February 27, 2017

Gratuity Exemption from Income Tax U/s 10(10) + Arrears Relief Calculator U/s 89(1) with Form 10E

If Gratuity is received by any employee while in employment then it is fully taxable in the hands of an employee. While if gratuity is received in the case of death or retirement or resignation, then the exemption is available up to the following limits.
In the case of Government employee – Any gratuity received by an employee of Central Government, State Government or local authority is wholly exempt from tax. This exemption is not available to employees of Statutory Corporation.
In case of employees covered by Payment of Gratuity Act –
An amount equal to the least of the following will be exempt from tax
·                          15/26 x Salary last drawn x No. Of completed years of service or part thereof in excess of 6 months.
·                          10,00,000
·                          Gratuity actually received
Notes:
In the case of seasonal establishments, 15 days is substituted by 7 days.
Salary includes basic salary and dearness allowance but does not include bonus, commission, overtime wages or any other allowance.
Part of a year exceeding six months is taken as a complete year.

Download Automated Arrears Relief Calculator U/s 89(1) with Form 10E


In case of any other employee –
An amount equal to the least of the following will be exempt from tax
·                          ½ x Average salary of last 10 months preceding the month of retirement x Completed year of service (fraction of a year is ignored)
·                          10,00,000
·                          Gratuity actually received
Notes:
Salary includes basic pay, dearness allowance to the extent it forms part of retirement benefits and percentage wise fixed commission on turnover.
If gratuity is received by an employee from more than one employer in the same previous year or in different previous years the aggregate maximum amount exempt from tax on account of gratuity cannot exceed Rs. 10,00,000.

If an employee had also rendered service to any other employer, then the period of service to such former employer is also included while calculating “completed the year of service” subject to the condition that any gratuity is not received from such former employer.
If Gratuity is received by any employee while in employment then it is fully taxable in the hands of an employee. While if gratuity is received in the case of death or retirement or resignation, then the exemption is available up to the following limits.
In the case of Government employee – Any gratuity received by an employee of Central Government, State Government or local authority is wholly exempt from tax. This exemption is not available to employees of Statutory Corporation.
In case of employees covered by Payment of Gratuity Act –
An amount equal to the least of the following will be exempt from tax
·                          15/26 x Salary last drawn x No. Of completed years of service or part thereof in excess of 6 months.
·                          10,00,000
·                          Gratuity actually received
Notes:
In the case of seasonal establishments, 15 days is substituted by 7 days.
Salary includes basic salary and dearness allowance but does not include bonus, commission, overtime wages or any other allowance.
Part of a year exceeding six months is taken as a complete year.

Download Automated Arrears Relief Calculator U/s 89(1) with Form 10E


In case of any other employee –
An amount equal to the least of the following will be exempt from tax
·                          ½ x Average salary of last 10 months preceding the month of retirement x Completed year of service (fraction of a year is ignored)
·                          10,00,000
·                          Gratuity actually received
Notes:
Salary includes basic pay, dearness allowance to the extent it forms part of retirement benefits and percentage wise fixed commission on turnover.
If gratuity is received by an employee from more than one employer in the same previous year or in different previous years the aggregate maximum amount exempt from tax on account of gratuity cannot exceed Rs. 10,00,000.

If an employee had also rendered service to any other employer, then the period of service to such former employer is also included while calculating “completed the year of service” subject to the condition that any gratuity is not received from such former employer.

February 26, 2017

At a Glance Personal Income Tax Changes In Union Budget 2017-18

Here is a quick look at the Income Tax changes in Union Budget 2017-18 for individuals:

Personal Income Tax Changes In Union Budget 2017-18
1) The existing rate of taxation for individual assesses between an income of Rs. 2.5 lakh to Rs. 5 lakh will be reduced to 5% from the present rate of 10%.
2) A surcharge of 10% of tax payable on categories of individuals whose annual taxable income is between Rs. 50 lakh and one crore, will be levied.
3) The existing surcharge of 15% of tax on people earning more than Rs 1 crore will continue. This is likely to give additional revenue of Rs. 2700 crore.
4) A simple one-page form to be filed as Income Tax Return will be made for the category of Individual having taxable income up to Rs. 5 lakh other than business income.

5) Also, a person of this category to file Income Tax Return for the first time would not be subjected to any scrutiny in the first year unless there is specific information available with the Department regarding his high-value transactions.
6) Arun Jaitley appealed to all citizens of India to contribute to Nation Building by making a small payment of 5% tax if their income is falling in the lowest slab of Rs. 2.5 lakh to Rs. 5 lakh.
7) The Finance Minister further announced that in line with an exemption available to the Prime Minister's Relief Fund and certain other funds, the income of the Chief Minister's Relief Fund or the Lieutenant Governor's Relief Fund shall be exempted from tax.
Here is a quick look at the Income Tax changes in Union Budget 2017-18 for individuals:

Personal Income Tax Changes In Union Budget 2017-18
1) The existing rate of taxation for individual assesses between an income of Rs. 2.5 lakh to Rs. 5 lakh will be reduced to 5% from the present rate of 10%.
2) A surcharge of 10% of tax payable on categories of individuals whose annual taxable income is between Rs. 50 lakh and one crore, will be levied.
3) The existing surcharge of 15% of tax on people earning more than Rs 1 crore will continue. This is likely to give additional revenue of Rs. 2700 crore.
4) A simple one-page form to be filed as Income Tax Return will be made for the category of Individual having taxable income up to Rs. 5 lakh other than business income.

