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Salary Components and E-filing of Returns

The document outlines the salary structure, including components such as basic salary, allowances, deductions, gross salary, and net salary. It also discusses income tax provisions related to salaries, exemptions for certain allowances, allowable deductions, and the filing of income tax returns. Key sections of the Income Tax Act are referenced to explain tax-saving options and requirements for filing returns.

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Anupam Srivastava
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2 views22 pages

Salary Components and E-filing of Returns

The document outlines the salary structure, including components such as basic salary, allowances, deductions, gross salary, and net salary. It also discusses income tax provisions related to salaries, exemptions for certain allowances, allowable deductions, and the filing of income tax returns. Key sections of the Income Tax Act are referenced to explain tax-saving options and requirements for filing returns.

Uploaded by

Anupam Srivastava
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Salary structure and Various

Components

1. Basic salary
2. Allowances
3. Deductions
4. Gross salary
5. Net salary
1. Basic Salary: This is the foundation of
the salary structure, representing the
base amount paid for the employee's
work. It's a fixed amount, and the
percentage of basic salary to total salary
can vary.
2. Allowances: These are additional
payments given to employees to cover
specific expenses or to enhance their
living standards. Examples include:
House Rent Allowance (HRA): Helps
employees with their housing expenses.
Dearness Allowance (DA): Provides
compensation for the rising cost of living.
Conveyance Allowance: Helps cover
transportation expenses.
Medical Allowance: Supports medical
expenses.
3. Deductions: These are amounts
withheld from the employee's gross
salary. Common deductions include:
Provident Fund (PF): A retirement savings
fund.
Income Tax (TDS): Tax deducted at
source.
Professional Tax: A tax levied by state
governments.
Other Deductions: May include insurance
premiums or loan repayments.
5. Gross Salary: The sum of all earnings
(basic salary, allowances, perquisites, etc.)
before any deductions.
6. Net Salary: The amount an employee
actually receives after all deductions have
been made from their gross salary.
Section 14 of the Incometax Act provides that for the
purpose shall be classified of charge of income tax and
computation of total income all income under the
following heads of income:
A. Salaries
B. Income from house property
C. Profits and gains of business or profession.
D. Capital gains
E. Income from other sources.
The total income from all the above heads of income is
calculated in accordance with the provisions of the Act as
they stand on the first day of April of any assessment
year.
Section 17(1) of the Income tax Act gives an
inclusive and not exhaustive definition of “Salaries”
including therein -
(i) Wages (ii) Annuity or pension (iii) Gratuity (iv)
Fees, Commission, perquisites or profits in lieu of
salary (v) Advance of Salary (vi) Amount transferred
from unrecognized provident fund to recognized
provident fund (vii) Contribution of employer to a
Recognised Provident Fund in excess of the
prescribed limit (viii) Leave Encashment (ix)
Compensation as a result of variation in Service
contract etc. (x) Contribution made by the Central
Government to the account of an employee under a
notified pension scheme
Exemption of Allowances
House Rent Allowance
A salaried individual having a rented accommodation
can get the benefit of HRA (House Rent Allowance).
This could be totally or partially exempted from
income tax.
Children Education Allowances
The employer may provide you education allowance
for your children as part of your salary. Such allowance
received by the employee towards children's education
is exempt from tax.
Leave Travel Allowance (LTA) or Leave Travel
Concession (LTC)
The income tax law also provides for an LTA/LTC
exemption to salaried employees, restricted to travel
expenses incurred during leaves by them and in
following condition

