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TDS ON SALARY. M. V. DAMANIA & CO 07/01/2012. TDS ON SALARY. SYNOPSIS Tax Deduction as required u/s192 What salary is charged to Tax u/s15 Deductions in Salary as allowable u/s 16 Salary as Defined u/s 17(1) Perquisites as Defined u/s 17(2) Profit in lieu of Salary as defined u/s 17(3)

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tds on salary

TDS ON SALARY

SANJAY CHOKSHI

M. V. DAMANIA & CO

07/01/2012

tds on salary2

TDS ON SALARY

SANJAY CHOKSHI

SYNOPSIS

Tax Deduction as required u/s192

What salary is charged to Tax u/s15

Deductions in Salary as allowable u/s 16

Salary as Defined u/s 17(1)

Perquisites as Defined u/s 17(2)

Profit in lieu of Salary as defined u/s 17(3)

Valuation of Perquisites under rule 3

tds on salary u s 192

TDS ON SALARY U/S. 192

SANJAY CHOKSHI

SS (1)

Person responsible for Payment of Salary

At the time of Payment

Average rate of Tax as per the Rates in Force

Estimated income under this head

tds on salary u s 1924

TDS ON SALARY U/S. 192

SANJAY CHOKSHI

SS (1A) and (1B)

In case of Perquisites

Payment of the whole or part of the tax without deduction of Tax

To be deducted on the basis of other salary at the time of such payment

tds on salary u s 1925

TDS ON SALARY U/S. 192

SANJAY CHOKSHI

SS (2)

If the Employee is employed with more than one employer

Simultaneously

Successively

Employee may provide the details of his salary and TDS thereon

Rule 26 Form 12B

Employer to account for that income for TDS

tds on salary u s 1926

TDS ON SALARY U/S. 192

SANJAY CHOKSHI

SS (2B)

Relief to be granted u/s 89(1) if applicable by:

Government

Company

Co-op. Society

Local Authority

University

Institution

Association or Body

Rule 21 Form 10E

Employee to account for such relief and deduct tax accordingly

tds on salary u s 1927

TDS ON SALARY U/S. 192

SANJAY CHOKSHI

SS (2B)

If the Employee has income other than Salary

Income should not be a loss

Loss in case of House Property

Provide information of such income and TDS thereon to the Employer

Rule 26B Form No. 12C

Employer to account for such income for the Purpose of TDS

Result should not reduce the TDS otherwise deductible

tds on salary u s 1928

TDS ON SALARY U/S. 192

SANJAY CHOKSHI

SS (2C)

Employer to furnish to the employee statement giving correct and complete details:

Particulars of Salary

Particulars of Perquisites

Profit in lieu of Salary

Rule 26, Form 16 and 12BA

tds on salary u s 1929

TDS ON SALARY U/S. 192

SANJAY CHOKSHI

SS (3)

Permits adjustments to be made during the F. Y. in relation to excess or shortage in deduction during the earlier deductions

tds on salary u s 19210

TDS ON SALARY U/S. 192

SANJAY CHOKSHI

SS (4)

Trustees of Recognised Provident Fund to deduct TDS

On payment of accumulated balances as per Rule 9(1) of Part A of Fourth Schedule

TDS as provided in Rule 10 of Part A of Fourth Schedule

tds on salary u s 19211

TDS ON SALARY U/S. 192

SANJAY CHOKSHI

SS (5)

Trustees of Recognised Superannuation Fund to deduct TDS

On payment of accumulated balances from such fund in relation to contribution made by the employer and interest thereon

TDS as provided in Rule 6 of Part B of Fourth Schedule

tds on salary u s 19212

TDS ON SALARY U/S. 192

SANJAY CHOKSHI

SS (6)

In case the salary is paid in Foreign Exchange, the same is to be converted to rupees as per the rates prescribed under RR 26 and 115

issues on tds on salary u s 192

ISSUES ON TDS ON SALARY U/S. 192

SANJAY CHOKSHI

Internal Private Agreement between Employer and Employee that The Employer need not deduct Tax and that the employee shall take care of his IT dues

TDS on Judgment Debts

Payment made for securing services of a person

Furlough Pay

Tax on Tax Exclusive Income

section 15 charging section in case of salaries

SECTION 15 – CHARGING SECTION IN CASE OF SALARIES

SANJAY CHOKSHI

Salary due from an employer or former employer in the previous year

Advance Salary

Arrears of Salary

Salary shall not be taxed on accrual if the same is taxed on the basis of advance payment.

