Thursday, January 21, 2016

Examples of Income Tax Calculation

Examples of Income Tax Calculation

SOME ILLUSTRATIONS
Example 1
For Assessment Year 2016-17
(A)
Income tax in the case of an employee (Male or Female) below the age of sixty years and having gross salary income of:
i) Rs.2,50,000/- ,
ii) Rs.5,00,000/- ,
iii) Rs.10,00,000/-
iv) Rs.20,00,000/-. and v) Rs. 1,10,00,000/-
(B) What will be the amount of TDS in case of above employees, if PAN is not submitted by them to their DDOs/Offices:
ParticularsRupees (i)Rupees (ii)Rupees (iii)Rupees (iv)Rupees (v)
Gross Salary Income (including allowances)2,50,0005,00,00010,00,00020,00,0001,10,00,000
Contribution of G.P.F.45,00050,0001,00,0001,00,0001,00,000
  Computation of Total Income and tax payable thereon 
ParticularsRupees (i)Rupees (ii)Rupees (iii)Rupees (iv)Rupees (v)
Gross Salary2,50,0005,00,00010,00,00020,00,0001,10,00,000
Less: Deduction U/s 80C45,00050,0001,00,0001,00,0001,00,000
Taxable Income2,05,0004,50,0009,00,00019,00,0001,09,00,000
      
(A)             Tax thereonNil18,000*1,05,0003,95,0003095000
Surcharge    3095000
Add:(i)    Education Cess @ 2%.(ii)     Secondary and Higher Education Cess @1% Nil Nil 360180 21001050 7,9003950 68,09034,045
Total tax payableNil18,5401,08,15040685035,06,635
      