1. LTA/LTC only covers domestic travel and not the cost


of international travel
2.The mode of such travel must be either railway, air
travel, or public transport through the shortest route to
the destination.
Leave encashment received during the
time of retirement :
•If leave encashment is received at the time of
retirement by a government employee, it will be
fully exempted.
•If leave encashment is received at the time of
retirement by non-government employees, the
least of the following will be exempted:
•Rs. 25 lakhs
•Actual leave encashment received
•10 months salary (on the basis of average
salary of last 10 months preceding retirement)
•Cash equivalent of unavailed leave (Based on
last 10 months average salary) to his credit at
the time of retirement.
Gratuity received during the time of retirement or
death :
•If gratuity is received at the time of retirement or death by
an employee of the government, defence services, local
authority, members of civil services, etc., will be fully
exempted.
•If gratuity received at the time of retirement or death by
other employees :
1.If covered under the Payment of Gratuity Act 1972, the
least of the following will be exempted:
•Rs. 20 lakhs
•Actual gratuity received
•15 days salary (based on last drawn salary) for every
completed year of service. (No. of days in a month to be
taken as 26)
2.If not covered under the Payment of Gratuity Act 1972,
the least of the following will be exempted:
•Rs. 20 lakhs
•Actual gratuity received
•Half-month salary (based on last drawn salary) for every
completed year of service. (No. of days in a month to be
Allowable Deductions
Section 80C, 80CCC and 80CCD(1)
Section 80C is the most extensively used
option for saving income tax. Here, an
individual or a HUF (Hindu Undivided
Families) who invests or spends on
stipulated tax-saving avenues can claim a
deduction of up to Rs 1.5 lakh.

Some of such investments are given below and are


eligible for an exemption under Section 80C, 80CCC,
and 80CCD(1) up to a maximum of Rs 1.5 lakh.
Life insurance premium
Equity Linked Savings Scheme (ELSS)
Employee Provident Fund (EPF)
Annuity/ Pension Schemes
Principal payment on home loans
Tuition fees for children
Contribution to PPF Account
Sukanya Samriddhi Account
NSC (National Saving Certificate)
Fixed Deposit (Tax Savings)
Post office time deposits
National Pension Scheme
.
Employer's Contribution towards NPS under
Section 80CCD(2)
Employees having NPS contribution from their
Employers can claim the same as a deduction
under this section. This is only available to
salaried individuals and can be claimed over and
above those of 80CCD(1).
Medical Expenditure and Insurance Premium
(Section 80D)
Section 80D is a deduction you can claim on
medical expenses. One could save tax on medical
insurance premiums paid for the health of self,
family and dependent parents.
The limit for Section 80D deduction is:
•Rs 25,000 for premiums paid for self/family
•Rs. 50,000 for premiums paid for senior citizen
parents.
Interest on Home Loan (Section 80C and Section
24)
Another key tax-saving tool is the interest paid on
home loans. Homeowners have the option to
claim up to Rs.2 lakh as a deduction for interest on
home loans for self-occupied property.
Deduction for Loan for Higher Studies (Section
80E)
The Income Tax Act provides a deduction for
interest on education loans.
Donations (Section 80G)
Section 80G of the Income Tax Act, 1961 offers income
tax deduction to an assessee, who makes donations to
charitable organisations.
Deduction on Savings Account Interest (Section
80TTA)
Section 80TTA of the Income Tax Act, 1961 offers a
deduction of up to Rs 10,000 on income earned from
savings account interest. This exemption is available for
Individuals and HUFs.
Interest on Home Loan (Section 80EE)
Section 80EE allows homeowners to claim an
additional deduction of Rs.50,000 (Section 24)
for the interest component of the home loan EMI.
Subject to the following:
•The loan must not be for more than Rs 35,00,000

•The value of the property must not be more than


Rs 50,00,000.
FILING OF INCOME TAX RETURN

Section 139(1) of the Income-tax Act, 1961 provides


that every person whose total income during the
previous year exceeded the maximum amount not
chargeable to tax shall furnish a return of income.

Where the return is furnished in paper format,


acknowledgement slip attached with the return should
be duly filled in. Returns in new forms are not required
to be filed in duplicate.
Returns can be e-filed through the internet. E-filing
of return is mandatory for companies and firms
requiring statutory audit u/s 44AB. From A.Y. 2011-
12, it is now also mandatory for all business
entities (including individuals/HUF) liable to tax
audit to e-file their return of income. E-filing can
be done with or without digital signature
1. ITR 1 (SAHAJ) : For individuals whose total
income includes -a) income from salary/pension or
b) income from house property (excluding cases
whose loss is brought forward from previous years)
or c) income from other sources (excluding winning
from lottery or income from race horses).
2. ITR 2 :ITR 2 For individuals and HUFs not having
income from Business or Profession.
3. ITR 3: ITR 3 For Individuals and HUFs being
partners in firms and not carrying out business or
profession under any proprietorship.
4. ITR 4:ITR 4 For individuals & HUFs having income
from a proprietary business or profession.
THANK YOU

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