m1 introduction

7/27/2019 M1 Introduction

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Definitions

What is assessment??

What is assessment year???

Period of 12 months Usually starting from 1st April to 31st March

Also called as Tax Year or financial year

The income of previous year is assessed in thisyear


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Previous year

Accounting or income year

E.g.

What will be the previous year for assessmentyear 2010-11

Newly set up business

Exceptions


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Assessee

The person is liable to pay tax or any some of

money under this is called an asseessee.

Assessee is the person who is also responsible for

the payment or the loss or the amount of refund

due to him or to such other persons.(e.g.)

The person who is deemed to be an

asseessee(e.g) The person who is deemed to be an asseessee in

default.(e.g.)


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Person

"Person" includes

an individual

a Hindu Undivided Family (H.U.F.)

a Company

a Firm .

an Association of Person (AOP) or Body ofIndividuals (BOI), whether incorporated or not;

a Local Authority and Every Artificial Juridical Person not falling within

any of the preceding categories.


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Income

Section - 2(24) of the Income-Tax Act gives a

statutory definition of income.The definition

states various receipts which are included in

income which is as under:

(1) Profits and gains.

(2) Voluntary contributions received by a trust.

(3) Amounts under the head of salary,


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Contd.

The value of perquisites or profits in lieu of salary.

(5) The value of any benefit or perquisite

obtained from a company by a director or a

person having substantial interest in the company

or by a relative of a director.

(6) The value of any benefit or perquisite arising

from the business or profession (whetherreceived in cash or not).

(7) Any capital gains.


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Contd

(8) Dividend

(9) Casual income e.g. winnings from lottery,

prize of crossword competition, races

including horse races, card games etc.

(10) Annuity income received or receivable.

(11) Any sum chargeable under Section: 28(ii), (iii), 41(1): or59.


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Gross salary

According to Section-14 the income of an

assessee is computed under the following five

heads:

(1) Salary

(2) Income from house property.

(3) Profits and gains of business or profession(4) Capital Gains.

(5) Income from other sources


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Contd.

The aggregate income under these heads is

termed as gross total income. In other words,

the gross total income means total income

computed in accordance with the provisions

of the Act before making any- deductions

under Section : 80 CCCto 80 U. :


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Agriculture income

2. Definition of Agricultural income:Section : 2(1A)of income-tax Act defines AgriculturalIncome as : -

Any rent or revenue derived from land which issituated in India and is used for agriculturalpurpose.

Any income derived from such land by

agricultural operations. Income from building used for agricultural

purpose.


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Contd.

Rent or Revenue derived from land

[Section-2(1A)(a)] :

It is not necessary that landlord should be

cultivating the land himself. If he has given the

land to any other person for cultivation, the

rent received by him is an agricultural income.

The rent may be received in cash or in kind.


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Contd.

Cultivation of the land would involve some

basic operations on the land itself and not

merely on the growths from the land.

Examples of such basic operations are tilling ofthe land, sowing of seeds, planting etc.

Subsequent operations include weeding,

digging the soil around the growth, removal ofundesirable undergrowths etc.


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Contd.

Income from processing of Agricultural

Produce:

If agricultural produce are not in a saleable

sate, they have to be further processed, in

order to make them marketable. Any income

derived from suchprocessing will also be

treated as agricultural income.


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Agricultural House Property:

Income from agricultural house property will betreated as agricultural income if-

The house property is situated on or inimmediate vicinity of an agricultural land.

The occupier requires it as a dwelling house, orstore house.

The land is assessed to land revenue in India or issubjected to local rate.


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The following incomes are not treated asAgricultural Income:

(1) Royalty income of mines. (2) Income from

stone quarries. (3) Income from fisheries. (4)Income from safe of earth for brick making. (5)Income of salt produced by flooding the land withseawater. (6) Remuneration received by a

manager of an Agricultural Company. (7)Agricultural Income earned from a land situatedoutside India.


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Contd.

(14) Commission earned by landlord for selling

agricultural produce of his tenant. (15) Income

from butter and cheese-making. (16) Income

derived from land let-out for processing salt.(17) Income derived from T.V. Serial shooting

in the farm.


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What is amalgamation?

