May, 2018,Saturday. Mondeal Heights, Iscon Circle, Ahmedabad. CA Nitin Pathak F.C.A,CISA, CISM,CIA, CISSP(USA) DISA(ICAI),DIRM(ICAI),SAP(FICO)

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1 CTC AND OTHER POINTS NEEDS TO BE KEPT 26 th May, 2018,Saturday Mondeal Heights, Iscon Circle, Ahmedabad CA Nitin Pathak F.C.A,CISA, CISM,CIA, CISSP(USA) DISA(ICAI),DIRM(ICAI),SAP(FICO) Certification course on International taxation( ICAI) Certification course on IFRS ( ICAI)

2 We are going to deliberate on CTC, what is simple tax option available, what needs to be taken while submitting the papers to CA/Tax consultant New forms What is the importance of submitting the details and consequences for not filing the same

4 EXEMPT INCOME 1. Interest on PPF/GPF/EPF 2. Interest on tax free bonds( Infra structure Companies) 3. Dividends on Shares and on Mutual Funds. 4. Any sum received under a life insurance policy 5. Saving bank interest of bank up to Rs 10,000/- U/s 80TTA/80TTB

5 GIFT TAX Gift received above Rs.50,000/- is taxable, except from specified persons. 1. Spouse. 2. Brother or sister 3. Brother or sister of the spouse 4. Brother or sister of either of the parents of the individual 5.Any lineal ascendant or descendant of the individual 6. Any lineal ascendant or descendant of the spouse of the individual 7. Spouse of the person referred to in (2) or (6) Also, gifts received on the occasion of marriage or under a will by way of inheritance are also tax free

7 Tax Planning Filling income tax return of wife, sons, daughters, etc. Creating HUF/Company/Firm/LLP Invest Income flow in such a manner that creates minimum tax liability Transferring the fund directly/indirectly in the name of spouse, daughter-in-law or minor child will lead to deem income in the hand of transferor

8 NATIONAL PENSION SCHEME(NPS) NPS keep contributing till the age of 65 years Deduction to NPS Scheme for contribution by individual u/s 80CCD(1) : Salaried employee 10% of his salary; Non salaried employee 20 % of his GTI Deduction towards NPS scheme for contribution made by the employer u/s 80CCD(2)(No deduction in excess of 10% of salary)

9 NATIONAL PENSION SCHEME(NPS) Additional exemption up to Rs.50,000 :u/s 80CCD(1B) Tax at NPS-Withdrawal Partial withdrawal up to 25 % exempt 40% of the accumulated balance shall be exempt from tax on withdrawal /maturity On death tax free to nominee Pension taxable Amount utilized for buying annuity tax free from NPS-Withdrawal /Maturity

10 COMPUTATION OF GROSS TAXABLE INCOME Five heads of income 1. Income from Salaries 2. Income from House Properties 3. Profit & Gains of Business & Profession 4. Capital Gains 5. Income from Other Sources

11 INCOME FROM HOUSE PROPERTY Self occupied/letout :- Up to Rs for HBA interest: No other rebate. Before possession interest 5 years Other than self occupied: A. Determine Annual Rental Income B Municipal tax C Deduct 30 % : Statutory deduction: D HBA interest

12 PROFIT FROM BUSINESS / PROFESSION Income derived from business and profession The expenses which are incurred to earn the income is allowable as business expenditure Capital expenditure/expenditure having endurable benefit not allowed Personal expenditure not allowed

13 INCOME FROM OTHER SOURCES Interest Income: Company deposits Debentures/bonds Savings / Fixed deposits with banks Post office savings schemes like MIS, NSC, Time Deposit etc. Private loans given to relatives, friends or any other entity. Government securities.

14 15G AND 15H The above form one can not submit if income of the assessee is higher than basic exemption limit. If you still submit the form you are liable for penal action

15 CAPITAL GAINS Any sale of a personal asset ( Certain assets exempt), capital gain is taxable between sale price and purchase price Capital gain tax is a levy on sale of immovable property, FMV, Shares & Mutual funds, etc. Certain deduction is available to reduce tax liability. Base Year of indexation for Immovable property is change to 01/04/2001.