Salary paid to partner is taxable as business income and not salary

section 16 deductions from salaries

SECTION 16 – DEDUCTIONS FROM SALARIES

SANJAY CHOKSHI

Entertainment allowance paid to government employees

1/5th of salary (inclusive of any allowance, benefit or other perquisites

Tax on Employment (Profession Tax)

Lower of the two above

distinction between employee and agent
DISTINCTION BETWEEN EMPLOYEE AND AGENT

EMPLOYEE

AGENT

  • Instructions with not only what he has to do but also how he has to do
  • More direct control
  • No authority to enter into contract on behalf of the employer
  • Payment in terms of wages and salaries
  • Instructions with only what he has to do and not how he has to do
  • More indirect control
  • Normally enters into contract on behalf of the principal
  • Payment by commission

SANJAY CHOKSHI

whether employees or otherwise

WHETHER EMPLOYEES OR OTHERWISE

SANJAY CHOKSHI

Director of a Company

Managing Director of a Company

Whole time Director of a company

Financial Advisor

Official Liquidator

Film Artist

Lawyer or professional

A doctor working in a hospital

A Chauffer driving a car

whether salary or otherwise

WHETHER SALARY OR OTHERWISE

SANJAY CHOKSHI

Director Sitting Fees

Professional Fees Paid to Director for services rendered

Salary paid to Managing Director

Salary paid to Whole time Director

Temporary Labour on daily wages

whether salary or otherwise19

WHETHER SALARY OR OTHERWISE

SANJAY CHOKSHI

Payment on piece rate to employees

Payment to Professional on time basis

Salary to part time workers

section 17 1 definition of salaries includes

SECTION 17(1)– DEFINITION OF SALARIES includes

SANJAY CHOKSHI

Wages

Annuities and/or Pension

Gratuity

Fees, commission, perquisites or profit in lieu of or in addition to any salary or wages

Advance salary

Leave encashment

section 17 1 definition of salaries includes21

SECTION 17(1)– DEFINITION OF SALARIES includes

SANJAY CHOKSHI

Annual accretion to the balance of the credit of the employee participating in a recognised provident fund to the extent to which it is chargeable to tax under Rule 6 of Part A of the Fourth Schedule

Contribution by Employer in excess of 12 %

Interest accrued in excess of that declared by the Government

section 17 1 definition of salaries includes22

SECTION 17(1)– DEFINITION OF SALARIES includes

SANJAY CHOKSHI

The aggregate of all sums that are comprised in the transferred balance as referred to in sub rule 2 of rule 11 of Part A of the For the Schedule of an employee participating in a recognised provident fund to the extent to which it is chargeable to tax under sub rule 4 thereof.

section 17 1 definition of salaries includes23

SECTION 17(1)– DEFINITION OF SALARIES includes

SANJAY CHOKSHI

Calculation of taxable transferred balance:

Recognisation is granted to an existing unrecognised Fund

Calculation of the taxable amount as per the earlier subsection as if the fund was a recognised fund since inception for each year till date

The sum of such taxable amount is taxable in the current year

section 17 1 definition of salaries includes24

SECTION 17(1)– DEFINITION OF SALARIES includes

SANJAY CHOKSHI

Contribution by an employer to a pension fund referred to in section 80CCD

section 17 2 definition of perquisites includes

SECTION 17(2)– DEFINITION OF PERQUISITES includes

SANJAY CHOKSHI

Value of Rent Free Accommodation provided to the assessee by his employer

Value of any concession in the matter of rent in relation to any accommodation provided to the assessee by his employer

section 17 2 definition of perquisites includes26

SECTION 17(2)– DEFINITION OF PERQUISITES includes

SANJAY CHOKSHI

The value of any benefit or amenity granted or provided free of cost or at a concessional rate in any of the following cases:

To an employee director

To an employee who is substantially interested in the company

Employee whose salary per annum exceeds Rs. 1 lac.

