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INCOME UNDER HEAD – SALARIES

“Doing JOB. . . Great. . .

. . .compute your income here”
Agenda/Topics to Be Covered
• BASIS OF CHARGE
• TAX TREATMENT OF DIFFERENT TYPES OF SALARIES
• RETIREMENT BENEFITS
• ALLOWANCES
• PERQUISITIES
• DEDUCTIONS Under Section 16
• HOW TO COMPUTE SALARY & PRESENTATION ?
BASIS OF CHARGE – Section 15
• Any benefit due to the EMPLOYER-EMPLOYEE RELATIONSHIP is
taxable under head Salaries.
• Salary is taxable on RECEIPT OR DUE whichever is earlier.
• BONUS is taxable on RECEIPT basis.
• Employer-Employee Relationship Taxable u/h SALARIES
• If an individual receives salary from more than one
source/employer during the same P/Y All will be taxable
• Any arrears of salary paid or allowed. . . W.E.F from__________
• SALARY includes –
– Wages
– Any annuity or pension
– Any Gratuity
– Any fees, commission, perquisite or profit in lieu of salary or in
addition to salary
– Any Advance Salary
– Leave Salary
– Amount transferred to RPF to the extent is taxable.
– Any other payment made or benefit extended due to the
employer-employee relationship.
TAX TREATMENT OF DIFFERENT FORMS OF
SALARY INCOME
• ADVANCE SALARY : taxable on receipt basis in the A/Y relevant to the
P/Y in which it was received. (However relief can be claimed)
• ARRERS SALARY : TAXABLE ON RECEIPT BASIS, if the same has not been
subjected to tax earlier on due basis. (However relief can be claimed)
• BONUS & COMMISSION RECEIVED : Both will be taxable in the year of
receipt, if it has not been taxed before. (However relief can be claimed)
LEAVE SALARY
• Encashment of leaves by surrendering leave standing to one’s
credit is known as LEAVE SALARY.
• Leave Salary paid to legal heirs in the case of Death of the
employee is not taxable.
• Leave Salary during the continuity of employment will be
chargeable to tax for all.
• However , leave salary is encashed on retirement by a
Government employee will fully exempt
• But for others it will be exempt up to a limit & balance shall be
taxable.
 LEAVE SALARY. . .

During the job On Retirement

OTHERS
FULLY TAXABLE Govt. Employee

Least of the following shall be exempt :-

a) Actual amount received

b) ₹ 3,00,000/-
FULLY EXEMPT
Salary
c) Salary* for a period of 10 months
means d) Cash equivalent of unavailed leave @ 30 days for every
BASIC + year of service
DA+ 1. Leaves actually allowed / 30 days per year (lesser)
2. Leaves actually taken
Comm.
3. (1–2) * Avg. monthly salary* as per (c) /30
 GRATUITY
Govt. Other Employees
Employee
Act
Applicable
Fully Exempt 1. Amount Received
2. ₹ 1,000,000/- 1. Amount Received
2. ₹ 1,000,000/-
3. 15/26 * Last drawn 3. 15/30 * Avg. Salary of
Salary * no. of years 10 months* No. of
Basic + DA of service in excess completed years
of 6 months

LEAST OF THE ABOVE WILL BE EXEMPT AS THE CASE MAY BE

GRATUITY. . . .
• When the gratuity is received from more than one employer in
the same previous year, the aggregate maximum amount
exempt from tax cannot exceed ₹10,00,000/-.
• Any gratuity paid to an employee while he continues to remain
in service not exempt in any case; except :-
– On retirement
– On Death
– On Resignation
– On Termination
– On becoming incapacitated prior to such retirement
 PENSION
Uncommuted
i.e. in instalments Commutted
i.e. Lump sum

TAXABLE FOR ALL

Other Employees Govt. employee

S1 = Compute 100% value of Commuted pension

FULLY EXEMPT
S2 =
• If no Gratuity – ½ of S1 = Exempt
• If along with Gratuity – 1/3 of S1 = Exempt
PENSION. . .
• Pension received from UNO by the employee or his
family member is not taxable.