5) Also, a person of this category to file Income Tax Return for the first time would not be subjected to any scrutiny in the first year unless there is specific information available with the Department regarding his high-value transactions.
6) Arun Jaitley appealed to all citizens of India to contribute to Nation Building by making a small payment of 5% tax if their income is falling in the lowest slab of Rs. 2.5 lakh to Rs. 5 lakh.
7) The Finance Minister further announced that in line with an exemption available to the Prime Minister's Relief Fund and certain other funds, the income of the Chief Minister's Relief Fund or the Lieutenant Governor's Relief Fund shall be exempted from tax.

February 25, 2017

Tax ability of Arrears of Salary – Relief u/s 89,With Automated Arrears Relief Calculator + Form 10E For F.Y.2016-17

An employee may receive any arrear or advance salary or salary for more than 12 months etc. In such a case, the assessee might have to pay higher taxes as the arrear /advance salary are taxed in the year of receipt of the same and not in the year in which they are actually due. The difference in tax liability in a due year and in receipt year might be due to changes in the slab rates. For this reason, the provision of relief u/s 89 comes in.

Download Automatic Arrears Relief Calculator U/s 89(1) with Form 10E from F.Y.2000-01 to F.Y.2016-17 

Arrears Relief's Main Data Input Sheet
Arrears Amount to bifurcation
Arrears Relief Form 10E
Relief is available under following cases:
  • Salary received in arrears or in advance;
  • Salary for more than 12 months in one financial year;
  • Family Pension being paid in arrears;
  • Gratuity;
  • Compensation on termination of employment; and
  • Commuted Pension
To calculate relief, the following steps should be taken:
Step 1: Calculate the tax due in the current year, firstly by including the arrears in your total income and then by excluding the arrears from your total income. Then take the difference of these two figures and let’s call the difference as ‘X’.
Step 2: Calculate your tax due (or the actual tax paid) in the year for which the arrears have been received, firstly by including the arrears in your total income and then by excluding the arrears from your total income. Then take the difference of these two figures and let’s call the difference as ‘Y’.
Step 3: The figure you get when you subtract X from Y is your relief amount.
This can be better understood with the help of the example below:
Mr.Niraj earned Rs. 15,00,000 p.a. in FY 2015-16 and also received an arrear of Rs. 3,00,000 p.a. for FY 2013-14. His total salary in FY 2013-14 was Rs. 6,00,000 p.a.
The table below explains the calculation of relief:
Details
Amount
Tax due on the income of Rs. 18,00,000 in FY 2015-16 (including the arrears)
3,75,950
Tax due on the income of Rs. 15,00,000 in FY 2015-16 (excluding the arrears)
2,83,250
Difference between Tax Due (X)
92,700

Details
Amount
Tax due on the income of Rs. 9,00,000 in FY 2013-14 (including the arrears)
1,08,150
Tax due on the income of Rs. 6,00,000 in FY 2013-14 (excluding the arrears)
46,350
Difference between Tax Due (Y)
61,800
Relief under section 89 = X-Y = 92700-61800=30900
Form 10E for claiming such relief has to be submitted to your employer. Your salary slips serve as proof of receipt of arrears and should be kept safely. One important thing to note is that relief can only be claimed if tax paid is actually higher due to receipt of such arrears. If there is no extra tax liability, relief is not allowed.

In the case of VRS Compensation being received by the employee, no relief shall be granted under Section 89 if he has claimed exemption u/s 10(10C) for Voluntary Retirement Scheme. An assessee can claim either exemption under section 10(10C) or relief u/s 89 and not both together.
An employee may receive any arrear or advance salary or salary for more than 12 months etc. In such a case, the assessee might have to pay higher taxes as the arrear /advance salary are taxed in the year of receipt of the same and not in the year in which they are actually due. The difference in tax liability in a due year and in receipt year might be due to changes in the slab rates. For this reason, the provision of relief u/s 89 comes in.