(B) TDS under sec. 206AA in case where PAN is not furnished by the employeeNil38,0001,30,00040685035,06,635
include Rebate of Rs 2000 u/s 87A
Example 2
For Assessment Year 2016-17
 Calculation of Income Tax in the case of an employee below the age of sixty years having a handicapped dependent (With valid PAN furnished to employer). 
S.No.ParticularsRupees
1Gross Salary4,20,000
2Amount spent on treatment of a dependant, being person with disability (but not severe disability)7000
3Amount paid to LIC with regard to annuity for the maintenance of a dependant, being person with disability( but not severe disability)60,000
4GPF Contribution25,000
5LIP Paid10,000
6Interest Income on Savings Account12,000
 Computation of Tax 
S.No.ParticularsRupees
1Gross Salary4,20,000
2Add: Income from Other SourcesInterest Income on Savings AccountRs 12,000
3Gross Total Income4,32,000
4Less: Deduction U/s 80DD (Restricted to Rs.60,000/- only)60,000
5Less:  Deduction U/s 80C (i) GPF Rs.25,000/-(ii) LIP   Rs.10,000/-   = Rs.35,000/-35,000
6Less: Deduction u/s 80TTA on Interest Income on savings account (restricted to Rs 10000/-)10000
7Total Income3,27,000
8Income Tax thereon/payable(includes Rebate of Rs 2000 as per Section 87A)5,700
9Add:(i).       cation Cess @2%(ii).       Secondary and Higher Education Cess @1% 11457
10Total Income Tax payable5,871
11Rounded off to5,870
 Calculation of Income Tax in the case of an employee below age of sixty years where medical treatment expenditure was borne by the employer (With valid PAN furnished to employer). 
S.No.ParticularsRupees
1Gross Salary5,20,000
2Medical Reimbursement by employer on the treatment of self and dependent family member35,000
3Contribution of GPF20,000
4LIC Premium20,000
5Repayment of House Building Advance25,000
6Tuition fees for two children60,000
7Investment in Unit-Linked Insurance Plan30,000
8Interest Income on Savings Account8,000
9Interest Income on Time Deposit15,000
 Computation of Tax
S.No.ParticularsRupees
1Gross Salary5,20,000
2Add: Perquisite in respect of reimbursement of Medical ExpensesIn excess of Rs.15,000/- in view of Section 17(2)(v)20,000
3Income from Other Sourcesi)           Interest  Income  on Savings Account       Rs  8,000ii)          Interest  Income  on Savings Account       Rs 15,00023,000
4Gross Total Income5,63,000
5a.Less:  Deduction U/s 80C(i)   GPF                                                                Rs.20,000/-(ii)    LIC                                                                  Rs.20,000/-(iii)      Repayment of House Building Advance      Rs.25,000/-(iv)       Tuition  fees  for two children                      Rs.60,000/-(v)     Investment in Unit-Linked Insurance Plan    Rs.30,000/-Total           =Rs.1,55,000/- Restricted to Rs. 1,58,000/-b. Less: Deduction u/s 80TTA on Interest Income on savings account (restricted to Rs 8000/- – available only on Savings account interest) Rs 8000Total deduction available Rs 1,58,000/-            1,58,000
6Total Income4,05,000
7Income Tax thereon/payable (after rebate u/s 87A)15,800
8Add:(i).       cation Cess @2%(ii).       Secondary and Higher Education Cess @1% 276138
9Total Income Tax payable14,214
10Rounded off to14,214
Illustrative calculation of House Rent Allowance U/s 10 (13A) in respect of residential accommodation situated in Delhi in case of an employee below the age of sixty years (With valid PAN furnished to employer). 
S.No.ParticularsRupees
1Salary3,50,000
2Dearness Allowance2,00,000
3House Rent Allowance1,40,000
4House rent paid1,44,000
5General Provident Fund36,000
6Life Insurance Premium4,000
7Subscription to Unit-Linked Insurance Plan50,000
 Computation of total income and tax payable thereon 
S.No.ParticularsRupees
1Salary + Dearness Allowance + House Rent Allowance 3,50,000+2,00,000+1,40,000 = 6,90,0006,90,000
2Total Salary Income6,90,000
3Less: House Rent allowance exempt U/s 10(13A):
Least of:(a). Actual amount of  HRA received=                         1,40,000 (b). Expenditure of rent in excess of 10% of salary(including D.A. presuming that D.A. is takenfor retirement benefit)  (1,44,000-55,000)  =            89,000(c).  50% of Salary(Basic+ DA)                         =          2,75,000
      89,000
 Gross Total Income6,01,000
 Less:  Deduction U/s 80C(i)   GPF                                                                Rs.36,000/-(ii)    LIC                                                                   Rs. 4,000(iii)      Investment  in  Unit-Linked Insurance Plan  Rs.50,000/-Total           =Rs.1,14,000/-    90,000
3Total Income5,11,000
 Tax payable27,200
 Add:(i).       cation Cess @2%(ii).       Secondary and Higher Education Cess @1% 544272
 Total Income Tax payable28016
 Rounded off to28020
For Assessment Year 2016-17 
Illustrating valuation of perquisite and calculation of tax in the case of an employee below age of sixty years of a private company in Mumbai who was provided accommodation in a flat at concessional rate for ten months and in a hotel for two months ( With valid PAN furnished to employer).
S.No.ParticularsRupees
1Salary7,00,000
2Bonus1,40,000
3Free gas, electricity, water etc. (Actual bills paid by company)40,000
4(a)Flat at concessional rate (for  ten month).     @ Rs.36000/month3,60, 000
4(bHotel rent paid by employer (for two month)1,00,000
4(c)Rent recovered from employee.60,000
4(d)Cost of furniture.2,00,000
5Subscription to Unit Linked Insurance Plan50,000
6Life Insurance Premium10,000
7Contribution to recognized P.F.42,000

COMPUTATION OF TOTAL INCOME AND TAX PAID THEREON:

