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CENTRAL GOVERNMENT EMPLOYEES - INCOME TAX

INCOME TAX RATES

ASSESSMENT YEAR 2010-2011

RELEVANT TO FINANCIAL YEAR 2009-2010

I. TAX RATES FOR INDIVIDUALS OTHER THAN II & III

Upto Rs.1,60,000 NIL
Rs.1,60,000 to 3,00,000 10% of the amount exceeding Rs.1,60,000
Rs.3,00,000 to 5,00,000 Rs.14,000 + 20% of the amount exceeding Rs.3,00,000
Rs.5,00,000 & above Rs.54,000 + 30% of the amount exceeding Rs.5,00,000


II. TAX RATES FOR RESIDENT WOMEN BELOW 65 YEARS

Upto Rs.1,90,000 NIL
Rs.1,90,000 to 3,00,000 10% of the amount exceeding Rs.1,90,000
Rs.3,00,000 to 5,00,000 Rs.11,000 + 20% of the amount exceeding Rs.3,00,000
Rs.5,00,000 & above Rs.51,000 + 30% of the amount exceeding Rs.5,00,000


III. TAX RATES FOR INDIVIDUAL RESIDENTS AGED 65 YRS AND ABOVE

Upto Rs.2,40,000 NIL
Rs.2,40,000 to 3,00,000 10% of the amount exceeding Rs.2,40,000
Rs.3,00,000 to 5,00,000 Rs.6,000 + 20% of the amount exceeding Rs.3,00,000
Rs.5,00,000 & above Rs.46,000 + 30% of the amount exceeding Rs.5,00,000


EDUCATION CESS ON INCOME TAX

The amount of Income-tax and Surcharge shall be further increased by Education Cess of 3% on Income-tax plus Surcharge.

SALARY - Section 17(1)

Salary defined under section 17(1) of the Income Tax Act as the term salary normally includes wages or salary due (whether paid or not), annuity, pension, gratuity, fees, commission, perquisites, advance salary paid or allowed, payment in lieu of leaves not availed, and any other payment received by an employee from the employer received during the year.

EXEMPTIONS/DEDUCTIONS FROM SALARY

A. ALLOWANCES

An allowance is a fixed money or substance or compensation given regularly in addition to salary to meet some service requirements. An allowance can be fully taxable, partly taxable or not taxable. The taxable allowances include city compensatory allowance, tiffin allowance, fixed medical allowance and servant allowances. The encashment of any concession is also taxable.

1. HOUSE RENT ALLOWANCE - Section 10(13A) - r/w rule 2A

(a) Actual HRA received : Rs."A"
(b) Rent paid in excess of 10% of Salary: Rs."B"
(c) 50% of Salary in Metro Cities or 40% of Salary in other cities: Rs."C"
(d) Least of (A), (B), (C) is exempted.

NOTE: The term “Salary” includes basic pay and DA, but excludes other allowances and perquisites. Exemption is not available where an employee lives in his own house, or in a house for which he does not pay any rent.

2. CONVEYANCE ALLOWANCE - Section 10(14) r/w rule 2BB

Any allowance granted to meet the expenditure incurred wholly, necessarily and exclusively on conveyance in performance of the duties of office and so certified by the employer is exempt u/s.10(14).

3. TRANSPORT ALLOWANCE - Section 10(14) r/w rule 2BB

Any allowance granted to an employee to meet the expenditure for the purpose of commuting between the place of his residence and the place of his duty to the extent upto Rs.800/- per month is exempt u/s.10(14).

4. CHILDREN EDUCATION ALLOWANCE

Children Education Allowance is not taxable to the extent Rs. 100/- per month per child up to a maximum of two children. Any allowance granted to an employee to meet the hostel expenditure on his child upto Rs. 300/- per child up to a maximum of two children also is exempted.

5. LEAVE TRAVEL CONCESSION - Section 10(5)

The amount paid for the employee and his family for travel to any place in India or for travel to any place in India after retirement is exempted. If the journey is by rail, the amount of air-conditioned first class rail fare by the shortest route or the amount spent, whichever is less, is not taxable. If the travel is by air, then the economy class fare is not taxable. The exemption is available on the expenses for two journeys in a block of four calender years. The current four-years block is from January 1, 2006 to December 31, 2009.

6. MEDICAL REIMBURSEMENT - Section 17(2)

An amount of Rs.15,000 or the actual amount reimbursed by the employer whichever is less is exempt u/s.17(2).

7. PROFESSIONAL TAX

Professional Tax levied by the State Government is allowable as a deduction from Gross Salary provided it has been paid.