Download Automatic Arrears Relief Calculator U/s 89(1) with Form 10E from F.Y.2000-01 to F.Y.2016-17 

Arrears Relief's Main Data Input Sheet
Arrears Amount to bifurcation
Arrears Relief Form 10E
Relief is available under following cases:
  • Salary received in arrears or in advance;
  • Salary for more than 12 months in one financial year;
  • Family Pension being paid in arrears;
  • Gratuity;
  • Compensation on termination of employment; and
  • Commuted Pension
To calculate relief, the following steps should be taken:
Step 1: Calculate the tax due in the current year, firstly by including the arrears in your total income and then by excluding the arrears from your total income. Then take the difference of these two figures and let’s call the difference as ‘X’.
Step 2: Calculate your tax due (or the actual tax paid) in the year for which the arrears have been received, firstly by including the arrears in your total income and then by excluding the arrears from your total income. Then take the difference of these two figures and let’s call the difference as ‘Y’.
Step 3: The figure you get when you subtract X from Y is your relief amount.
This can be better understood with the help of the example below:
Mr.Niraj earned Rs. 15,00,000 p.a. in FY 2015-16 and also received an arrear of Rs. 3,00,000 p.a. for FY 2013-14. His total salary in FY 2013-14 was Rs. 6,00,000 p.a.
The table below explains the calculation of relief:
Details
Amount
Tax due on the income of Rs. 18,00,000 in FY 2015-16 (including the arrears)
3,75,950
Tax due on the income of Rs. 15,00,000 in FY 2015-16 (excluding the arrears)
2,83,250
Difference between Tax Due (X)
92,700

Details
Amount
Tax due on the income of Rs. 9,00,000 in FY 2013-14 (including the arrears)
1,08,150
Tax due on the income of Rs. 6,00,000 in FY 2013-14 (excluding the arrears)
46,350
Difference between Tax Due (Y)
61,800
Relief under section 89 = X-Y = 92700-61800=30900
Form 10E for claiming such relief has to be submitted to your employer. Your salary slips serve as proof of receipt of arrears and should be kept safely. One important thing to note is that relief can only be claimed if tax paid is actually higher due to receipt of such arrears. If there is no extra tax liability, relief is not allowed.

In the case of VRS Compensation being received by the employee, no relief shall be granted under Section 89 if he has claimed exemption u/s 10(10C) for Voluntary Retirement Scheme. An assessee can claim either exemption under section 10(10C) or relief u/s 89 and not both together.

February 24, 2017

Automatic Advance Income Tax Calculator for F.Y.2017-18 and Ass Yr 2018-19 + Major Highlights Budget 2017, Changes Made by Finance Bill 2017

Major Highlights Budget 2017, Changes Made by Finance Bill 2017. Budget Analysis for Small and Medium Enterprises. Analysis of Finance Bill 2017 for Small and Medium Enterprises. Direct Tax Amendments, Check Key Highlights of Budget 2017-18,  Details Analysis for Direct tax changes in Budget 2017. Now scroll down below n check more details for “Major Highlights Budget 2017, Changes Made by Finance Bill 2017 “

Download Automatic Excel Based Income TaxCalculator for Financial Year 2017-18 and Assessment Year 2018-19 as per the Finance Budget 2017-18


Direct Tax – Personal Income Tax Rates and Surcharge

     ·                          Tax on Total Income between Rs. 2.50 Lacs and Rs. 5 Lacs reduced to half i.e. 5% from 10%
      ·                 Rebate u/s 87A reduced to Rs. 2500 from Rs. 5000; Allowed to only Individuals/HUF with total income less than or equal to Rs. 3.50 Lacs
      ·                     Surcharge of 10% on every Individual/HUF/AOP/BOI having Total Income more than Rs. 50 lacs but less than Rs. 1 Crore
Final Position of Tax Slabs



Donation-related Amendments
    A ·                          Cash donation is allowed only up to Rs. 2000/- in cash for deduction under section 80G [A.Y. 2018-19 on wards]

    ·                          Also, the donation to political parties in cash shall be allowed as the deduction only if made up to Rs. 2000/-
Major Highlights Budget 2017, Changes Made by Finance Bill 2017. Budget Analysis for Small and Medium Enterprises. Analysis of Finance Bill 2017 for Small and Medium Enterprises. Direct Tax Amendments, Check Key Highlights of Budget 2017-18,  Details Analysis for Direct tax changes in Budget 2017. Now scroll down below n check more details for “Major Highlights Budget 2017, Changes Made by Finance Bill 2017 “

Download Automatic Excel Based Income TaxCalculator for Financial Year 2017-18 and Assessment Year 2018-19 as per the Finance Budget 2017-18


Direct Tax – Personal Income Tax Rates and Surcharge

     ·                          Tax on Total Income between Rs. 2.50 Lacs and Rs. 5 Lacs reduced to half i.e. 5% from 10%
      ·                 Rebate u/s 87A reduced to Rs. 2500 from Rs. 5000; Allowed to only Individuals/HUF with total income less than or equal to Rs. 3.50 Lacs
      ·                     Surcharge of 10% on every Individual/HUF/AOP/BOI having Total Income more than Rs. 50 lacs but less than Rs. 1 Crore
Final Position of Tax Slabs



Donation-related Amendments
    A ·                          Cash donation is allowed only up to Rs. 2000/- in cash for deduction under section 80G [A.Y. 2018-19 on wards]

    ·                          Also, the donation to political parties in cash shall be allowed as the deduction only if made up to Rs. 2000/-

 
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