• Pension received by the family after death –

Taxable in the hands of recipient under head Other Sources
and Deduction of 1/3rd OR ₹15,000/- shall be given.
 RETRENCHMENT COMPENSATION
• Compensation received by a workmen under the Industrial
Dispute Act, 1947 or under any Act, Rule, Order, Notification
issued at the time of retrenchment, is exempt from tax to the
extend of lower of the following :-
1. Amount Received
2. ₹ 5,00,000/- (amount specified by the Govt.)
3. 15/26 * Salary * Every completed year of Service in excess of 6 months
VOLUNTARY RETIREMENT COMPENSATION
• Compensation received at the time of voluntary retirement or separation
is exempt from tax if following condition are satisfied :-
– Employees of Central or State Government
– Employee of P.S.U. or any other company
– Statutory Corporation
– Local authority, University
– I.I.T. or notified institute of management.

• Least of the following shall be exempt :

1. Amount Received
2. ₹ 5,00,000/-
3. a) 3 months Salary * Every completed year of Service
b) Salary of the balance months of service left before his normal retirement.

If exemption is claimed in one A/Y. . .

then exemption is not allowed in another A/Y. . .
 Category #1
Category #3
Category #2
RECEIVED
HOUSE
OR RECEIVED RENT
SPENT or ALLOWANCE
(whichever is less) LIMIT (H.R.A.)
(whichever is less)
Category 1 : Received or Spent
(whichever is less)
1. CONVEYANCE ALLOWANCES
2. ACADEMIC ALLOWANCES
3. TRAVELLING / TRANSFER ALLOWANCES
4. HELPER ALLOWANCES
5. UNIFORM ALLOWANCES
6. DAILY ALLOWANCES
Category 2 : Received or Limit
(whichever is less)
 CHILDERN EDUCATION ALLOWANCES :
Exempted up to ₹100/- per month per child (up to maximum 2
children).
• HOSTEL EXPENDITURE ALLOWANCES :
Exempted up to ₹ 300/- per month per child (up to maximum 2
children)
• TRANSPORT ALLOWANCES :
Exempted up to ₹ 800/- per month,
For handicapped employees - ₹1,600/- per month
Category 2 : Received or Limit
(whichever is less). . .
 ALLOWANCES ALLOWED TO TRANSPORT EMPLOYEES :
The amount of exemption shall be :- ₹10,000/-
(whichever is less) or 70% of such allowances

 HILLY AREA / BORDER ARES / REMOTE ARES ALLOWANCES :

₹ 300– 7,000 /- per month
Category 2 : Received or Limit
(whichever is less). . .

• TRIBAL AREA ALLOWANCE : ₹200/- per month

• UNDER GROUND ALLOWANCES :

These allowances are granted to employees working in
uncogneial, unnatural climate in under-ground coal mines shall be
exempt up to ₹ 800 per month.
CATEGORY 3 : HOUSE RENT
ALLOWANCE (H.R.A.)

• Least of the following shall be exempted :

– Actual amount received
– Rent paid less 10 % of the SALARY
– 50% of the Salary (if the house is located in
Delhi/Mumbai/Kolkata/Chennai)
– 40% of the Salary (if the house is located elsewhere )
 CATEGORY 3 : HOUSE RENT
ALLOWANCE (H.R.A.) . . .
• H.R.A. IS CALCULATED MONTHLY AND CAN BE CALCULATED TOGETHER
FOR THE PERIORD WHERE
– ACTUAL HRA
– RENT PAID
– SALARY
– LOCATION OF HOUSE IS SAME

• IF ANY OF THE ABOVE CHANGES H.R.A. SHALL BE CALCULATED SEPERATELY

• NO EXEMPTION SHALL BE GIVEN, IF RENT PAID DOESNOT EXCEED 10 % OF SALARY.