Condition (1): all the properties of the

amalgamating company immediately before

the amalgamation should become the

property of the amalgamated company byvirtue of amalgamation.

(2) all the liabilities of the amalgamating

company.


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Classification of income

Indian income

Foreign income


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SCOPE OF TOTAL INCOME & ITS TAXABILITY

No. Particulars of Income

(During PY:2008-09)

Residential Status & Tax Liability

ROR RBNOR NR

1 Income Received in India Taxable Taxable Taxable

2 Income deemed to bereceived in India. Taxable Taxable Taxable

3 Income which accrues or

arises in India.

Taxable Taxable Taxable

4 Income which is deemed to

accrue or arise in India.

Taxable Taxable Taxable

5 Income which accrues orarises outside India from a

business controlled in India

or a profession set up in

India

Taxable Taxable Not Taxable

6 Income accruing or arising

outside India

Taxable Not Taxable Not Taxable


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Tax planning Exempted Income

Agricultural income Agricultural land inIndia Used for agricultural purpose- Rent orrevenue from the land Income fromagricultural operations on the land to render

produce fit for market Payments to a member from HUF share of profit received by partner from the

firm

Salary received by foreign citizen fromforeign company provided stay is not over 90days


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Contd.

Tax paid on behalf of foreign companies / nonresident Govt. agreement before 1-6-02

The taxpayer should be the foreign company It has the income by the way of royalty &

technical services such royalty should received from the central

govt.or stat govt. under agreement made after31-3-76 & before 1-6-02

If the above conditions are satisfied, the taxliability of the foreign company born by the payerwill not be taxable in the hands of the FC


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Tax planning exempted income

8. For employees- Gratuity Provident Fund

Leave salary Retrenchment compensation

L T C Compentation under VRS- Education

allowance Hostel allowance H R AEntertainment allowance Perquisites under

Fringe benefit tax payed by employee.


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Tax Planning- exempted income

Scholarship for cost of education

Income of scientific research association

income of professional bodies contribution

Professional bodies should situated in India for thepurpose of regulating, control, supervision orencouragement of the law, accountancy, medicines anyother notified profession

It should apply its income solely for the objective for

which it was established. It should approved by the central govt.


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Income of mutual fund set up by Financialinstitution / banks

income of venture capital fund / venture

capital company Income of Trade unions / political parties

Income of minor child upto Rs. 1500

dividend from domestic companies.


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Provision in respect of newly established

undertakings in free trade zone etc.

Conditions:It must begin manufacturing or production in

free trade zone

Not formed by reconstruction of business

Not formed by transfer of old machinery

Sale consideration should be remitted to indiain foreign exchange

Books of account should be audited

Return of income should be submitted in time


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Contd

Amount of deduction

(Profit of the business of undertaking*exportturn over)/total turn over of business carried

over by undertaking. Period of deduction:

10 consecutive assessment years beginning

with the AY in which the undertaking begin tomanufacture articles or things or computersoftware.


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Amount of deduction

special provision

If the business is established during 1-4-02 &

31-3-05 than:

100 % export profit for 5 years + 50 % 2 yr. +3

year 50 % transfer to sp economic Zone

Reinvestment allowance Reserve


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Basic understanding of five heads of

income

Income from house property.

Register of he house-owner-liable to pay tax

Income from the land appurtenant is also

taxable under this head.

The property should not be used as the

business or profession

Income tax is assessed on the annual value of

the house.


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Profit & gains from the business or

profession

Business connotes some activity which is

carried on by devoting time, attention &

labour of the either by himself or through

others with an intention to make a profit.

Profession is any human activity which

requires an intellectual skills e.g doctors &

lawyers.


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Income from other sources

The last head of the income

Conditions:

It should be an income

It must not an exempted under any otherprovision of this act

It also must not included in the first four

heads of the income E.g.: any winnings from lottery, interest on

securities


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Income from salary

What is salary??

Relation of payer & payee-employer &

employee

Payment received by the person other than

employer will be treated under income from

business or profession or income from other

sources.

E.g. paper setting for other university


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Contd.

Salary & wages

Salary from more than one sources

Salary from the former, present or prospective

employer.

Salary income must be real & not fictitious.