16 Sr. No. Capital Asset 1 Listed security in a recognised stock exchange in India (other than a unit) Minimum Holding Period for "Long- Term" 12 months 2 Units of Unit Trust of India 12 months 3 Unit of an equity oriented fund 12 months 4 Unlisted shares (w.e.f 1st April 2017) 24 months 5 Land or Building or both (w.e.f 1st April 2018) 6 Units of a Mutual Fund specified under section 10(23D) 24 months 36 months 7 Any other Capital Asset 36 months

17 Exemption Capital gains: U/s 54 HP : 1 year before and 2/3 after U/s 54B Agriculture land: within two year U/s 54D Industrial Land: Within 3years U/s 54EC LTCA: within six month bonds U/s 54EE LTCA: within six month bonds U/s 54F Any Capital Assets (Less residential) 1 year before 2 /3 year after in residential property. U/s 54G Industrial land /Building and plant shifting of a plant U/s 54GB residential property being a House/Plot of land Investment in specified equity within 1 year U/s 54GA shifting of a plant to specified economic zone

18 LTCG SALE OF EQUITY SHARES, MF U/S 10(38) & 112A Section 10(38) exemption withdrawn New section 112A added LTCG on from transfer of long term capital asset(ltca) being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust shall be taxed at 10 per cent of such capital gains exceeding one lakh rupees. The rate of 10 per cent will be applicable to such LTCG, if i) in a case where LTCA is in the nature of an equity share in a company, securities transaction tax(stt) has been paid on both acquisition and transfer of such capital asset; and ii) in a case where LTCA is in the nature of a unit of an equity oriented fund or a unit of a business trust, STT has been paid on transfer of such capital asset.

19 U/S 112A FOR COMPUTATION OF LTCG The first and second provisos to section 48, The indexation benefit in respect of cost of acquisitions and cost of improvement while computation of LTCG is withdrawn Capital gains in foreign currency in the case of a non-resident, will not be allowed. The new scheme of computation of LTCG under:- The cost of acquisitions in respect of the LTCA acquired by the assessee before the 1st day of February,2018, shall be deemed to be the higher of a) the actual cost of acquisition of such asset; and b) the lower of (I) the fair market value of such asset as on 31 st January, 2018 ; and (II) the full value of consideration received or accruing as a result of the transfer of the capital asset. Broad three scenario is explained

20 FMV : FAIR MARKET VALUE(SHARES/UNITS OF MF) 1. In a case where the capital asset is listed on any recognized stock exchange, the highest price of the capital asset quoted on such exchange on the 31st day of January, A However, where there is no trading in such asset on such exchange on the 31st day of January, 2018, the highest price of such asset on such exchange on a date immediately preceding the 31st day of January, 2018 when such asset was traded on such exchange shall be the fair market value; 2. In a case where the capital asset is a unit and is not listed on recognized stock exchange, the net asset value of such asset as on the 31st day of January, 2018.

21 Sr NO. Particulars Scenario-1 Scenario-2 Scenario-3 1 Actual Cost of acquisition A FMV as on 1st February, B Sales consideration Lower of 2A & 2B Cost of acquisition(higher of 1 or 2) Sales consideration LTCG(S-C) ROT 10% 10% 10% Tax payable

22 DEDUCTION 80C Under this section, a deduction of up to Rs. 1,50,000 is allowed from taxable Income in respect of investments made in some specified schemes. 1. Life Insurance Premiums 2. Employee s Contributions to Employees Provident Fund/GPF 3. PPF(Maximum Rs.1,50,000/-)

23 DEDUCTION 80C 4. NSC (National Savings Certificates) 5. Unit Linked Insurance Plan (ULIP) 6. Repayment of Housing Loan (Principal) 7. Equity Linked Savings Scheme (ELSS) of Mutual Funds 8. Tuition Fees including admission fees or college fees paid for full-time education of any two children of the assessee (Any development fees or donation or payment of a similar nature shall not be eligible for deduction).

24 DEDUCTION 80C 9. Interest accrued in respect of NSC VIII issue. 10. Pension scheme of LIC of India or any other insurance company. 11. Fixed Deposit with Banks having a lock-in period of 5 Years 12. Amount deposited under Post Office Senior Citizens Scheme. 13. Amount deposited in Five Year Time Deposit Scheme in Post Office 14. Amount deposited in the NABARD (Rural Development Bonds of NABARD)

25 80D On whose life health Insurance Policy is taken Self & Pare nts Total Premium paid + preventive health check up expenses of self, family, dependent Additional Deduction if one of the Insured is Senior Citizen (60 year of Age) Total

26 U/S 15/17 SALARY INCOME. Salary is chargeable to tax on due or receipt basis whichever is earlier and includes wages, annuity or pension, gratuity, fees, commission, perquisites or profits in lieu of salary, advance salary, leave encashment, etc.