ENTERTAINMENT ALLOWANCE
• Entertainment allowances is first included in income
under the head Salaries and deduction is given only to
Government Employees :-
• Least of the following shall be exempt :
– Actual amount received
– 20% of Basic Salary
– ₹5,000/-
PERQUISITIES
• In respective of all the perquisites whenever any concession is
given or any amount is recovered from the employee, the value
of the perquisite shall be calculated as follows:-
• Step 1 : Determine Value of the Perquisite as if nothing has been
recovered from the employee
• Step 2 : Determine the amount recovered from the employee
• Step 3 : (Step 1 - Step 2) shall be the taxable value of the
perquisite; if Positive.
 PERQUISITES
• Who is a Specified Employee ?
– The following employees are called specified employees :-
– DIRECTOR

– An employee who is drawing a salary in excess of ₹50,000/-

– Employee who has Substantial interest in the employer company

Having 20% or more voting power or equity shared in the employer company

An employee who is not specified employee is a Non-Specified Employee.

 1. RENT FREE ACCOMODATION
a) GOVERNMENT EMPLOYEES : as per Government Rules (Licence Fees)
b) Others – Value of RFA shall be :-

Population Owned by Employer Not owned by Employer

Up to 10 7.5 % of the Salary* 15% of the Salary*

lakhs
10 – 25 lakhs 10% of the Salary* OR

Actual Rent
More than 15% of the Salary*
25 lakhs (whichever is LESS)
 1. RENT FREE ACCOMODATION. . . .
c) ACCOMODATION IN HOTEL :
24% of Salary (OR) ACTUAL CHARGES {whichever is less}

However nothing shall be taxable if the accommodation is provided for

not more than 15 days + provided on transfer of employees from one
place to other.

For all Government and Non-Government employees.

 1. RENT FREE ACCOMODATION. . . .

d) FURNISHED HOUSE :-
If furniture is also provided by the employer to their employee, then value
of such furniture shall be
10% p.a. of the cost
or
Actual hire charges

Any maintenance charges or repaired of the building incurred by

employee shall be ignored.
 1. RENT FREE ACCOMODATION. . . .

e) TWO HOUSES ON TRANSFER :-

In case of transfer from one place to another , and if employee is
provided house at the new place and the employee also retains the old
house, then value of such houses shall be taken on follows :-
Up to 90 days of transfer : Value of one house whichever is lower shall be
taxable.
Post 90 days : Value of both the houses shall be taxable.

0 Any 1 of lower value 90 Both the houses. . . . .

 1. RENT FREE ACCOMODATION. . . .

f) CONCESSIONAL HOUSE :-
The amount recovered from the employee shall be reduced from the
value determined for such house.
g) RENT FREE ACCOMODATION TAXABLE
When house is located in a remote area and provided to an employee
working at a mining site or on shore oil exploration site.
 1. RENT FREE ACCOMODATION. . . .

Note:
1. Salary of all employees shall be taken.
2. Only current year’s monetary payment shall be taken.
3. Salary – Basic + DA (UTOE) + Bonus + Commission + Taxable portion of
all allowances + all monetary payments but does not include
Provident Fund.
 2. VALUE OF INTEREST FREE LOAN
• Loan type = Any
• Rate = Rate charged by S.B.I. on 1st day of relevant P/Y
• Interest shall be calculated on the outstanding balance for each loan as on the
last day of each month.
• However nothing shall be taxable
– If Loan in aggregate do not exceed ₹20,000/- OR
– If the loan provided for the treatment of specified diseases.