Vehicle provided for journey from residence to office and return is not included as perquisite

section 17 2 definition of perquisites includes27

SECTION 17(2)– DEFINITION OF PERQUISITES includes

SANJAY CHOKSHI

any sum paid by the employer in respect of any obligation which but for such payment, would have been payable by the assessee

any sum payable by the employer, whether directly or through a fund, other than a recognised provident fund or an approved superannuation fund or a Deposit-linked Insurance Fund established under section 3G of the Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948 (46 of 1948), or, section 6C of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952)], to effect an assurance on the life of the assessee or to effect a contract for an annuity

section 17 2 definition of perquisites includes28

SECTION 17(2)– DEFINITION OF PERQUISITES includes

SANJAY CHOKSHI

the value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer, or former employer, free of cost or at concessional rate to the assessee.

section 17 2 definition of perquisites includes29

SECTION 17(2)– DEFINITION OF PERQUISITES includes

SANJAY CHOKSHI

Explanation : For the purposes of this sub-clause,—

(a) "specified security" means the securities as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and, where employees' stock option has been granted under any plan or scheme therefor, includes the securities offered under such plan or scheme;

(b) "sweat equity shares" means equity shares issued by a company to its employees or directors at a discount or for consideration other than cash for providing know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called;

section 17 2 definition of perquisites includes30

SECTION 17(2)– DEFINITION OF PERQUISITES includes

SANJAY CHOKSHI

(c) the value of any specified security or sweat equity shares shall be the fair market value of the specified security or sweat equity shares on the date on which the option is exercised by the assessee as reduced by the amount actually paid by, or recovered from the assessee in respect of such security or shares;

(d) "fair market value" means the value determined in accordance with the method as may be prescribed;

(e) "option" means a right but not an obligation granted to an employee to apply for the specified security or sweat equity shares at a predetermined price;

section 17 2 definition of perquisites includes31

SECTION 17(2)– DEFINITION OF PERQUISITES includes

SANJAY CHOKSHI

the amount of any contribution to an approved superannuation fund by the employer in respect of the assessee, to the extent it exceeds one lakh rupees; and

the value of any other fringe benefit or amenity as may be prescribed

exclusion from fringe benefit or amenity

EXCLUSION FROM FRINGE BENEFIT OR AMENITY

SANJAY CHOKSHI

the value of any medical treatment provided to an employee or any member of his family in any hospital maintained by the employer ;

exclusion from fringe benefit or amenity33

EXCLUSION FROM FRINGE BENEFIT OR AMENITY

SANJAY CHOKSHI

any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family—

in any hospital maintained by the Government or any local authority or any other hospital approved by the Government for the purposes of medical treatment of its employees;

in respect of the prescribed diseases or ailments in any hospital approved by the Chief Commissioner having regard to the prescribed guidelines :

Provided that, in a case falling in sub-clause (b), the employee shall attach with his return of income a certificate from the hospital specifying the disease or ailment for which medical treatment was required and the receipt for the amount paid to the hospital.

exclusion from fringe benefit or amenity34

EXCLUSION FROM FRINGE BENEFIT OR AMENITY

SANJAY CHOKSHI

any portion of the premium paid by an employer in relation to an employee, to effect or to keep in force an insurance on the health of such employee under any scheme approved by the Central Government or the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999), for the purposes of clause (ib) of sub-section (1) of section 36 ;

any sum paid by the employer in respect of any premium paid by the employee to effect or to keep in force an insurance on his health or the health of any member of his family under any scheme approved by the Central Government or the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999), for the purposes of section 80D ;

exclusion from fringe benefit or amenity35

EXCLUSION FROM FRINGE BENEFIT OR AMENITY

SANJAY CHOKSHI

any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family other than the treatment referred to in clauses (i) and (ii); so, however, that such sum does not exceed fifteen thousand rupees in the previous year.

exclusion from fringe benefit or amenity36

EXCLUSION FROM FRINGE BENEFIT OR AMENITY

SANJAY CHOKSHI

any expenditure incurred by the employer on—

medical treatment of the employee, or any member of the family of such employee, outside India;

travel and stay abroad of the employee or any member of the family of such employee for medical treatment ;

travel and stay abroad of one attendant who accompanies the patient in connection with such treatment, subject to the condition that—

the expenditure on medical treatment and stay abroad shall be excluded from perquisite only to the extent permitted by the Reserve Bank of India; and

the expenditure on travel shall be excluded from perquisite only in the case of an employee whose gross total income, as computed before including therein the said expenditure, does not exceed two lakh rupees.