Foregoing of income Voluntary payments


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Basis of income

Any income due from an employer or from

former employer to an asseessee in PY

whether paid or not.

Any salary paid or allowed to him in previous

by or on behalf of an employer.

Any arrears of salary paid or allowed to him in

the PY by or on behalf of an employer, if not

charged to income tax for ant earlier PY.


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Salary on receipt & due basis whichever isearlier

Place of accrual of salary:

under sec 9(1)(ii) salary in respect of theservices rendered in India is deemed to accrueor arise in india even it is paid outside in india

Pension paid abroad is deemed to accrue inindia if it is paid for the services rendered inindia


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Contd

Nature of salary Status of

employee

Whether it is

taxable or not

Leave encashment

during the continuity ofemployment

Govt non govt employees it is chargeable to tax

At the time of retirement

of the job

Government employees It is fully exempted from

the tax u/sec 10(10AA)

At the time of retirement

of the job

non Government

employees

It is fully or partly exempt

from tax u/sec 10(10AA)


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Non government employees

In the case of non government employees leave

salary is exempted from tax on the basis of least ofthe following:

1 Period of earned leave (in no of months) to the

credit of the employee at the time of hisretirement or leaving the job*average monthly

salary

2 10* average monthly salary

3 3,00,0000( specified by the govt

4 Leave encashment actually received at the time of

retirement


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Contd..

How to find out leave standing of anemployee at the time of retirement orleaving the job:

Step (A):find out the duration of the service inno of years (ignore any fraction of years)

Step (B): find out the rate of earned leaveentitlement from the service rules-how manydays the leave is credited for each year ofservice


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Contd.

Step (C): find out earned leave actually taken

or encashed (in no of days) during the service

time.

The computation shall be made as follows:

[Step (A)*step (B) minus step (C)]/30


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Average monthly salary is calculated on the

basis of average salary for the ten months

immediately preceding the month in which

the employee has taken retirement


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e.g.

X was employed by PQR LTD up to march 15

1988. at the time of leaving he was paid

3,50,000 as leave salary out of which 57,000

was exempt from the tax .thereafter he joinedABC p ltd.& received 4,14,000 as leave salary

at the time of is retirement on December

31,2008.determine the amount of taxableleave salary from the following information:


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Contd.

Salary at the time of retirement..23,000

Average salary received during 10 months

From march 1, 2008 to July 31,2008.22,600

From august 1to December 31,2008.22,900

Duration of service (A)..14(3/4) years

Leave entitlement for every years of service45 days

Leaved availed while in service (C)90 days


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Contd..

Salary to the partners

Fees & commission

Bonus


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Gratuity

It is the retirement benefit payable at the time

of retirement of the employee

Exemption in respect of gratuity is available

when it is paid to an employee (i) on his

retirement; or (ii) on his becoming

incapacitated prior to retirement or on

termination of his employment; or (iii) to legalheir if the employee dies.


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Contd

Status of an employee Whether gratuity is taxable

Government employees Fully exempt from the tax

u/sec 10(10)(i)

Non government employeescovered by the payment of

gratuity act,1972

It is fully or partly exemptfrom the tax u/sec 10(10)(ii)


not covered by the payment ofgratuity act,1972

It is fully or partly exempt

from the tax u/sec 10(10)(iii)


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Non government employees covered by the

payment of gratuity act,1972

1. 15 days salary (7 days salary in case of

employees of seasonal establishment)based

on salary last drawn for each of the eservice

(15*length of services)

2 3,50,000

3 Gratuity of actually received


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e.g.

X an employee of PQ LTD receives 78,000 as

gratuity. He is covered by the payment of

gratuity act,1972.he retires on December

12,2008 after rendering service for 38 years &8 months at the time of retirement his

monthly salary & DA was 2400 & 800 resp. is

the entire amount of gratuity exempt fromtax?


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In case of any other employees

1 3,50,000

2 Half months average salary for each

completed years of service3 Gratuity actually received


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Contd

Average monthly salary is calculated on the

basis of average salary for the ten months

immediately preceding the month in which

the employee has taken retirement.

Salary in this mean basic salary it includes DA

& also commission payable @ fixed % of

turnover


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Contd.