27 SECTION 17(3)/ PROFITS IN LIEU OF SALARY Any compensation from employer or former employer on termination or modification of the terms of employment.

28 SECTION 17(3)/ PROFITS IN LIEU OF SALARY Any receipt from Employer/former employer or from provident/other fund (other than gratuity, commuted pension, retrenchment compensation, house rent allowance, provident fund or such other funds) to extent not consisting of contributions by assessee/ interest on such contributions.

29 SECTION 17(3)/ PROFITS IN LIEU OF SALARY Any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy. Any sum received before his joining any employment or after cessation of his employment.

30 PENSION [SECTION 10(10A)] Pension is taxable as salary Commuted value of pension is exempt: For Government employees, fully exempt For other employees, following is exempt If employee has received gratuity then commuted value of 1/3rd of the pension which he is entitled to receive, and In any other case, commuted value of 1/2 of the pension which he is entitled to receive. Any payment in commutation of pension received from fund set up by LIC is exempt under section 10(23AAB)

31 GRATUITY [SECTION 10(10)] Death-cum-retirement gratuity received by the Government employees or employees under Civil Services wholly exempt from tax. Employees covered by Payment of Gratuity Act. Amount received on termination, after continuous service of not less than five years qualifies for exemption. Exemption is least of the following: (aggregate maximum from any number of employers) 15 days salary (denominator taken as 26 in case of monthly salary) for every completed year/ part thereof in excess of 6 months, or 10,00,000/- Gratuity actually received whichever is less.

32 GRATUITY [SECTION 10(10)] Other employees Amount received on retirement, incapacitation, death or termination Exemption is least of the following : (aggregate maximum from any number of employments) 10,00,000/-. Half month s salary for each completed year of service; (based on last ten months average salary), or Gratuity actually received. Definition of salary: Salary includes dearness allowance, if terms of payment allows but excludes all other allowances and perquisites

33 RETRENCHMENT COMPENSATION -SECTION 10(10B) Exempt to the extent of the lower of the following: Amount calculated in accordance with s. 25F(b) of the Industrial Disputes Act, 1947; or 5,00,000/- In cases where the scheme is approved by the Central Government the entire amount is exempt.

34 VOLUNTARY RETIREMENT COMPENSATION [SECTION 10(10C)] Any amount received or receivable by an employee of A public sector company, or Any other company, or An authority established under a Central, State or Provincial Act, or A local authority A co-operative society A university established under a Central, State or Provincial Act

35 VOLUNTARY RETIREMENT COMPENSATION [SECTION 10(10C)] An Indian Institute of Technology/ State Government/The Central Government; Notified institutions having importance throughout India or in any State or States Notified Institute of Management at the time of his voluntary retirement or termination under a scheme framed in accordance with guidelines prescribed by Rule 2BA.

36 VOLUNTARY RETIREMENT COMPENSATION [SECTION 10(10C)] Exemption allowable only in one A.Y. restricted to Rs 5 lakhs. The said limit is relaxed w.e.f. A.Y to cover VRS payments received in instalments with an overall limit of 5,00,000. * U/s 89 relief will not be available w.e.f where exemption is claimed.

37 HOUSE RENT ALLOWANCE 50% of salary (Mumbai, Kolkata, Delhi or Chennai) and 40% of salary where residential house is situated at any other place; HRA paid Actual rent paid over 10% of salary Where Salary = B+A+B+C

38 LEAVE ENCASHMENT Encashment of earned leave while in service will be treated as income Exempt at the time of retirement: 10 months salary * last 10 months average salary or Rs.3,00,000/- whichever is less Entitlement to earned leave not to exceed 30 days for every year of actual service. Limits aggregate n of employers.

39 LEAVE TRAVEL CONCESSION For himself/spouse/children/dependent parents/siblings Amount actually spent for travelling In India only Twice in a block of four calendar years. (Block year ) Two surviving child Road travel on vehicle, second class train fair Air fare of a economy class/air condition first class rail fare/1 st class or deluxe class public transport fare For C/f entitlement one is allowed

40 Situations Amount of exemption Where journey is performed by air Where journey is performed by rail Where the place of origin of journey-destination are connected by rail and journey is performed by any other mode of transport Amount of economy class air fare of the national carrier by shortest route or amount spent whichever is less Amount of air-conditioned first class rail fare by the shortest route or amount spent whichever is less Amount of air-conditioned first class rail fare by the shortest route or amount spent whichever is less

41 Situations Amount of exemption Where the place of origin of journey and destination are not connected by rail a. Where a recognized public transport exists b.where no recognized public transport exists First class or deluxe class fair by the shortest route or the amount spent whichever is less Air conditioned first class rail fare by shortest route or the amount spent whichever is less.

