Rs.60,000/- (ii). LIC                                                                  Rs.  4,000/- (iii). Investment in Unit-Linked Insurance Plan    Rs.50,000/-

Total           =Rs.1,14,000/-

 

 

1,14,000

6

Total Income

4,87,000

7

Tax payable on total income(includes Rebate of Rs 2000 as per Section 87A) 21700

8

Add:(i).  Education Cess @2%

(ii).  Secondary and Higher Education Cess @1%

434

217

9

Total Income Tax payable 22351

10

Rounded off to

22350



Example – 5

Illustrating valuation of perquisite and calculation of tax in the case of an employee below age of sixty years of a private company in Mumbai who was provided accommodation in a flat at concessional rate for ten months and in a hotel for two months ( With valid PAN furnished to employer).

S.No. Particulars Rupees

1

Salary 7,00,000

2

Bonus 1,40,000

3

Flat at concessional rate (for ten month).       = Rs.3,60,00 3,60, 000

4

Hotel rent paid by employer (for two month) 1,00,000

5

Cost of furniture 2,00,000

6

Free gas, electricity, water etc. (Actual bills paid by company) 40,000

7

Rent recovered from employee 60,000

8

Subscription to Unit Linked Insurance Plan 50,000

9

Life Insurance Premium 10,000

10

Contribution to recognized P.F. 42,000

 COMPUTATION OF TOTAL INCOME AND TAX PAID THEREON:

S.No.

Particulars

Rupees

1

Salary 7,00,000

2

Bonus 1,40,000

3

Total Salary(1+2) for the purpose of valuation of perquisites (12 months) 8,40,000
Valuation of perquisites
4(a) Perquisite for flat:Lower of (15% of salary for 10 months = Rs.1,05,000/-) and

(actual rent paid= Rs 3,60,000)               i.e. Rs. 1,05,000/-

Less : Rent recovered   Rs.   60000/-

 

Rs 45,000

 

 

 

 

 

 

1,38,600

4(b) Perquisite for hotel :Lower of (24% of salary of 2 months=Rs 33,600)

and (actual payment= Rs 1,00,000)

Rs 33,600
4(c) Perquisites for furniture@ 10% of cost  of Rs.2,00,000 Rs 20,000
4(d) Perquisite for free gas, electricity, water etc. Rs 40,000

4

Total

1,38,600

5

Gross Total Income (Rs.8,40,000+ 1,38,600) 9,78,600

6

Gross Total Income 9,78,600

7

Less: Deduction U/s 80C:(i). Provident Fund (80C)                                           : Rs.42,000/-

(ii). LIC   (80C)                                                          : Rs.10,000/- (iii). Subscription to Unit Linked Insurance Plan(80C)    : Rs.50,000/- Total                                       = Rs.1,02,000/-

 

 

1,02,000

8

Total Income 8,76,600

9

Tax Payable 1,00,320

10

Add:(i).   Education Cess @2%

(ii).  Secondary and Higher Education Cess @1%

2,006

1,003

11

Total Income Tax payable 1,03,329

12

Rounded off to 1,03,330

Example – 6

Illustrating Valuation of perquisite and calculation of tax in the case of an employee below the age of 60 years of a Private Company posted at Delhi and repaying House Building Loan ( With valid PAN furnished to employer).

S.No. Particulars Rupees
1 Salary 4,00,000
2 Dearness Allowance 1,00,000
3 House Rent Allowance 1,80,000
4 Special Duties Allowance 12,000
5 Provident Fund 60,000
6 LIP 10,000
7 Deposit in NSC VIII issue 30,000
8 Rent Paid by the employee for house hired by her 1,20,000
9 Repayment of House Building Loan (Principal) 60,000
10 Tuition Fees for three children (Rs.10,000 per child) 30,000

Computation of total income and tax payable thereon

S.No.