When gratuity received by an employee from

more than one employer in the same previous

year ,the aggregate amt of gratuity cannot

exceeds 3,50,000.if the employee has receivedgratuity from former employee in any earlier

year & from another employee in later year

than this 3,50,000 reduced by amounts ofgratuity exempt from tax under 10(10)(iii)


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Pension

pension Status of employees It is chargeable totax or not

Uncommuted

pension

Govt/non govt

employees

It is chargeable

to tax

Commuted

pension

Government

employees

It is fully exempt

from the tax

Commuted

pension

Non government

employees

It is fully or

partially exemptfrom tax


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Contd

Uncommuted pension: it is periodical

payment of pension for e.g. x gets monthly

pension of 2000 it is taxable as salary under

section 15 in the hands of a governmentemployee as well as non government.


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C d


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Contd

Commuted pension is taxable as under:

Status of employee Gratuity received /not

received

Exemption in respect

of commuted pension

u/sec10(10A)

Government

employees

Gratuity may or may

not received

Entire commuted

pension is exempt fromthe tax

Non government

employees

Gratuity received 1/3 of the pension

which he is normally

entitle to receive

exempt from tax

Non government

employees

Gratuity not received 1/2 of the pension

which he is normally

entitle to receive

exempt from tax


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Retrenchment compensation

(A): an amount calculated in accordance with

the provision of sec 25F(b) of industrial

dispute act , 1947

(B):amt notified by the govt( 5,00,000)

Amt actually received

Whichever is low is exempt from tax


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Different allowances

Allowances is generally define as fixed amount

of money given regularly in addition to salary

for the purpose of meeting some particular

recuirenement connected with the servicerendered by employee or as compensation for

unusual conditions of that service

it is taxable u\s 15 on due or receipt basiswhichever is earlier.


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Contd..

allowances.docx
http://localhost/var/www/apps/conversion/tmp/scratch_3/allowances.docxhttp://localhost/var/www/apps/conversion/tmp/scratch_3/allowances.docx


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Other allowances & their effects The following allowances are exempt u/s 10(14) in following

manner. The amount of the Allowance

Or

The amount utilised for the specific purpose for which

allowance is given, (WHICHEVER IS LOWER)

They are:

Travelling allowance / Transfer Allowance.

Conveyance Allowance.

Daily Allowance.

Helper Allowance.

Research Allowance.

Uniform Allowance.

ENTERTAINMENT ALLOWANCE [SEC


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ENTERTAINMENT ALLOWANCE [SEC.

16 (II)]

Entertainment allowance is initially included in

taxable as fully taxable. Thereafter, a

deduction is allowed under this section form

gross taxable salary. However, deductionunder Section -16(ii) shall be available to the

government employee only.


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Contd..

Deduction for Entertainment Allowance

being minimum of the following:

Actual Entertainment Allowance

Rs. 5000/-

20% of Basic Salary

Salary exclude any allowances & benefits or

other benefits.


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Contd..

Note:

Amount actually expended towards

entertainment ( out of the amount received as

allowances )is not taxable

No deduction is available under this section to

a non government employee.

HOUSE RENT ALLOWANCE (S ti 10(13A)


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HOUSE RENT ALLOWANCE (Section 10(13A)

An allowance to meet the expenses in connection

with the rent of the house Exempted House Rent Allowance if the house is

situated in Mumbai, Delhi, Chennai and Kolkata

Minimum of the 3 conditions is exempted value of house rentallowance

Sr.

No.

Particulars Rs Rs

1

Actual HRA Received

2 Actual Rent Paid

(-) 10% of Salary

3 50% of Salary


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Contd..

Exempted House Rent Allowance if the house

is situated in other cities.

Sr.

No.

Particulars Rs Rs

1 Actual HRA Received2 Actual Rent Paid

(-) 10% of Salary3 40% of Salary


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Contd..

Exemption is not available if employee lives in hisown house, or in a house for which he does notpay any rent.

For criteria of 50% or 40% of salary as deduction,place of employment is not significant but placewhere the house is situated is important.

Deduction from HRA depends on salary of the

employee, Amount of HRA, Place of residence(not place of employment), rent paid by theemployee.


