Income From Salary Flashcards
Who is employee and employer?
Employee means any individual engaged in employment.
Employer means any person (individual, AOP, company) who engages and remunerates the employee.
Describe employment?
Employment includes –
_A directorship or other office involved in the management of a company
_A position which gives the employee a fixed or ascertainable remuneration ; or
_The holding or acting in any public office
When does a salary is treated to be received?
A person shall be treated as having received an amount, benefit or perquisite if it is;
a) Actually received by the person
b)applied:
On behalf of the person
At instruction of the person or
Under any law; or
c) made available to the person
(See examples on book)
Give Examples of salaries which are included in income from salary?
Salary received by an employee from any employment whether of a revenue or capital nature.
a) Any pay wages or remuneration provided to an employee including leave pay, payment in lieu of leave, over time bonus, commission, fees gratuity or work conditions supplements(such as for unpleasant or dangerous working conditions).
b) any perquisite
c)any allowance provided by an employer including a cost of living subsistence rent, utilities, education, entertainment or travel allowance
excluding allowances solely expended for performing official duties;
Explanation:
1-allowance which is paid in monthly salary on fixed basis or percentage of salary or
2-allowance which is not wholly exclusively necessarily or actually spent on behalf of the employer
How reimbursement is income from salary.
d) An expense of an employee that is paid or reimbursed by the employer other than reimbursements for performing official duties is considered income from salary.
Point e section 12?
The amount of any profits in view of or in addition to salary including any amount received-
By a person for agreeing to enter into an employment relationship By a person for agreeing to any conditions of employment or any changes to those conditions On termination of employment including compensation for redundancy or loss of employment and Golden handshake payments From a provident or other fund if it is employer contribution and interest Buy a person for agreeing to a restrictive covenant for any past present or prospective employment.
What deductions are allowed from income from salary?
No deduction shall be allowed for an expense paid by the employee under the head salary.
When an amount shall be treated as received by an employee?
And amount shall be treated as received by an employee if it is paid ;
By the employee’s employer, an associative of the employer or a third party under an arrangement with the employer
By a past or prospective employer
To the employee or an associate of the employee or a third party under an agreement with the employee.
An employee who has received an amount on termination of employment including compensation for redundancy or loss of employment and Golden handshake may, by notice to commissioner, elect for the amount to be taxed at following rate:-
A/B%
A: is the tax paid by the employee on the employee’s taxable income for three preceding tax years and
B: is the employees taxable income for three preceding tax years.
When salary is paid in arrears?
Where;
any salary is paid to an employee in arrears and
Because of this employee’s income is charged at higher rate as compared to the rate that was applicable if the salary was paid in the year he rendered the services,
He may, give notice to the commissioner and elect the rate applicable in the year in which he earned salary.
What will be the tax treatment if employer has provided employee a motor vehicle in a tax year?
Partly for personal and partly for official use:
5% of;
a) the cost of the employer for acquiring the motor vehicle; or
b) the fair market value of the motor vehicle at the commencement of the lease, if it is taken on lease.
For personal use only:
10% of;
a) the cost to the employer for acquiring the motor vehicle; or
b) the fair market value of the motor vehicle at the commencement of the lease if it has taken on lease.
For official use:
0%
When services of a housekeeper driver Gardner or other domestic assistant are provided?
When the services of a housekeeper, driver Gardner or other assistant are provided by an employer to an employee the following shall be added in the salary income;
-the salary paid by the employer to a person providing service less amount paid by employee to employer.
Services include provin of any facility
When utilities are provided by an employer to an employee?
If utilities are provided by an employer to an employee the salary shall include the fair market value ( jobill per likhi hui) of the utilities less amount paid by the employee to employer.
utilitiez include electricity gas water and telephone.
When loan is provided by an employer to an employee?
When loan is provided by an employer to an employee the salary shell include-
Scenario :
Where no profit on loan is paid by an employee.
Amount to be added in salary income :
Interest on loan calculator at benchmark rate
Scenario:
Where interest on loan paid by employee is less than benchmark rate.
Amount to be added in salary income:
The difference between the profit onloan paid by the employee and profit on loan computed at the benchmark rate.
Exceptions on loan provided by an employed to an employee?
Nothing will be added in salary income if;
-Loan is up to 1000,000
-The interest benefit is arising because employee has wave the interest to employer when employee had provided the loan to the employer.