• But if such loan has been reimbursed under any medical insurance scheme &
the loan is not paid to the employer, it shall be taxable.
• Check only the last days balance & calculate interest thereon for the whole
month. Transactions within the month shall be ignored & if no balance at the end
of the month – No interest 
 3. USE OF MOVEABLE ASSETS

a) LAPTOP & COMPUTERS : NIL VALUE

b) OTHER ASSETS : 10% p.a. of the Actual Cost
OR
Actual Hire Charges
4. TRANSFER OF MOVEABLE ASSETS
• Value of the benefit shall be :
– Actual Cost of the assets shall be reduced by the following percentage for
each completed year; ignoring fractions from the date of purchase/put to use
by the employer :
– Computer & Electronic Items 50% W.D.V.
– Motor Car 20% W.D.V.
– Any other assets 10% S.L.M.

“Electronic items do not include household appliances”

 5. PERSONAL EXPENDITURE BENEFITS

a) SWEEPER / GARDNER / WATCHMAN / PERSONAL ATTENDENT :

 Actual cost to the employer.

b) GAS, ELECTRICITY, WATER :

 Own Source : manufacturing cost per unit.
 Other Source : amount paid to outside agency.
 5. PERSONAL EXPENDITURE BENEFITS
C) CHILDREN EDUICATION :

 If the education facility is owned by employer.

OR

 Free education is provided in any other educational institution by the

reason of employee being in employment of that employer.
FAIR MARKET VALUE OF SUCH SIMILAR EDUCATION.
HOWEVER NOTHING SHALL BE TAXABLE IF VALUE PER CHILD
DOESNOT EXCEED ₹1,000/- PER MONTH.

 Other Cases : Actual expenditure incurred by employer.

 6. LEAVE TRAVEL CONCESSION
If the Journey is made

By AIR OTHER THAN BY AIR

National carrier

Fare up to 1st CLASS AC FARE

Economy Class 1st Class Fare if
Public transport
exists.
L.T.C. . . .
• Exemption can be claimed for 2 journeys in a block of 4 years
i.e. 2006-2009, 2010-2013.
• Out of 2 journey, exemption of one journey can be claimed in
the calendar year.
• Exemption can be claimed only for 2 children (who are born
after year-1999)
• LTC given to foreign citizen is chargeable to tax.
 7. MEDICAL PERQUISITE
WITHIN INDIA :-
• Expenditure incurred or reimbursed on any medical treatment provided to
an employee or any member of his family is FULLY EXEMPT without any limit
for treatment in any hospital, dispensary, etc., if
– Maintained by the Employee
– Maintained by Government
– Maintained by any local authority
– Approved by Govt. for treatment of Government or other employees
– Approved for a specified disease only for treatment of specified disease.
 7. MEDICAL PERQUISITE . . .
WITHIN INDIA :-
• Health Insurance Premium incurred or reimbursed for insurance on the
health of employee or any member of his family is FULLY EXEMPT.
• REIMBURSEMENT BY EMPLOYER of any amount actually spent by the
employee for obtaining his or his family member’s treatment in any
hospital, nursing home or a clinic up to maximum ₹15,000/- for P/Y.
 7. MEDICAL PERQUISITE. . .
OUTSIDE INDIA:-
• Such medical expenses shall be tax-free to the extent permitted by R.B.I.
• Expenses on stay abroad of the employee or any member of his family for
medical treatment with one attendant who accompanies the patient in
connection with such treatment to the extent permitted by R.B.I.
• TRAVEL EXPENSES of patient ( employee or his family member) and one
attendant. . Who accompanies the patient in connection with such
treatment shall be exempt,
IF Gross Total Income (excluding such travel expenses but
after including taxable medical expenses but after including taxable
medical and boarding) doesn’t exceed ₹2,00,000/-.
 FAMILY FOR THE VALUATION OF
MEDICAL FACILITIES & LTC

• Spouse & Children of the employee (Whether dependent or not).