42 MEDICAL BENEFITS (U/S 17) Family includes: Spouse, children and dependent brothers, sisters and parents Hospital maintained by the employer. Hospital maintained by the Government, or any local authority or any other hospital approved by Government. Treatment in respect of prescribed diseases in a hospital approved by the Chief Commissioner, provided certificate from the hospital specifying the disease and receipt for amount paid is attached along with the return of income.

43 MEDICAL BENEFITS U/S 17 Medical insurance only under a Central Government approved scheme. Reimbursement of Insurance premium for mediclaim, etc. A:.Reimbursement of amounts actually spent for medical treatment other than treatment referred in above, not exceeding in aggregate 15,000/- upto AY From AY19-20 this will above would not be entitled. It will be included in Standard Deduction upto Rs. 40,000/-

44 MEDICAL BENEFITS U/S 17 Actual expenditure on medical treatment outside India, including expenditure on travel and stay abroad as also on travel and stay abroad of one attendant, to the extent permitted by RBI. Expenditure on travel abroad will be exempt only if the gross annual total income of the employee excluding this perquisite is 2 lakhs or less.

45 SPECIAL ALLOWANCES EXEMPT Any allowance, not in the nature of perquisite, granted to meet expenses wholly, necessarily and exclusively incurred in the performance of duties, to the extent to which actually incurred. Allowance granted to meet personal expense at the place where duties of his office are ordinarily performed or at the place where he ordinarily resides or to compensate for increased cost of living as may be prescribed in Rule 2BB.

46 SPECIAL ALLOWANCES EXEMPT Travel expenses on tour or transfer, Ordinary daily charges on account of absence from normal place of duty on tour or journey in connection with transfer For conveyance in performance of duties where it is not provided For expenditure on helper engaged for performance of office duties

47 SPECIAL ALLOWANCES EXEMPT For encouraging academic, research and training pursuits in educational and research institutions For purchase or maintenance of uniform, Special Compensatory Allowance in specified areas to extent specified

48 1 City Compensatory Allowance 2 Fixed Medical Allowance 3 Tiffin/Lunch/Dinner/Refreshment Allowance 4 Servant Allowance 5 Dearness Allowance 6 Project Allowance 7 Overtime Allowance 8 Interim Allowance 9 Any Other Cash Allowance

49 Sr Allowances Exemption limits 1 Children Education allowance 100 p.m per child maximum 2 children 2 Children hostel exp. allowance 300 p.m per child maximum 2 children 3 Tribal area allowance 200 p.m 4 Transport allowance (between residence & office)from AY19-20:Rs.3200/- 5 Transport allowance for transport employee (During the course of transport) 6 Underground allowance 800 p.m 800 p.m & 1600 p.m for blind/handicapped Least of 70% of allowance or 10,000 p.m

50 Sr Allowances Exemption limits 7 Compensatory field area allowance 8 Compensatory modified hill area allowance 9 Special Compensatory hill area or high altitude 10 Border area, Remote area, Disturbed area allowance 11 High altitude allowances (Non-congenial climate) 12 Special compensatory for highly active field area Maximum 2600 p.m. Maximum up to 1000 p.m. 300 p.m to 7000 p.m allowance, etc. 200 p.m to 1300 p.m. 1,060 p.m. (Altitude for 9,000 ft. to 15,000 ft.), 1,600 p.m. (Above ft.) Limit is 4,200 p m allowance

51 PERQUISITES Value of rent-free accommodation/value of concession in rent. 15 % of Salary or rent paid whichever is lower Value of any security or sweat equity shares allotted or transferred by employer/former employer as free or concessional cost. Contribution to an approved superannuation fund by the employer, up to Rs.1,00,000/- Any sum payable either directly or through a fund by employer (other than recognized PF, approved superannuation fund, etc.) to effect an assurance on the life of the employee or to effect a contract for an annuity.

52 LOAN TO EMPLOYEE Any loan given by an employer is taxable at the rate of for the same purpose, if given by SBI, on maximum monthly balance Reduced by any amount charged by an employer

53 Assets given a) Use of laptops and computers b) Movable asset other than Laptops and computers Value of benefits Nil i. 10% p.a. of the actual cost of such asset, or ii. the amount of rent paid, or payable by the employer iii. Less: amount recovered from employee.