B. OTHER RECEIPTS

1. VOLUNTARY RETIREMENT – Section 10(10C)

The Benefit of section 10(10C) has been extended to the employees of the Central and State Government Employee from 1.4.2001 i.e. from the assessment year 2001-2002 vide section 5(a) of the Finance Act, 2001. Amount received or receivable (i.e., in installments) by an employee on his voluntary retirement in accordance with any scheme of Voluntary Retirement is exempt to the extent of Rs.5,00,000, provided the VRS is in accordance with Rule 2BA of IT Rules.

2. LEAVE ENCASHMENT

The cash equivalent of unutilised earned leave will not form part of total income if received on retirement in one of the following circumstances.

  • In respect of payment received by an employee of the Central Government or State Government as the cash equivalent of the leave salary in respect of the period of earned leave  at his credit at the time  of his retirement whether on superannuation or otherwise.
  • In the case of others, concerning the category of leave specified at (a) above, the exemption is limited to the cash equivalent of leave salary related to unutilised leave of upto 10 months, calculated on the average salary of the 10 months preceding the month  of retirement, or Rs. 2,40,000/- whichever is lower.

Entitlement of leave for the purposes of this provision shall be deemed to be limited to 30 days' leave for each year of actual service.

Where an employee receives such payments from more than one employer in the same previous year, the aggregate amount exempted will be subject to the limit indicated above.

Where he has received such a payment for an earlier previous years also, the amount exempt during the current year will be reduced by the amount which was not included in the total income earlier as cash equivalent of unutilised earned leave.

3. STATUTORY PROVIDENT FUNDS & PUBLIC PROVIDENT FUNDS

The history of the Provident Fund legislation in India dates back to the year 1919. Various provident fund schemes were first framed u/s 96-B of the Government of India Act, 1919. Later, the Provident Fund Act, 1925 was enacted to amend and consolidate the laws relating to both Government and other Provident Funds. A statutory provident fund is set up under the provisions of the Provident Fund Act, 1925. This fund is maintained by Government and Semi Government organizations, local authorities, railways, universities and recognized educational institutions. Retired employees normally will not be concerned with such funds after their retirement.

The Finance Act, 1968 amended section 10(11) to provide for exemption of payments made from a notified fund also. The Central Government has notified the Public Provident Fund under the Public Provident Fund Scheme, 1968 (Notification No. SO 2430 dated 2.7.1968) as such a fund.

Any member of the Public whether a salaried employee, pensioner, a self employed person or businessman can participate in the Public Provident Fund by opening an account at any branch of the State Bank of India or its subsidiaries. Any amount in multiples of Rs. 5 (subject to a minimum of Rs. 100 and a maximum of Rs. 60000 in a year) can be deposited in this account. The accumulated balance is payable after 15 years. Withdrawals can however, be made to the extent indicated after every 5 year. The compound rate of interest on this account is now 9.5%. It was 12% upto 15.1.2000 and 11% from 15.4.2000 to 28.2.2001 (compounded interest).

The Income-tax Law relating to payments received from or made to such statutory provident funds or the Public Provident Fund can be summed up as under:

  • Payments made to subscriber/employee from such a fund are not liable to tax [Sec.10(11)].
  • The annual contribution made by the employer to a statutory provident fund is not chargeable to tax in the hands of the employees while he is in service.
  • The employee's own contribution subject to fulfillment of certain conditions is eligible for tax rebate with effect from the assessment year 1991-92 under section 88 along with life insurance premia, contribution to the Unit Linked Insurance Plan, sums paid to effect or keep in force a contract for deferred annuity etc.
  • The interest   credited to individual accounts of such statutory provident funds or the Public Provident Fund, from year to year, does not attract income tax.

STANDARD DEDUCTION u/s. 16(1) IS NOT ALLOWABLE FOR A.Y. 2010-11

DEDUCTIONS FROM HOUSE PROPERTY

1. DEDUCTION - Section 23(1)

For let out property, amount paid by the owner towards taxes levied by any local authority in respect of the property is deductible from Annual value(taxes pertaining to any previous years).

2. DEDUCTION - Section 24(a)

For let out property, deduction of 30% of the Net Annual Value is allowed. No separate deduction for Repairs, Collection Charges, Insurance Premium, Annual Charge and Ground Rent.

