CALCULATION OF TOTAL & TAXABLE INCOME IMPORTANT RULES

CALCULATION OF TOTAL & TAXABLE INCOME IMPORTANT RULES

  a)Income from salary-

       Salary includes wages,annuity,pension and gratuity,fees compensation,perquisites,indexed pay and profits.Any compensation received in connection with termination of service and advance salary is also taxable.

1)House rent allowance

a)If House Rent Allowance is received as Cash Allowance,the amount in excess of 45% of the minimum of the time scale of the salary is taxable;

b)If rent Free unfurnished accommodation has been provided by Employer,A>L>V. exceeding 45% of initial basic salary subject to the maximum of 15% of salary,shall be included in the total income and taxable;

c)If Rent Free furnished accommodation has been provided by Employer,A.L.V.exceeding 45$ of initial basic salary subject to the maximum of 25% of salary,shall be included in the total income shall be taxable;

2)Conveyance Allowance

1)Where no coneyance provided by the employer,nor owned by the employee,cash received in excess of Rs. 3,600 per or in excess of the actual expenditure,whichever is the higher,shall be included in his income,and he will be required to pay tax thereon;

2)Where employer owns or hires the conveyance and bears running and maintenance cost,whole of the conveyance allowance if any shall be included in his income

   
3)Where conveyance is owned and maintained by employee, Rs. 3,600 or 10% of basic salary which is higher is exempt and the remainder shall be included in the total income;
4)Where free conveyance has been provided by employer,Rs. 3600 or 50% of maintenance cost,whichever is lower is lower shall be exempt and the remainder will be taxable;
5)Where employee owns and bears running and maintenance cost.the amount which exceeds Rs .4,800 or 10% of the basic salary,whichever is higher,shall be included in his income;(used exclusively for business purposes);
6)where employee owns the conveyance and wmployer bears running and maintenance cost,the amount which exceeds Rs.2,400 or 7.5% of the basic salary,whichever is higher, shall be included in his income.

3)Entertainment Allowance

      The entire amount of entertainment is taxable in the hands of the employee and will be added to his income for tax purposes.Actual expenditure incurred by an employee and reimbursed to him by the employer will not however be taxable.

4)Medical Fees & Expenses

       The amount, if any,by which the sum received by the exceeds the actual expenditure incurred by him is to be included in the salary.