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Example

X who is posted in Delhi but reside @ Noida

gets Rs 60,000 p.a. as basic salary he gets Rs

9,000 p.a. as HRA ,though he paid 12,000 p.a.

as rent during the PY 2008-09 he received Rs.5000 as advance salary of April 2009


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Perquisites

Any casual benefit that is attached to the to anoffice or positions in addition to salary orwages

It may be provided in cash or kind It is taxable under the head salary when

Allowed by employer to his employee

Allowed during continuity of service

Provided for the personal advantage of the employee

Derived in terms of keeping in mind the authority ofemployees


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Contd..

Perquisite subject to fringe benefit tax &

taxable to the employer not to employee.

Perquisite taxable in the hands of employee

whether or not employer is liable to pay fringebenefit tax.

Perquisite taxable in the hand of employee

when employer is not liable to pay tax

Perquisite taxable in the hands of employee


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whether or not employer is liable to pay fringe

benefit tax.(A)

Valuation of rent free accommodation: Valuation of unfurnished accommodation

Valuation of furnished accommodation

Government employees


Government employees: If the accommodation is provided by the central

or state govt.

d


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Contd..

Employees of local authority or foreign govt

are not covered by this group & treated as

private employees

For govt employees the license fees decidedby or determined under the govt rules is the

taxable value.


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C d


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Contd...

Value of Furnished House in case Accommodation is ownedby the Employer and the house is situated in city where the

population is more than 10 lakhs but less than 25 Lakhs

Value of Furnished House in case Accommodation is owned

by the Employer and the house is situated in city where the

population is 25 lakhs or more

Sr. No. Particulars Rs Rs

1 10% of Salary

Sr. No. Particulars Rs Rs

1 15% of Salary

C d


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Contd..

Salary:

Employee's contribution to PF, gratuity, perquisites not taken intoconsideration

Sr. No. Particulars Rs

1 Basic Salary

+ DA (considered for

Retirement Benefits)

+ All taxable allowances

+ Bonus

+ Commission

Total Salary


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Valuation for furnished


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Valuation for furnished

accommodation


population is 10 lakhs or less

Sr.

No.

Particulars Rs Rs

1 7.5% of Salary

+ 10% of the original Cost of

Furniture

+ Hire Charges Paid in

respect of Furniture

- Token Taken From the

Employees

C td


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Contd..


population is more than 10 lakhs but less than 25 Lakhs

Sr.

No.

Particulars Rs Rs

1 10% of Salary

+ 10% of the original Cost

of Furniture




Employees

C td


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Contd..


population is 25 lakhs or more

Sr.No.

Particulars Rs Rs

1 15% of Salary

+ 10% of the original Cost

of Furniture




Employees

C td


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Contd..

Value of Furnished House in case Accommodation is taken onLease or Rental Basis

Sr.

No.

Particulars Rs Rs

1 Actual Rent paid or 15%

of Salary (whichever is

Less)

+ 10% of the original Cost of

Furniture

+ Hire Charges Paid inrespect of Furniture


Employees


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C td


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Contd.. Free Domestic Servants: Actual expenditure of the

employer is the salary paid by the employer anytoken amount paid by the employee remaining istaxable

Gardners salary paid by employer will not be

considered taxable in case of house provided toemployee owned by an employer

Gas, Electricity or water supplied: the taxable amt isthe manufacturing cost provided by the employer if it

is provided from the own resources & if purchasedfrom the outside than amount paid to outside agencywill be taxable any token taken from employee will bereduced from that amount.

C td


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Contd..

Free Education Facility to the Family Members of theEmployee:

School fees of the children of employee directly paid toschool will be taxable in all cases

Reasonable cost of education in a similar institute in ornear the locality is taxable (up to Rs. 1,000 per monthper child is not taxable if education facility is providedto the children of an employee in an educational

institution owned/maintained by the employer). Scholarship granted by employer is not assessed as

perquisites

Medical facilities in India


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Medical facilities in India

Fixed medical allowances are always taxable If hospital is maintained by the employer, any

medical facilities taken & expenses is rendered

by employer than the amount is notchargeable to tax

If it is maintained by central govt., localauthority, & any treatment is taken for that

the employer has paid the expenses than alsothe amount is not chargeable to tax

Contd


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Contd..