S.No.ParticularsRupees
1Salary7,00,000
2Bonus1,40,000
3Total Salary(1+2) for Valuation of Perquisites8,40,000
Valuation of perquisites
4(a)Perquisite for flat:Lower of (15% of salary for 10 months=Rs.1,05,000/-) and (actual rent paid= Rs 3,60,000) i.e. Rs. 1,05,000             1,38,600
4(b)Perquisite for hotel :Lower of (24% of salary of 2 months=Rs 33,600) and (actual payment= Rs 1,00,000)  i.e. Rs 33,600
4(c)Perquisites for furniture(Rs.2,00,000) @ 10%  of cost   Rs. 20,000
4(c)(i)Total of [4(a)+(b)+(c)] (1,05,000+ 33,600+ 20,000)Rs.158,600Less:  rent  recovered                                                (-)Rs. 60,000=                                                                                      Rs. 98,600
4(d)AddPerquisite for free gas, electricity, water etc. Rs.40,000 (+) Rs 98,600   [4(c)(i)] =                   Rs1,38,600Total perquisites
5Gross Total Income (Rs.8,40,000+ 1,38,600)9,78,600
6Gross Total Income9,78,600
7Less: Deduction U/s 80C:(i).  Provident Fund (80C)                                             :42,000(ii). LIC   (80C)                                                            :10,000(iii). Subscription to Unit Linked Insurance Plan(80C) :50,000/-Total                                                = 1,02,000Restricted to Rs 1,02,000 u/s 80C      1,02,000
8Total Income8,76,600

9Tax Payable1,00,320
10Add:(i).         cation Cess @2%(ii).       Secondary and Higher Education Cess @1% 2,0061,003
11Total Income Tax payable1,03,329
12Rounded off to1,03,330
 Example 6
For Assessment Year 2016-17 

Illustrating Valuation of perquisite and calculation of tax in the case of an employee below the age of 60 years of a Private Company posted at Delhi and repaying House Building Loan  ( With valid PAN furnished to employer). 

S.No.ParticularsRupees
1Salary4,00,000
2Dearness Allowance1,00,000
3House Rent Allowance1,80,000
4Special Duties Allowance12,000
5Provident Fund60,000
6LIP10,000
7Deposit in NSC VIII issue30,000
8Rent Paid by the employee for house hired by her1,20,000
9Repayment of House Building Loan (Principal)60,000
10Tuition Fees for three children (Rs.10,000 per child)30,000
 Computation of total income and tax payable thereon 
S.No.ParticularsRupees
1Gross Salary (Basic+DA+HRA+SDA)6,92,000
 Less: House rent allowance exempt U/s 10 (13A) Least of:(a). Actual amount of  HRA received.                     :Rs.1,80,000 (b). Expenditure on rent in excess of 10% of salary(Including D.A.)assuming D.A. is included forretirement benefits (1,20,000- 50,000)               :Rs. 70,000(c). 50% of salary  (including D.A)                           : Rs. 2,50,000      70,000
2Gross Total Taxable Income6,22,000
 Less:  Deduction U/s 80C(i).         Provident   Fund                                         60,000(ii).      LIP                                                              :   10,000(iii).     NSC  VIII  Issue                                         :   30,000(iv).    ayment  of  HBA                                         60,000 (v).    Tuition Fees (Restricted to two children)        :  20,000Total                   : 1,80,000Restricted to  1,50,000       1,50,000

 Total Income4,72,000
 Income Tax thereon/payable20,200
 Add:(i).       cation Cess @2%(ii).       Secondary and Higher Education Cess @1% 404202
 Total Income Tax payable20,806
 Rounded off to20,810
 Example 7 
For Assessment Year 2016-17 

A.        Calculation of Income tax in the case of a retired employee above the age of sixty years but below the age of 80 years and having gross pension of:

 iv) Rs.4,50,000/-,v)   Rs.8,00,000/- ,vi)  Rs. 12,50,000/-. B         What will be the amount of TDS in case of above employees, if PAN is not submitted by them to their DDOs/Offices: 
ParticularsRupees (i)Rupees (ii)Rupees (iii)
Gross Pension4,50,0008,00,00012,50,000
Contribution of P.P.F.70,0001,00,0001,50,000
 Computation of Total Income and tax payable thereon 
ParticularsRupees (i)Rupees (ii)Rupees (iii)
Gross Pension4,50,0008,00,00012,50,000
Less: Deduction U/s 80C70,0001,00,0001,50,000
Taxable Income3,80,0007,00,00011,00,000
    