54 Assets transferred Value of perquisites Computers & electronics Motor cars Depreciated value of asset [depreciation is on WDV for each completed year of usage] less: amount recovered from employee. Depreciated value of asset [depreciation is on WDV for each completed year of usage] less: amount recovered from employee. Any other asset Depreciated value of asset [depreciation is on SLM for each completed year of usage] less: amount recovered from

55 MISCELLANEOUS Free meals during office hours (Free meal in remote area or offshore installation area is not taxable perquisite) Actual cost to the employer in excess of 50 per meal or tea or snacks less: amount recovered from the employee. (Tea or non-alcoholic beverages and snacks during working hours is not taxable) Value of any gift or Value of gift In case

56 MISCELLANEOUS Expenditure incurred on credit card or add on card including membership fee and annual fees Expenditure on club other than health club or sports club or similar facilities provided uniformly to all employees Actual expenditure to employer is taxable Less: amount recovered Less spent for official purpose Actual expenditure incurred by the employer Less: amount recovered Less spent for official purpose

57 Specified employee Section 17(2)(iii) Director of the company or Employee having 20% or more voting power in the employer company or Employee having salary* more than 50,000 *Salary means all taxable monetary benefit after deduction u/s 16

58 WHAT IS THE DEFINITION OF SALARY FOR CALCULATION? Salary = basic salary + DA + bonus (current year) + commission + taxable portion of all allowances + monetary payment from employer other than PF (not include perquisites)

59 TAX FREE PERQUISITES Employer s contribution to staff group insurance scheme Actual traveling expenses paid/reimbursed for journeys undertaken for business purposes Payment of annual premium on personal accident policy, if such policy is taken to safeguard the employer s interest

60 Employers contribution to provident fund Employee s contribution Interest credited Lump sum payment received at the time of retirement/ Statutory Provident FundRecognised Provident Fund Not taxable Available deduction u/s 80C Fully exempt Exempt u/s 10(11) Not taxable up to 12 per cent* of salary Available deduction u/s 80C Exempt up to 9.5% Exempt from tax u/s10(12) Subject to conditions: not taxable if

61 Employers contribution to provident fund Employee s contribution Interest credited Lump sum payment received at the time of retirement or termination of service or withdrawn Unrecognised Provident Fund Not taxable Not available U/s 80C Not taxable at the time of credit Employee s contribution exempt from tax & Interest thereon is taxable under the head of Income from other sources. Employer s contribution and interest thereon is taxable as Profits in lieu Public Provident Fund Employer does not contribute Available deduction u/s 80C Exempt from tax Exempt from tax u/s

62 Change in ITR of A.Y Fees for late filing of return [Section 234F]. Require more details of salary and property income. On presumptive basis additional details : Debit side: Fixed assets, Cash/bank balance, Inventories, Sundry debtors, Loans and advances and other current assets including advance to creditors : Credit side: Capital Account, Secured/Unsecured loan, Advances from debtors, Sundry creditors, GIFT receive during the year in cash or kind Further, new ITR 4 seeks GSTR no. of the assessee and turnover as per GST return filed by him. Details of GST Payment/Refund Details of business transactions with registered and unregistered suppliers under GST.

63 Capital Gains in case of transfer of unquoted shares. Reporting of sum taxable as Gift. Revised Depreciation Schedule i.e. the highest rate of depreciation for any block of asset is restricted to 40% Info relating to capital gains exemption to be furnished in detail. Disallowance of expenses in case of TDS default (for residuary income).

64 Taxability on remission of trading liability in case of 'Income from other source'. Impact on profit or loss due to ICDS deviation. Details of foreign bank account of non-residents. Ownership information in case of unlisted company. Taxability of Dividend in excess of Rs. 10 lakhs.[section 115BBDA] No deduction for corpus donations made to other institutions [Section 11]. Political Parties to confirm if cash donations are received [Section 13A].

65 THINKS COVERED IN ONE LINE WILL Annual Return RTI Rights of consumer Rights of a citizen Record of books, vouchers and documents Reverse Mortgage GST

66 Prayer Oh god give me a courage, To change the things, which I can, Oh God give me a serenity to accept the things, which I cannot change, Give me a wisdom to know, what I can change and what I can t change.

67 Thanks you all for being with me

68 QUESTIONS IF ANY? M BLOG: CANITINMPATHAK.BLOGSPOT.IN

Income From Salaries

Page: SAL-1 Income From Salaries An income can be taxed under the head Salaries only if there is a relationship of an employer and employee between the payer and the payee. The relationship of employer