3. INTEREST ON BORROWED LOAN - Section 24(b)

FOR SELF OCCUPIED PROPERTY

a. If Property is acquired or constructed with loan taken after 01/04/99 and construction is completed within 3 years from the end of the financial year in which the capital was borrowed – Rs.1,50,000 or actual interest paid/payable whichever is less is deductible.
b. If new housing loan is taken for repayment of old loan (old loan taken after 1/4/99) – Rs.1,50,000 or actual interest paid/payable whichever is less is allowed as deduction.
c. If Property is acquired or constructed with loan taken before 01/04/99, Rs.30,000 or actual interest paid/payable whichever is less is allowed as deduction.
d. If loan taken for Repairs, renewal, reconstruction of property, Rs.30,000 or actual interest paid/payable whichever is less is allowed as deduction.
FOR LET OUT PROPERTY, actual interest paid/payable can be claimed as deduction.
ONLY OWNER OF THE HOUSE PROPERTY CAN AVAIL THE ABOVE DEDUCTIONS.

CAPITAL GAINS

With effect from 01/10/2004, Long Term Capital Gains arising on sale of equity shares or unit of equity oriented fund through recognized stock exchange is exempt if such transaction is chargeable to Securities Transaction Tax (u/s. 10(38)).

With effect from 01/10/2004, Short Term Capital Gains arising on sale of equity shares or unit of equity oriented fund through recognized stock exchange is subject to tax at the rate of 10% if such transaction is chargeable to Securities Transaction Tax.

EXEMPTION - Section 54EC

The Capital Gain arising out of sale of long term capital asset can be invested in National Highways Authority of India, Rural Electrification Corporation Limited, within six months from the date of sale (Lock-in period is 3 years).

STANDARD DEDUCTION FOR FAMILY PENSION - Section 57(iia)

An amount of Rs.15,000 or 331/3% of family pension whichever is less is allowed as deduction. If an assessee receives arrears of family pension, then Relief u/s. 89(1) can be claimed by him.
Family Pension received by the widow or children or nominated heirs, as the case may be, of a member of the armed forces (including para-military forces) of the union, where the death of such member has occurred in the course of operation is exempt.

EXEMPTIONS – OTHER SOURCES

Any income by way of Dividends from company, Income received in respect of units from the Unit Trust of India, Income received in respect of the units of a mutual fund are exempt.

DEDUCTIONS FROM GROSS TOTAL INCOME (CHAPTER VIA)

Sl. No. I.T. Sec. Nature of Deduction Amount of deduction
1.a. 80 CCE, 80 C Life Insurance Premia, PF, PPF, NSC, ELSS, Units of Mutual Fund referred to u/s.10(23D), Tuition Fees(max. 2 children), Repayment of Principal of Housing loan, Bank Fixed Deposit of 5 yrs period, notified Bonds of NABARD etc. Maximum overall deductions allowed u/s. 80C, 80CCC & 80CCD is Rs.1,00,000.
b. 80 CCC Life Insurance Premia, PF, PPF, NSC, ELSS, Units of Mutual Fund referred to u/s.10(23D), Tuition Fees(max. 2 children), Repayment of Principal of Housing loan, Bank Fixed Deposit of 5 yrs period, notified Bonds of NABARD etc.
c. 80 CCD Contribution to Central Government Pension Schemes. Upto 10% of salary with matching contribution from Government.
2. 80 D (a) Medical Insurance Premium paid by Cheque for policies taken from General Insurance Corporation /other approved Insurance Regulatory and Development Authority. Upto Rs.15,000.
(b) For Senior Citizens Upto Rs.20,000.
3. 80 DD (a) Any expenditure for Medical, Nursing & Rehabilitation incurred on dependant suffering from permanent disability including blindness, mental retardation, autism, cerebral palsy or multiple disabilities Rs.50,000 with an additional Rs.50,000 if the disability is severe exceeding 80%
(b) Deposits under LIC, UTI’s Scheme & other IRDA approved insurers for the benefit of physically handicapped dependent
4. 80 DDB (a) Actual expenditure incurred on Medical treatment of self or dependant or a member of HUF suffering from terminal diseases like Cancer, AIDS, Renal failure etc. Upto Rs.40,000.
(b) For Senior Citizens (self or dependent on whom expenditure on medical treated is taken) Upto Rs.60,000.
5. 80 E Interest on loan taken from Financial/Charitable Institutions for Self/Spouse/Children for pursuing Higher Education (for a max. period of 7 yrs) Actual interest repaid.
6. 80 G (a) Donations made to National Defence Fund, Prime Minister’s Relief Fund, approved Funds of reputed Educational Institutions, National Trust for Welfare of persons with Autism, Cerebral Palsy etc. 100% of donation.
(b) Donations made to Jawaharlal Memorial Fund, PM’s Drought Relief fund, Any approved Charitable Institution/Trust, Religious Institutions, a corporation established by the Government for promoting interest of the members of a Minority Community 50% of donation restricted to 10% of adjusted gross total income.
7. 80 GG Deduction in respect of rents paid, provided the assessee is not in receipt of HRA and no house is owned by self, spouse, minor child or HUF in the place of work subject to filing of declaration in Form No.10BA 25% of income or rent paid in excess of 10% of income or ceiling of Rs.24,000 p.a whichever is less.
8. 80 U Persons suffering from Permanent Physical Disability as specified in Rule 11D Rs.50,000 (Rs.75,000 in case of severe disability).

