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
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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
[catlist tags=”section-192-of-income-tax-act” sortby=”date” sort=”desc” numberposts=5]
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