Whichever Is Lower Is Exempt From Tax. For Example

COMPENSATION RULES AND DESIGN GUIDELINES Guidelines Monthly Components Basic keep >50% of Total Fixed Salary As per
labour Department Minimum Basic Rs.3,934/- (minimum) maximum no limit.. figure for skilled, semi skilled and un skilled employees should be minimum of Rs.3934 (Unskilled), 4100 (SemiSkilled) and 4358/-(Skilled). However to be on safer side, do not keep Basic figure less than Rs.4000/- p.m. Income Tax Benefit: NIL Amounts (per month)
House Rent Allowance (HRA)
Maximum 50% basic (Metro cities) 40% basic Maximum allowed 50% Basic (Metro Cities) OR (non metro cities). 40% Basic (Non Metro Cities) Income Tax Benefit: Excess of Actual rent paid over 10% of Basic salary OR Maximum HRA allowed (50% or 60% of basic) OR Actual Rent Paid whichever is lower is Exempt from Tax. For example. Basic Rs.20000/HRA Rs.10000/Actual Rent Rs.8000/Excess of actual rent paid over 10% of Basic (10%x20000 8000) Rs.6000 Hence max exemption allowed is lowest i.e. Rs.6000/- subject to Rent Receipts of Rs.6000/- only
Conveyance Allowance
Supposed to be conveyance allowance meant Rs.800/- (max) for transportation between office and residence only. Income Tax Benefit: Exempt maximum up to Rs.800/- per month. No proof required. Income Tax Benefit: Rs.100 per child subject to max 2 children. Hence maximum Rs.200/- is exempt Rs.200/- (max)
Childrens education allowance
Special Allowance
Balancing figure after choosing all the above Balancing Figure components with respect to their maximum limits absorbed, remaining amount can be named as Special Allowance. It is fully taxable.
Medical Reimbursements
Can be given against bills or without bills does Rs.1250/- (max) not matter. Some companies give it monthly, some quarterly, half yearly or yearly also. Some companies give it only against medical bills, some do not ask for bills, rather bills are only demanded for Final Tax Computation at the end of the year. No thumb rule about it. Preferred to pay monthly, without bills and ask bills as per your wish, quarterly, half yearly or at the end of the year. Do not choose to give it against bills only, there is no rule for the sameIt only makes salary processing a cumbersome process. Income Tax Benefit: Maximum Rs.1250/- p.m. (Rs.15000 p.a.) is exempt only if Original Bills are provided.
Food Coupons
Non cash component, exempt up to Rs.3000/- Rs.3000/- (max) p.m.
Income Tax Rules - Salary

What is Salary? Chargeability of Salary?
Wherever there is Employer Employee relationship
Chargeable on due or receipt basis which ever is earlier;
Denave India Private Ltd Date of Joining - 2nd February, 2009 Name Designation Location XYZ Executive - Accounts & Finance New Delhi Details of Emoluments Per Month Earnings Break Up: Basic HRA Conveyance CCA Medical Reimbursement Special Allowance A. Gross Salary Performance Incentive B. Variable Salary 14000 7000 1200 2500 1500 1,800 28,000 0 0 Company Contribution: PF Comp. Contri.@12% ESI Comp. Contri. @ 4.75% Gratuity @ 4.81% Statutory Bonus @ 20% C. Company Contribution Total ( A+B+C ) 1,680 0 673 0 2,353 30,353 Employee Deduction: PF Emp Contri.@12% ESI Emp Contri. @ 1.75% Professional Tax D. Employee Deduction In Hand Pre Tax 1,680 0 As Per Govt. Rules 1,680 26,320 20,160 0 As Per Govt. Rules 20,160 315,840 20,160 0 8,076 0 28,236 364,236 168,000 84,000 14,400 30,000 18,000 21,600 336,000 0 0 Per Annum
Salary Components
-
Basic Salary / Wages Dearness Allowance Special Allowance Fee / Commission/Incentive Profit in lieu of salary Advance Salary Leave Encashment Exempted up to 3 lac on retirement Pension Gratuity Exempted up to 3.5 lac Bonus - taxable on receipt basis.
Allowances / Reimbursements

Conveyance / Transport Allowance Ex. Rs. 800/- pm House rent Allowance Exemption u/s 10 (13) Medical Allowance Fully Taxable Medical Reimbursement Non Taxable up to Rs. 15,000/- pa Education allowance Ex. Up to 1200/- per annum per child up to two child Hostel Allowance Rs. 300/- pm up to two child Leave Travel Allowance Non Taxable twice / two journeys in block of four years Food Allowance / Vouchers Ex. Up to Rs. 100/- per day Any other Allowance Fully taxable
Compensation
Retrenchment : Amount fully exempted where scheme is approved by central govt. or in other cases, amount calculated u/s 25 (b) of Industrial Dispute Act, 1947 Voluntary : Exempted up to Rs. 5 lac / In case of installment receipt up to overall Rs. 5 lac
Fringe Benefit Tax No Tax from Employee
Clause 115 WB (2) 20% of Value

Clause 115 WB (2) 50 % of Value

Entertainment Hospitality (5% of value in case of Hotel ) Conference / sales Promotions Employees Welfare Conveyance / tour expenses Hotel Expenses/Boarding / Lodging Telephone Maintenance & depreciation cost of Motor Car Maintenance of House Accommodation
Festival Celebrations Health Club or similar facilities Club Facilities Gifts Scholarships
Tax Slabs..
General Up to 1.5 lac Nil 150001- 300000 : 10% 300001- 500000 : 20% Above 500000 :30%
For Women Up to 1.80 lac Nil 180001- 300000 : 10% 300001- 500000 : 20% Above 500000 :30%
Tax Slabs..
For Senior Citizen Up to 2.25 lac Nil 225001- 300000 : 10% 300001- 500000 : 20% Above 500000 :30% 10 % Surcharge of tax if taxable income is above 10 lac 3% Education Cess on Tax
Deductions / Rebate

Loss from House Property : Interest on Housing Loan up to 1.5 lac if borrowed after 01/04/1999 Under chapter VI :
u/s 80 D Premium of Mediclaim Policy u/s 80 C : Up to 1 lac
LIC PPF PF ULIP NSC Infrastructure Bonds Principal Amount of Housing Loan Tuition fee of any of two children Pension Fund
Income from Other Sources
Any income which does not fall under any head will fall under income from other sources and will be added in taxable income like income from commission, interest etc.
IT Returns

Form 24 Q Quarterly Return to be filed by employer within 15 days Form 24 Annual return to be filed on or before 30th June Income certificate from Employer : Form 16 To be issued to the employees within one month from last day of financial year IT return to be filed by individual in Form 2 D Saral on or before 31st July In case of more than one employer in a year, Form 12 B to be submitted to new employer by the employee

Whichever Is Lower Is Exempt From Tax. For Example

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COMPENSATION RULES AND DESIGN GUIDELINES Guidelines Monthly Components Basic keep >50% of Total Fixed Salary As per

House Rent Allowance (HRA)

Childrens education allowance

Non cash component, exempt up to Rs.3000/- Rs.3000/- (max) p.m.

Income Tax Rules - Salary

Wherever there is Employer Employee relationship

Chargeable on due or receipt basis which ever is earlier;

Fringe Benefit Tax No Tax from Employee

Clause 115 WB (2) 20% of Value

Clause 115 WB (2) 50 % of Value

Income from Other Sources

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