FRINGE BENEFIT TAX (FBT)

Fringe Benefit Tax is a tax for the Fringe Benefits provided to the Employee by his Employer as defined u/s. 115WB(1) and (2). It means any privilege, service, facility or amenity, directly or indirectly received by present & former Employees.

Fringe Benefits Base Value of FBT
Tour and Travel 5
Entertainment 20
Provision of Hospitality 20
Conference 20
Sales Promotion including publicity 20
Employee Welfare 20
Conveyance 20
Use of Hotel, Boarding & Lodging 20
Repairs, running, maintenance & depreciation on motor cars 20
Repairs, running, maintenance & depreciation on Aircraft 20
Use of Telephone 20
Maintenance of Guest House 20
Festival Celebrations 50
Use of Health Clubs 50
Use of any other Club facility 50
Gifts 50
Scholarships 50
Free or concessional tickets for private journey 100
Contribution by Employer to Approved Superannuation Fund 100

Fringe Benefit Tax (FBT) is calculated @ 30% (+SC+EC) on the percentage value of Fringe Benefits.

INCOME TAX ON FRINGE BENEFITS

The tax on fringe benefits provided by their employer to their employee as defined u/s.115WB(1) and (2) is payable by the Employer.

PENALTY - Section 271F

If a person who is required to furnish a return of income as required under section 139(1) or by the proviso to sub-section, fails to furnish such return before the end of the relevant assessment year, shall be liable to pay by way of penalty a sum of Rs.5,000.

INTEREST - Section 234A

Where the return of Income of any assessment year u/s. 139(1) or 139(4) or in response to a notice u/s.142(1), is furnished after the due date as specified in sub-section 1 of section 139, or is not furnished, the assessee shall be liable to pay simple interest at the rate of one percent for every month or part of a month comprised in the period commencing on the date immediately following the due date.

INTEREST - Section 234B

Where an assessee who is liable to pay advance tax under section 208 has failed to pay such tax or, where the advance tax paid by such assessee under the provisions of section 210 is less than 90% of the assessed tax, the assessee shall be liable to pay simple interest at the rate of one percent for every month or part of a month comprised in the period from the 1st day of April following the financial year.

INTEREST - Section 234C

Where an assessee other than a Company, who is liable to pay advance tax under section 208 has failed to pay such tax or,
1) The advance tax paid by the assessee on his current income on or before the 15th day of September is less than 30% of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of December is less than 60% of the tax due on the returned income, then, the assessee shall be liable to pay simple interest at the rate of one percent per month for a period of three months on the amount of the shortfall from 30% or, as the case may be, 60% of the tax due on the returned income.
2) The advance tax paid by the assessee on his current income on or before the 15th day of March is less than the tax due on the returned income, then, the assessee shall be liable to pay simple interest at the rate of one percent on the amount of the shortfall from the tax due on the returned income.

DUE DATES FOR FILING RETURNS OF INCOME

All Individuals/HUF/Firms deriving Income from Salary, House Property, Capital Gains, Business or Other Sources and not covered under section 44AB are required to file the Return of Income by 31st July. All Tax Audit Cases covered under section 44AB, Company returns are required to file the Return of Income by 31st October.

PERMANENT ACCOUNT NUMBER (PAN)

Every assessee is required to obtain 10 alpha numeric Permanent Account Number (PAN) and quote the same in his returns, challans & correspondence. PAN can be obtained by applying in new Form No.49A at the designated Service Centres of UTITSL OR NSDL (Log on to our website). PAN is essential for processing the Return of Income and for giving credit for taxes paid. If a person who is required to quote his Permanent Account Number fails to do so or intimates false number, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum of Rs.10,000.

INCOME TAX PAYMENTS

Advance tax payments and Self-assessment tax payments have to be made in Challan No.280. Please obtain counterfoil of challan containing Challan Identification Number (CIN) from the Bank and enclose copy of the same with the return and quote CIN in the return.


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