compensationmgmt taxation

7/31/2019 CompensationMgmt Taxation

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COMPENSATION RULES AND DESIGN GUIDELINES

Monthly ComponentsGuidelines Amounts (per month)

Basic keep >50% of Total Fixed Salary As per labour Department Minimum Basicfigure for skilled, semi skilled and unskilled employees should be minimumof Rs.3934 (Unskilled), 4100 (Semi-Skilled) and 4358/-(Skilled). However tobe on safer side, do not keep Basic

figure less than Rs.4000/- p.m.Income Tax Benefit: NIL

Rs.3,934/- (minimum) maximum no limit..

House Rent Allowance (HRA) Maximum 50% basic (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.6000Hence max exemption allowed is lowest i.e.

Rs.6000/- subject to Rent Receipts ofRs.6000/- only

Maximum allowed 50% Basic (Metro Cities) OR40% Basic (Non Metro Cities)

Conveyance Allowance Supposed to be conveyance allowance meant

for transportation between office andresidence only.Income Tax Benefit:Exempt maximum up to Rs.800/- per month.

No proof required.

Rs.800/- (max)

Childrens education allowance Income Tax Benefit:Rs.100 per child subject to max 2 children.

Hence maximum Rs.200/- is exempt

Rs.200/- (max)

Special Allowance Balancing figure after choosing all the abovecomponents with respect to theirmaximum limits absorbed, remainingamount can be named as SpecialAllowance. It is fully taxable.

Balancing Figure


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Medical Reimbursements Can be given against bills or without bills doesnot matter. Some companies give itmonthly, some quarterly, half yearly oryearly also. Some companies give itonly against medical bills, some do notask for bills, rather bills are onlydemanded for Final Tax Computation atthe end of the year. No thumb rule about

it. Preferred to pay monthly, without billsand ask bills as per your wish, quarterly,half yearly or at the end of the year. Donot choose to give it against bills only,there is no rule for the sameIt onlymakes salary processing a cumbersomeprocess.

Income Tax Benefit:Maximum Rs.1250/- p.m. (Rs.15000 p.a.) is

exempt only if Original Bills areprovided.

Rs.1250/- (max)

Food Coupons Non cash component, exempt up to Rs.3000/-p.m.

Rs.3000/- (max)


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Income Tax Rules - SalaryWhat is Salary?

Wherever there isEmployer Employee

relationship

Chargeability of Salary?

Chargeable on due orreceipt basis which ever

is earlier;


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Denave India Private Ltd

Date of Joining - 2nd February, 2009

Name XYZ

Designation Executive - Accounts & Finance

Location New Delhi

Details of Emoluments

Per Month Per Annum

Earnings Break Up:

Basic 14000 168,000

HRA 7000 84,000

Conveyance 1200 14,400

CCA 2500 30,000

Medical Reimbursement 1500 18,000

Special Allowance 1,800 21,600

A. Gross Salary 28,000 336,000

Performance Incentive 0 0

B. Variable Salary 0 0

Company Contribution:

PF Comp. Contri.@12% 1,680 20,160

ESI Comp. Contri. @ 4.75% 0 0

Gratuity @ 4.81% 673 8,076

Statutory Bonus @ 20% 0 0

C. Company Contribution 2,353 28,236

Total ( A+B+C ) 30,353 364,236

Employee Deduction:

PF Emp Contri.@12% 1,680 20,160

ESI Emp Contri. @ 1.75% 0 0

Professional Tax As Per Govt. Rules As Per Govt. Rules

D. Employee Deduction 1,680 20,160

In Hand Pre Tax 26,320 315,840


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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.


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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


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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


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Fringe Benefit Tax No Tax

from Employee Clause 115 WB (2) 20% 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

Clause 115 WB (2) 50 % ofValue Festival Celebrations

Health Club or similar facilities

Club Facilities

Gifts

Scholarships


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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%


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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


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Deductions / Rebate

Loss from House Property : Interest on Housing Loan up to 1.5 lac ifborrowed 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


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Income from Other Sources

Any income which does not fall under any head will fall

under income from other sources and will be added intaxable income like income from commission, interest etc.


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