Category: salary

Medical expenses and tax under salary head

In salary head, there are many elements. One is medical expenses’ reimbursement. yes, medical expenses are done by employee and bill is paid by employer. In this case, what will be tax implications? Read it in this post. Tax on Medical expenses when bill is paid by employer: First, understand one thing that medical reimbursement is not medical allowance. Both are different things. Medical allowance is fixed amount the employee gets per year from employer. While medical reimbursement is the one which the employer reimburses the employee which the employee has incurred for his or his relatives’ medical treatment. Tax treatment: (section 17(2))Fixed Medical Allowances: Always taxable. Medical facility: If provided in any hospital maintained by the employer. : fully exempt If any sum paid by employer for medical treatment of employee or his family member in the hospital maintained by the government, local authority, in hospital approved under central government health scheme or state government health scheme. : fully exempt If any sum paid by employer for medical treatment of employee or his family member in the hospital approved by the chief commissioner for prescribed diseases or ailments : fully exempt. To claim above exemption, the employee has to show receipt of payment and certificate from the hospital specifying the disease or ailment for which medical treatment was required. If employer has paid group insurance premium for employees...

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Leave salary tax treatment

In this article,I have tried to explain the treatment of leave salary and provident fund in income tax act. Leave salary: when employee receives cash equivalent in respect of earned leave(leave not taken) , it is called leave salary. treatment of leave salary received by government employees and non government employees are different.   Leave salary earned by any employee during the period of service is taxable. government employees:   Leave salary received by government employees at the time of retirement is exempt.   Non-government employees:   Leave salary is exempt from tax up to least of following. Rs. 3,00,000 Amount actually received. cash equivalent of the leave to the credit of the employee at the time of retirement. 10 month’s salary on the basis of last 10 month’s average salary.   How to calculate cash equivalent? Cash equivalent should be based on last 10 months average salary. while calculating average salary consider salary of the month of retirement also. 30 days credit for each completed year of service should be given. salary means salary, DA and commission as a percentage of turnover achieved by the employee. Example: Mr. Anup receives Rs. 52000 as leave salary at the time of retirement on 31st July, 2013. His basic pay was 4000 p.m. from 1st April, 1988. Leave to his credit is 24 months on the basis of 45 days entitlement...

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Salary and Taxation-1

Salary has many elements like basic salary, dearness allowance, gratuity, pension, perquisites etc. On each element, tax calculation is different. Here I have tried to explain tax treatment for each element of salary. So let’s take a look. Taxability of salary: Salary is chargeable to tax either on due or receipt basis whichever is early. Salary due in previous year is taxable whether it is received or not during that year. When advance is received by employee, it is also taxable on receipt basis. But it is not taxable again on due basis when it is accrue. See the chart Salary received Salary accrued Salary taxable 13-14 13-14 13-14 12-13 13-14 12-13 14-15 13-14 13-14 Total taxable salary elements: Basic salary, DA, commission, bonus are fully taxable under salary head. Entertainment Allowance: Entertainment allowance is qualifying for deduction u/s 16(2). The deduction is only for government employees and for other employees it is taxable. Following deduction is allowed to government employees. 1.       Rs. 5000 2.       20% of basic salary 3.       Actual entertainment allowance received Whichever is lower. Professional tax: If professional tax is paid by employer on behalf of employee, it is included in salary and deduction u/s 16(3) is allowed. If professional tax is paid by employee, he is eligible for deduction in that case also. Leave travel concession taxability: Value of travel concession received by individual and...

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