• Dependent :
– Parents
– Brother
– Sister of the employee
 8. VALUATION OF MOTAR CAR

WHEN CAR IS WHEN CAR IS

OWNED OR HIRED OWNED AND USED
BY EMPLOYER BY THE EMPLOYEE

1. Exclusively for OFFICIAL purpose

2. Exclusively for PERSONAL purpose
3. Partly OFFICIAL Partly PERSONAL purpose
 When car is owned or hired by
EMPLOYER and used for :
1. EXCLUSIVELY FOR OFFICIAL PURPOSE NIL

2. EXCLUSIVELY PERSONAL PURPOSE Actual Running &

Maintenance
+
Actual Chauffeur Expenses
+
wear & tear @ 10% of Cost
OR
Actual HIRE CHARGES
 When car is owned or hired by
EMPLOYER and used for :
3. PARTLY OFFICIAL & PARTLY PERSONAL PURPOSE :
– Running & Maintenance Expenditure is borne by EMPLOYER
up to 1.6 Litres CC ₹1,800 p.m.
Exceeding 1.6 Litres CC ₹2,400 p.m.

– Running & Maintenance Expenditure is borne by EMPLOYEE

up to 1.6 Litres CC ₹600 pm
Exceeding 1.6 Litres CC ₹900 pm

– Add : ₹900 per month of Chauffeur ₹900 pm (BOTH

CASES)

Nothing shall be deducted in respect of 600/900/9000, if any amount is recovered from

the employee.
WHEN CAR IS OWNED BY EMPLOYEE
AND USED :

1. Exclusively for Official Purpose : NIL

2. Exclusively for Personal Purpose : Actual Expenditure incurred

by employer

3. Partly Official Partly Personal :

• Up to 1.6 Litres CC ₹1,800 p.m.
• Exceeding 1.6 Litres CC ₹2,400 p.m.
WHEN CAR IS OWNED BY EMPLOYEE
AND USED . . .
STEP 1 : Find out the actual expenditure incurred by the
Employer.
STEP 2 : Less : ₹1,800 / 2,400 per month
₹900 per month for Chauffer

STEP 3 : Less : Any amount recovered from employee

BALANCE . . . . If positive then TAXABLE

 9. VALUATION OF PERQUISITE IN RESPECT
OF GIFTS, VOUCHER OR TOKEN
• If the amount of Gift exceeds ₹5,000/- in aggregate during the previous
year, then such excess amount shall be taxable.

• However if the gift is by way of Cash or by way of Cheque,

then the entire amount shall be taxable

 10. VALUATION OF CREDIT CARD
STEP 1 : Find out the expenditure incurred by the employer in
respect of credit card used by the employee or any
member of his household.
STEP 2 : Less : Expenditure incurred for only official Purpose
STEP 3 : Less : Amount recovered from employee

BALANCE IF POSITIVE = TAXABLE

11. VALUATION OF PERQUISITE :
CLUB EXPENDITURE
STEP 1 : Expenditure incurred by employer in respect of club
expenditure.
STEP 2 : Less : Amount incurred for official purpose
Less : Amount recovered from employee
BALANCE IF POSITIVE WILL BE TAXABLE

Note : Health Club, Sports facilities etc. provided uniformly to all classes of
employees by the employer shall be EXEMPTED.
Note : Initial deposit / Fees for Corporate or institutional
membership, where benefit doesn’t remain with the particular employee
after the cessation of employment are exempt.
 12. SWEAT EQUITY SHARES
• Equity Shares issued by a company to its employees or directors at
discount or consideration other than cash for providing know-how or
making available rights in the nature of intellectual property rights or value
addition, by whatever name called.
• Value of such Equity Share shall be :-
– When the share is listed on a Recognized Stock Exchange :
Average Price of opening & closing price of the share – on date of exercise of option.
– Where listed on multiple stock exchange :
Price on the Recognized Stock Exchange where the shares are mostly traded.
– Thinly or No traded Stock :
F.M.V. of the closing price of the share on any recognized stock exchange on the closest to
the date of exercise of option & immediately preceding such date.
– Where the Equity Shares are unquoted :
F.M.V. = Value of the share,
as determined by Merchant Banker on the specified date / date of option
13. EMPLOYER’s CONTRIBUTION TOWARDS
APPROVED SUPERANNUATION FUND :-