Tax thereon (after rebate u/s 87A)6,00060,0001,50,000
Add:(i)   Education Cess @ 2%.(ii)   Secondary and Higher Education Cess @1% 12060 1200600 30001500
Total tax payable6,18061,8001,54,500
    
TDS under sec. 206AA in case where PAN is not furnished by the employee24,00090,0001,70,000
 Example 8 
For Assessment Year 2016-17 

A.        Calculation of Income tax in the case of a retired    employee above the age of 80 years and having gross pension of:

 i)    Rs.5,00,000/-,ii)  Rs.8,00,000/- ,iii) Rs. 12,50,000/-. B         What will be the amount of TDS in case of above employees, if PAN is not submitted by them to their DDOs/Offices: 
ParticularsRupees (i)Rupees (ii)Rupees (iii)
Gross Pension5,00,0008,00,00012,50,000
Contribution of P.P.F.80,0001,20,0001,50,000
 Computation of Total Income and tax payable thereon 
ParticularsRupees (i)Rupees (ii)Rupees (iii)
Gross Pension5,00,0008,00,00012,50,000
Less: Deduction U/s 80C80,0001,20,0001,50,000
Taxable Income4,20,0006,80,00011,00,000
    
Tax thereonNil36,0001,30,000
Add:(i)   Education Cess @ 2%.(ii)   Secondary and Higher Education Cess @1%  720360 26001300
Total tax payableNil37,0801,33,900
    
B. TDS under sec. 206AA in case where PAN is not furnished by the employeeNil37,0801,33,900
 Example 9
 Exemption u/s 10 (13A) 
1.       Mr. A, employed with XYZ Ltd. Up to 31.10.2015, received following emoluments : 
S.No.ParticularsRupees
1.Basic pay p.m.13,000
2.Bonus for the year received in July, 201572,000
3.Club facility (for private use only) Expenditure by employer p.m.700
4.House Rent Allowance p.m.2,800
5.Employer’s contribution to URPF p.m. (Mr. A also made equal contribution)1,000
W.e.f. 01.11.2015, Mr. A joined PQR Ltd., with following pay package :
1.Basic pay p.m.18,000
2.House Rent Allowance p.m.1,600
3.Club Facility (for private use only) Expenditure by employer p.m.1,100
4.Use of car for journey between office and residence – Employer’s expenditure p.m.600
5.Employer’s contribution to RPF p.m. (Mr. A also made equal contribution)2,000
Other particulars of Mr. A are as under :
1.Mr. A resides at Amritsar paying a monthly rent of3,500
2.Mr. A’s income from other sources95,000
3.Mr. A contributed to LIC/PPR/NSC etc.20,000
Compute Mr. A’s taxable income and tax liability for A.Y. 2016-17.
 Computation of Tax 
S.No.ParticularsRupees
1.Income from Salary 
 (a) From XYZ Ltd. 
 Basic pay (Rs.13,000 x 7)91,000
 Bonus7,200
 Club facility (Rs.700 x 7)Rupees4,900
 H.R.A. (Rs.2,800 x 7)19,600 
 Less : Exempt u/s 10(13A)15,4004,200
 Employer’s Contribution to U.R.P.F. 1,07,300
 (b)  From PQR Ltd.Rupees 
 Basic pay (Rs.18,000 x 5)90,000 
 H.R.A. (Rs.1,600 x 5)8,000 
 Less : Exempt u/s 10(13A)8,000 
 Club Facility (Rs.1,100 x 5)5,500 
 Facility of Car (not taxable as perquisite)15,400 
 Employer’s Contribution to R.P.F.95,500
 Gross Salary2,02,800
 Less: Deduction—–
 Net Salary2,02,800