Particulars

Rupees
1 Gross Salary (Basic+DA+HRA+SDA) 6,92,000
Less: House rent allowance exempt U/s 10 (13A)Least of:

(a). Actual amount of HRA received.                        :Rs.  1,80,000 (b). Expenditure on rent in excess of 10% of salary

(Including D.A.)assuming D.A. is included for

retirement benefits (1,20,000- 50,000)                 :Rs.    70,000

(c). 50% of salary (including D.A)                            :Rs. 2,00,000

 

 

 

70,000

2 Gross Total Taxable Income 6,22,000
Less:  Deduction U/s 80C(i).    Provident Fund                                            : Rs.     60,000 (ii).   LIP                                                               : Rs.     10,000 (iii).  NSC VIII Issue                                            : Rs.     30,000 (iv).  Repayment of HBA                                     : Rs.     60,000 (v).   Tuition Fees (Restricted to two children)    : Rs.     20,000

Total        : Rs.   1,80,000

Restricted to Rs.  1,50,000

 

 

 

 

1,50,000

Total Income

4,72,000
Income Tax thereon/payable(includes Rebate of Rs 2000 as per Section 87A) 20,200
Add:(i).  Education Cess @2%

(ii).  Secondary and Higher Education Cess @1%

404

202

Total Income Tax payable 20,806

Rounded off to

20,810



Example – 7

A.        Calculation of Income tax in the case of a retired employee above the age of sixty years but below the age of 80 years and having gross pension of:

Particulars

Rupees

(i)

Rupees

(ii)

Rupees

(iii)

Gross Pension 4,50,000 8,00,000 12,50,000
Contribution of P.P.F. 70,000 1,00,000 1,50,000

B         What will be the amount of TDS in case of above employees, if PAN is not submitted by them to their DDOs/Offices:

Computation of Total Income and tax payable thereon

Particulars

Rupees

(i)

Rupees

(ii)

Rupees

(iii)

Gross Pension 4,50,000 8,00,000 12,50,000
Less: Deduction U/s 80C 70,000 1,00,000 1,50,000
Taxable Income 3,80,000 7,00,000 11,00,000

Tax thereon (A)

6,000 60,000 1,50,000
Add:(i) Education Cess @ 2%.

(ii) Secondary and Higher Education Cess  @1%

120

60

1200

600

3000

1500

Total tax payable 6,180* 61,800 1,54,500
B. TDS under sec. 206AA in case where PAN is not furnished by the employee 16,000 80,000 1,60,000

*includes Rebate of Rs 2000 as per Section 87A

Example  8

For Assessment Year 2015-16

A.        Calculation of Income tax in the case of a retired employee above the age of 80 years and having gross pension of:

Particulars

Rupees

(i)

Rupees

(ii)

Rupees

(iii)

Gross Pension 5,00,000 8,00,000 12,50,000
Contribution of P.P.F. 80,000 1,20,000 1,50,000

B         What will be the amount of TDS in case of above employees, if PAN is not submitted by them to their DDOs/Offices:

Computation of Total Income and tax payable thereon

Particulars

Rupees

(i)

Rupees

(ii)

Rupees

(iii)

Gross Pension 5,00,000 8,00,000 12,50,000
Less: Deduction u/s 80C 80,000 1,20,000 1,50,000
Taxable Income 4,20,000 6,80,000 11,00,000

Tax thereon (A)

Nil

36,000 1,30,000
Add:(i) Education Cess @ 2%.

(ii) Secondary and Higher Education Cess  @1%

720

360

2600

1300

Total tax payable

Nil

37,080 1,33,900
B. TDS under sec. 206AA in case where PAN isnot furnished by the employee

Nil

37,080 1,33,900

Click here to download Circular No: 17 / 2014 dated 10.12.2014 issued by Income Tax Department

Check the links below for more Details on Income Tax Circular No. 17/2014 dated 10.12.2014

Comments
Loading...
;

Add A Knowledge Base Question !

You will get a notification email when Knowledgebase answerd/updated!

+ = Verify Human or Spambot ?

close

Got a question?

Just post it on GC Assist and let the members of GConnect Community help you find the answer.