• The amount of any contribution to an approved superannuation

fund by the employer in respect of the assessee (employer), to the
extent it exceeds ₹1,00,000/-.
• It is taxable in the year in which contribution is made.
 14) etc. . . . .
• RESIDUAL HEAD. . . WHICH COVERS THOSE BENEFITS, AMMENITY, SERVICE,
RIGHTS OR PRIVILAGE PROVIDED BY AN EMPLOYER WHICH IS NOT
COVERED BEFORE ( IN 1 to 13 ).

• Mobile / Telephone as perquisite is not taxable anywhere in the Salary

head or any other head.

• Any other benefit shall be valued @ Cost to employer.

DEDUCTION FROM SALARY INCOME
UNDER SECTION 16

• ENTERTAINMENT ALLOWANCE :
– Only available to GOVERNMENT EMPLOYEE
– Least of the following shall be exempt :
1. ₹ 5,000/-
2. 20 % of the Basic Salary
3. Actual amount received
DEDUCTION FROM SALARY INCOME
UNDER SECTION 16

• PROFESSIONAL TAX / TAX ON EMPLOYMENT :

– Deduction is only available on the year of actual payment.
– If professional tax is paid by the employer, then it is first included and then
deducted from the Gross Salary.
– There is no monetary ceiling on the amount of deduction. . . Only condition
it should have been actually paid.
– e.g. : ₹ 2,500/- is the Professional Tax p.a.
– For 10 years no payment is made – no deduction in these 10 years
– 11th Year paid for ( 10 + 1 ) years -- - - - - Deduction = ₹ 2,500 * 11 years = 2,75,000
EMPLOYEES PROVIDENT FUND
= RETIREMENT BENEFIT SCHEME
• Under this scheme, a stipulated sum is
deducted from the salary of the
employee as contribution towards the
fund and generally the employer also
contributes the same amount as
contributed by the employee.
 EMPLOYEES PROVIDENT FUND. . . .
• Interest is earned on such
investment which gets credited
to the Employee’s Provident
fund scheme A/C.

• Such Interest includes both the

interest earned on Employer’s &
Employee’s contribution.

• The accumulated amount of

the scheme (i.e. Credit balance
of the scheme) is paid to
employee on his retirement or
to the family members in the
case of death
 TYPES OF PROVIDENT FUND
• STATUTORY PROVIDENT FUND
1. • Set up under the provisions of Provident Funds Act, 1925

• RECOGNIZED PROVIDENT FUND

• PF to which Employee’s Provident Fund & Misc. provisions Act, 1952
2. applies.

• UNRECOGNIZED PROVIDENT FUND

• When a P.F. is not recognized by the Commissioner of Income Tax.
3.
 STATUTORY PROVIDENT FUND
• EMPLOYER CONTRIBUTION EXEMPTED

• EMPLOYEE CONTRIBUTION TAXABLE HERE

(But Deduction u/s 80 is available)

• INTEREST EARNED Not treated as Income of the year

in which interest is credited.

• LUMP-SUM PAYMENT EXEMPT FROM TAX

(upon the termination of service / on retirement)
 RECOGNIZED PROVIDENT FUND
• EMPLOYER’s CONTRIBUTION EXEMPTED UPTO 12% OF “SALARY”
BASIC + DA (UTOE) + COMMISSION

• EMPLOYEES CONTRIBUTION TAXABLE BUT DEDUCTIONI IS

AVAILEBLE U/S 80 C

• INTEREST EXEMPTED up to 8.5% Rate of Intt.