Health insurance policy & if the premium ispaid by the employer amount is not

chargeable to tax

If the hospital is maintained by any otherperson for eg private clinic for taking any

service if the expenses incurred by employer

the amount will not chargeable to tax up to15,000 in aggregate per assessment year

Lunch & refreshment


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Lunch & refreshment

Tea or similar non alcoholic beverages &snacks during working hours are not

chargeable tax

Expenses on free meal in excess of Rs. 50 permeal is chargeable to tax

The employer provides tea coffee exp 6,000

PA besides he provides free lunch (120 permeal. Rs 10 per meal is covered by employee)

Contd


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Contd..

Gift voucher or token: gift received by theemployee in cash or convertible form of

money are not exempt from tax. other gifts

value of that gifts if aggregated comes to 5000is not chargeable to tax beyond that it is

chargeable

Credit card facility


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Credit card facility

Step 1 Expenditure incurred by the employer

in respect of credit card used by the

employee( annual fees, membershipetc)

Less:step2 Expenditure on use for office purpose

Less: Step 3 Amount recovered from employee

Leave travel concession in India


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Leave travel concession in IndiaDifferent situation Amount of exemption ( exemption is

available only in respect of fare forgoing anywhere in india along with

family twice in block of four years)

Where journey by Air Amount of economic class fare of

national carrier by the shortest route

or amount spent whichever is less

Where journey by Rail Amount of air condition first class

fare of national carrier by the shortest

route or amount spent whichever is

less

Where place of origin of journey &

destination connected by rail &

journey is performed by any other

mode of transport

Amount of air condition first class

fare of national carrier by the shortest

route or amount spent whichever is

less

Contd


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Contd..

Carry over concession: if leave travelconcession is not availed by the employee in

the four year block for one occasion or for two

occasion for that the exemption can beavailable for in the next year for the first

calendar year but in respect of only one

journey


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Fare of more than 2 children: exemption notavailable to more than 2 children in case of

children born after October 1, 1998

Exemption will be admissible to all survivingchildren born before October 1, 1998

Employees obligation met by


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employer

Amount paid by an employer in respect of anyobligation which otherwise would have been

paid by employee

E.g. servant facility

Valuation of perquisite in respect of interest free


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loan at concessional rate

If the loan is given by employer to hisemployee or any member of family than it istaxable on the following bases:

Step 1:find out the maximum outstandingmonthly balance ( aggregated outstandingbalance for each loan on the last day of eachmonth)

find out the rate interest charged for the loanby SBI


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Step 3: find out the interest for each month ofPY on outstanding amt

Step 4: from that calculated interest reduce

amt if interest paid by employee

Remaining amt is taxable perquisite

Use of movable asset


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Use of movable asset

Mode of

valuation

Computer

s/ laptops

Owned by

employers

Taken on hire

Step 1: find outcost to employer

Nil 10% PA of actualcost

Amt of rent paid orpayable

Step 2: less:

amount

recovered from

employee

Nil Recovery from

employee

Recovery from

employee

Taxable value of

the perquisite

Nil Balance amt Balance amt

Any other asset

Transfer of movable asset


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Transfer of movable asset

Asset transferred Value of benefitComputers and other

electronics

Actual cost to employer (-) 50% of cost for each

completed year during which such asset was put to

use by the employer, by WDV method

Motor cars Actual cost to employer (-) 20% of cost for each


use by the employer, by WDV method

Any other asset Actual cost to employer (-) 10% of cost for each


use by the employer, by SLM method


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Valuation of perquisites in respect of freetransport:

Mode of valuation Employees of

railways/airlines

Employees of any

other transport

Step 1: cost to the

employer

nil Value at which such

transport is offered by

the employer to the

public

Less: amount recoveredfrom employee

nil Recovery

Taxable value: balance nil Balance if positive

Perquisites exempt from tax for all


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types of employees

Medical facility Medical reimbursement : upto 15,000

Health insurance premium

Free food and meal (meal up to 50 per meal )

Recreation facility provided to group of employees Free telephone including mobile is exempt