exclusion from fringe benefit or amenity37

EXCLUSION FROM FRINGE BENEFIT OR AMENITY

SANJAY CHOKSHI

any sum paid by the employer in respect of any expenditure actually incurred by the employee for any of the purposes specified in clause (vi) subject to the conditions specified in or under that clause.

section 17 3 definition of profit in lieu of salary includes

SECTION 17(3)– DEFINITION OF PROFIT IN LIEU OF SALARY INCLUDES

SANJAY CHOKSHI

The amount of any compensation due to or received by an assessee from his employer or former employer at or in connection with the termination of his employment or the modification of the terms and conditions of his employment;

section 17 3 definition of profit in lieu of salary includes39

SECTION 17(3)– DEFINITION OF PROFIT IN LIEU OF SALARY INCLUDES

SANJAY CHOKSHI

any payment [other than any payment referred to in clause (10), (10A), (10B), (11), (12) (13)] or (13A)] of section (10)], due to or received by an assessee from an employer or a former employer or from a provident or other fund, to the extent to which it does not consist of contributions by the assessee or interest on such contributions or any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy.

section 17 3 definition of profit in lieu of salary includes40

SECTION 17(3)– DEFINITION OF PROFIT IN LIEU OF SALARY INCLUDES

SANJAY CHOKSHI

any amount due to or received, whether in lump sum or otherwise, by any assessee from any person

before his joining any employment with that person; or

after cessation of his employment with that person.

rule 3 valuation of perquisites

Rule 3– VALUATION OF PERQUISITES

SANJAY CHOKSHI

Valuation on the basis amount paid or cost of manufacture, or cost of providing such services:

Sweeper, Gardner, Watchmen or Personal Attendant

Gas, Electric Energy or Water

Education to any member

Carriage of passengers

Travel, tour and accommodation.

rule 3 valuation of perquisites42

Rule 3– VALUATION OF PERQUISITES

SANJAY CHOKSHI

Valuation in case of Loans:

Interest on similar loans charged by SBI as on 1/4 of that FY on the maximum outstanding monthly balance

No interest on loan given for medical treatment of diseases specified in rule 3A. If Loans are reimbursement against Mediclaim, interest on such outstanding shall be considered as perquisites.

rule 3 valuation of perquisites43

Rule 3– VALUATION OF PERQUISITES

SANJAY CHOKSHI

Valuation on the basis amount paid or cost of manufacture or of provision of services:

Food and non alcoholic beverages provided by employer if the same is in excess of Rs. 50/- per meal or tea or snacks provided during working hours

Value of gifts or vouchers on ceremonial occasions if the same exceeds Rs. 5000/- p.a.

rule 3 valuation of perquisites44

Rule 3– VALUATION OF PERQUISITES

SANJAY CHOKSHI

Valuation on the basis amount paid or cost of manufacture or of provision of services:

Personal Expenses paid through credit card including membership and annual fees.

If exclusively for official purpose, the valuation shall be nil.

Proper records to be maintained and a certificate to that effect to be given by employer

rule 3 valuation of perquisites45

Rule 3– VALUATION OF PERQUISITES

SANJAY CHOKSHI

Valuation in case of club membership:

Actual expenditure incurred or reimbursement

In case of corporate membership, initial fees paid for acquiring such membership not to be included

If exclusively for official purpose, the valuation shall be nil, provided proper records to be maintained and a certificate to that effect to be given by employer

Not applicable to use of sports, health club or similar facility provided uniformly to all employees

rule 3 valuation of perquisites46

Rule 3– VALUATION OF PERQUISITES

SANJAY CHOKSHI

Valuation of use of moveable asset other than furniture and computers:

In case owned by employee – 10% of cost

In case rented – actual rent paid

rule 3 valuation of perquisites47

Rule 3– VALUATION OF PERQUISITES

SANJAY CHOKSHI

Valuation in case of transfer of moveable asset:

Actual cost of asset reduced by depreciation @ 10% for each completed year on WDV method

In case of Computers the rate of Depreciation shall be 50%

In case of Cars the rate of Depreciation shall be 20%

rule 3 valuation of perquisites48

Rule 3– VALUATION OF PERQUISITES

SANJAY CHOKSHI

Valuation of any other benefit, amenity, right or privilege:

Cost to employer under an arm’s length price

Not applicable in relation to telephone and mobile phone.

thank you

THANK YOU

SANJAY CHOKSHI

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