• PAYMENT (LUMP-SUM) EXEMPTED IF :-

 EMPLOYEE LEFT THE JOB AFTER ATLEAST 5 YEARS OF SERVICE
 DUE TO ILL HEALTH, DISCONTINUANCE OF EMPLOYERS BUSINESS
OR REASONS BEYOND CONTROL
 BALANCE OF RPF IS TRANFERED TO THE NEW EMPLOYER
 UNRECOGNIZED PROVIDENT FUND
• EMPLOYER’S CONTRIBUTION
• EMPLOYEES CONTRIBUTION
• INTEREST
• LUMPSUM PAYMENT :
– EMPLOYER’S CONTRIBUTION
– EMPLOYEES CONTRIBUTION
– INTEREST OF EMPLOYER’S CONT.
– INTEREST OF EMPLOYEE’S CONT.
EXEMPTED
No exemption BUT
deduction U/S 80C.
Not taxable in the year in
which interest is credited.
TAXABLE U/H SALARIES
EXEMPT
TAXABLE U/H SALARIES
TAXABLE U/H OTHER SOURCES
 RELIEF UNDER SECTION 89
• If any individual receives any portion of his salary in
arrears or in advance or receives profit in lieu of salary,
he can claim relief in terms of section 89 :-

• STEP 1 : Calculate tax payable of the P/Y in which the arrears /

advance salary is received.
a) TAX on total income INCLUSIVE of additional salary
b) TAX on total income EXCLUDING additional salary

(A)
• STEP 2 : Calculate tax payable of that previous year to which the
additional salary relates to.
a) TAX on total income of that year INCLUDING additional Salary
b) TAX on total income of that year EXCLUDING additional Salary

(B)

Step 3 : [A-B]

Positive Negative

Relief YES NO
E.g. Salary of Raju for P/Y 2008-09 was
₹20,000 per month. On 01-04-2009 his Salary
was increased to ₹25,000 per month ; w.e.f.
01-04-2008. Calculate relief u/s 89(1) ?

2009-2010
• Up to 150,000 nil
• 150,000 -300,000 10%
• 300,000-500,000 20%
• 5,00,000 & above 30%
Income of 2009-10 ₹ 25,000 * 12 = ₹ 3,00,000/-
Income of 2008-09 now due ₹ 5,000 * 12 = ₹ 60,000 -/

Income of 2008-09 ₹ 20,000 * 12 = ₹240,000/-

Income received in 2009 of 2008 ₹ 5,000 * 12 = ₹ 60,000/-

STEP 1 : Calculation of Tax of the P/Y in which the income is received

a) 3,00,000 + 60,000 = 3,60,000 - TAX 15,000 + 12,000 = 27,000

b) 3,00,000 + 0 = 3,00,000 - TAX 15,000 (15,000)
A 12,000
• STEP 2 : Calculation of Tax of that P/Y to which the additional salary relates
(2008-09)
a) 2,40,000 + 60,000 = 3,00,000 - TAX 15,000 = 15,000
b) 2,40,000 + 0 = 2,40,000 - TAX 9,000 = (9,000)
B 6,000

• STEP 3 : [A-B] ₹(12,000 – 6,000) ₹6,000/-

Since the amount is Positive ;

Relief u/s 89(1) will be granted
 METHOD OF COMPUTATION
INCOME UNDER HEAD “SALARIES” ₹ ₹
1 Basic Salary ( ₹______ X months) XXXXX
2 Dearness Allowances XXXXX
3 Allowances:
a) House Rent Allowances (Note no. #)
Received XXXX
Less : Exempt (xxxx) XXXX
4 Perquisites (Note #)
a)__________ xxxx
b)__________ xxxx XXXXX
5 Retirement Benefits: (Note #)
Received xxx
Less : Exempt xxx XXXXX
 METHOD OF COMPUTATION
INCOME UNDER HEAD “SALARIES” ₹ ₹
6 GROSS SALARY ( 1+2+3+4+5) XXXXX

7 Less : Deduction u/s 16

a) Professional Tax xxxx
b) Entertainment Tax xxxx XXXXX

8 INCOME UNDER HEAD SALARIES (6-7) XXXXX