Training of employees

Rent free accommodation to judges of high court

(official residence) Gift

Use of computer /laptop

Perquisites taxable for all type of


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employees

Value of rent free accommodation Payment of employees income tax , personal

debt etc

any sum payable by employer (life insurancepremium paid by the employer on behalf ofemployee)

The amount of contribution to an approvedsuperannuation fund

Perquisites taxable for specified


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employees only


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Provident fund


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Provident fund

Provident fund scheme is retirement benefit.Under this scheme a stipulated sum isdeducted from the salary of the employee ashis contribution towards the fund

Employers also generally contribute towardsthe fund

The contribution of both is invested &

interested thereon is also credit to theaccount of employee


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Deduction u/s 80 C


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Deduction u/s 80 C

Under Section 80C deduction is available from total gross income ofan individual assessee or Hindu Undivided Family. The followingitems qualify for deduction under this Section :

Premium paid by the assessee for insurance on his own life or onthe life of his wife or any child or premium paid on the life of anymember of Hindu Undivided Family. Premium paid upto 20% of

policy value is qualified for deduction and excess (if any) is not to beconsidered.

Contribution to Statutory Provident Fund, Recognised ProvidentFund and Public Provident Fund.

Contribution towards Unit-linked Insurance Plan (ULIP) or

contribution towards LIC Mutual Fund of Life Insurance Corporation(as notified under Sec. 10(23D).


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Payment towards the cost of purchase orconstruction of a residential house.

Such payment will include any installment or partpayment made by the assessee to Housing Board,

Co-op. Housing Society, Bank, L.I.C. , Central orState Government, University or to anyauthorised institution established for the purposeof promotion of house construction activity.

Subscription (including reinvestment of accruedinterest) towardsHome Loan Account Scheme,Approved Pension Fund Scheme of NationalHousing Bank


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Contribution towards units of notified mutualfund or U.T.I.

Contribution to any approved mutual fund ornotified pension fund of U.T.I., e.g., Retirement

Benefit Scheme of UTT and Kothari PioneerPension Plan.

Contribution in the notified annuity scheme of

L.I.C, e.g., New Jeevan Dhara, New Jeevan Akshay,New Jeevan Dhara-1, New Jeevan Akshay-1, NewJeevan Akshay-II and New Jeevan Akshay-III.


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If the assessee has paid an amount as tuition fees(excluding any payment towards anydevelopment fees or donation or payment ofsimilar nature) to any university, college, school

or other educational institution in India for thepurpose of full time education.

Any sum invested in equity shares anddebentures of a public company, engaged ininfrastructure including power sector. Such sharesor debentures must be a part of public issue,which is approved by the Board.


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Any sum paid as subscription to any scheme of a publiccompany engaged in providing long term finance forresidential houses in India and any scheme of HousingBoard engaged in the planning, development orimprovement of towns / cities.

A term deposit-placed with a 'schedule bank' also qualifiesfor deduction provided it is for a fixed period of not lessthan 5 years and the scheme has been notified by theCentral Government.

Investment in 'Rural Development Bonds' of NABARD

Amount deposited under senior citizens savings scheme Amount deposited in 5 yrs. Time Deposit Scheme in post

office.


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Note : If the total of above qualifying itemsexceeds Rs. 1,00,000, a maximum deduction

of Rs. 1,00,000 is to be allowed from the total

gross income of an assessee.


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Practice


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Practice

X (age 30 years) is in teaching staff of well known privatecollege at pune owned by B LTD.during PY 2008-09 he gets

salary: 4,86,000, DA: 92,300, city compensatory allowances:

33,100, childrens education allowances 2340 (65 pm for 3

children)HRA 46,200 (rent paid 58,000)remuneration from

delhi university for paper setting etc. 36,400( expenditure

incurred 3400)he gets reimbursement for medical facility for

the family members 18,890, besides he gets reimbursement

from the employer in respect of expenditure incurred for

books purchased by him 12,600. the employer provides 1200cc car for ofiice & private purpose


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He contributes 11%of his salary to RPF. Whichmatching contribution made by the employer .

Besides he makes an expenditure of 16,000 on

LIP of rs 50,000 Determine his taxable income. Does it make

any difference if employer is state gvt?

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