2.Income from Others Sources95,000
 Gross Total Income2,97,800
 Less : Deduction u/s 80C 
 : Contribution to LIC/PPF/NSCRs. 20,000 
 : Contribution to RPF ( Rs.2000 x 5)Rs. 10,00030,000
 Total Income2,67,800
 Computation of Tax Liability 
 Tax payable on Rs.2,67,8001,780
 Less : Rebate u/s 87A1,780
 Net Income-tax payableNil
 Add : SurchargeNil
 Add : EC @ 2%
 Add : S&HEC @ 1%
 Total Tax PayableNil
  Example 10 2.      
One Computation of Taxable Salary and allowances, Deduction for Interest on Housing Loan and Deduction u/s 80C. Mr. X, a Central Govt. Officers in Delhi, is receiving Basic Pay Rs.23,720, grade Pay Rs.7,600, DA at prescribed rates, transport allowances @ Rs.3200+DA thereon, and HRA 30% of basic pay + grade pay (though living in his own house). His date of increment is Ist July. The following are other particulars of his income. Compute his taxable income and tax payable, for A.Y.2015-16. 
S.No.ParticularsRupees
1.Honorarium for valuation of answer books of a departmental examination3,000
2.Fee for work done for a  private body (1/3rd  of fees  has  been retained    byGovt.)6,000
3.Contributions to G.P.F. p.m.4,700
4.Postal Life Insurance Premium financed from G.P.F. p.m.280
5.Contribution to Central Govt. Employees Group Insurance Scheme p.m.500
6.Life Insurance Premium (being a Life Insurance Policy of Rs.1,00,000 taken in name of his wife before 1.04.2012)10,500
7.Contribution to Public Provident Fund10,000
8.Repayment of HDFC loan borrowed after 1.04.1999 EMI Rs.25,000 (Towards loan Rs.95,000, towards interest Rs.2,05,000)3,00,000
 Computation of Tax 
S.No.ParticularsRupees
1.Income from Salary 
 Basic Pay @ Rs 23,720 p.m 
 (March to June ’14)94,880 
 @ Rs 24,660 p.m * (July 2014 to Feb 2015)1,97,2802,92,160
   91,200

 Grade Pay @ Rs 7,600 p.m  
 Dearness Allowance  
 1.3.2014 to 30.06.2014 @ 100% i.e., Rs 31,320 p.m1,25,280 
 1.7.2014 to 31.12.2014 @ 107% i.e. Rs 34,518 p.m2,07,108 
 1.1.2015 to 28.02.2015 @ 113% (assumed) i.e.,  
 Rs. 36,454 p.m72,9084,05,296
 House Rent Allowance  
 @ 30% of basic pay + grade pay  
 1.3.2014 to 30.06.2014 @ Rs 9,39633,584 
 1.07.2014 to 28.2.2015 @ Rs 9,67877,4241,15,008
   
 Transport Allowance 
 1.3.2014 to 30.6.2014 @ Rs 6,400 p.m25600 
 1.7.2014 to 31.12.2014 @ Rs 6,624 p.m39,744 
 1.1.2015 to 28.2.2015 @ Rs 6,816 p.m13,632 
  78,976 
 Less: Exempt u/s 10(14) @ 800 p.m960069,376
   9,73,040
 Honorarium3,000
 Fees (2/3 retained by him)4000
 Total Salary9,80,040
 Less: Standard Deduction
 Net Salary9,80,040
2.Income from House Property 
 Self-occupied u/s 23(2)(a) deemed at nil  
 Less: Interest on HDFC Loan2,00,000 (-)2,00,000
 Gross Total Income 7,80,040
 Less: Deduction u/s 80 C  
      GPF @ Rs 4,700/-p.m56,400 
       CGEGIS @ Rs 500/- p.m6,000 
      Life Insurance Premium10, 500 
      Repayment of HDFC Loan95,000 
      Deposit in Public Provident Fund10,000 
 1,77,900 
  1,50,000
 Restricted to a maximum of Taxable Income6,30, 040
   
 Computation of Tax Liability 
 Tax payable51,008
 Add: Surcharge
 Add: Education Cess1020
 Total Tax Liability52,538