For some one who has lots of deductions like repayment of housing loan etc Just go through the Income Tax Act and Direct Taxes Ready Reconer............you need to buy those immediately.
All the best :) Under the Income Tax Act (I.T. Act), 1961, income tax is payable on the total income of an assessee. Thus, an assessee is a person, inter alia, by whom income tax is payable under the I.T. Act. For the Assessment Year 2005-2006, i.e. in respect of the income earned during the FY 2004-2005, the new Section 88 D provides full tax rebate to individual tax payers having income up to Rs. 1,00,000 during the financial year 2004-05. As a result, tax payable would be zero for all individuals having income up to Rs. 1 lakh, including individual tax payers whose total income exceeds Rs. 1,00,000 and the income-tax payable on such total incomes (as computed before allowing the deductions under this Chapter) exceeds the amount by which such total income is in excess of Rs. 1 lakh, shall be entitled to a deduction from the amount of income tax on his total income, of an amount equal to the amount by which the income-tax payable on such total income is in excess of the amount by which the total income excess one hundred thousand rupees.
The total income of an assessee is divided under five different specific heads of income:
a) Salary;
b) Income from house property;
c) Profits and gains of business or profession;
d) Capital gains; and
e) Income from other sources.
Each head of income deals with certain specific types of income only and has an exclusive jurisdiction over the items covered under that head. It is the total of all the different items of income after giving allowances and making deductions under each head that the gross total income of an assessee is computed. Thereafter certain further deductions are admissible which result into a taxable amount known as 鈥渢otal income鈥?
Taxable Salary
An employee or a salaried taxpayer is liable to income tax in respect of different types of income, allowances, perquisites, etc. under the head 鈥渟alaries鈥? He may also have other sources of income like dividend, bank interest, rental income from house property, or capital gains, etc. Their computation is done under different sections of the I.T. Act. However, as regards the computation of total income under the head 鈥渟alaries鈥?there are various items of income, which are known as salary. Salary now includes the basic salary, advance salary, the wages, pension, fees, commissions, bonus, taxable gratuity, leave salary, leave encashment salary (not otherwise exempt), profits in lieu of salary, taxable house rent allowance and other taxable allowances. Thus, while computing the taxable income under the head 鈥渟alaries鈥?the sum total of all taxable items comprising 鈥渟alary鈥?has to be made.
Not all items of allowances are taxable. Likewise, all types of perquisites enjoyed by an employee are not liable to income tax. Some items of allowances and perquisites are completely exempt from income tax, whereas other items are partially exempt. In some cases some items of perquisites or allowances are fully taxable.
Valuation of Perquisites
For the purposes of valuation of perquisites as per rule 3 鈥渟alary鈥?includes the pay, allowances, bonus or commission payable monthly or otherwise or any monetary payment, by whatever name called from one or more employers, as the case may be, but does not include the following namely:
(a) dearness allowance or dearness pay unless it enters into the computation of superannuation or retirement benefits of the employee concerned;
(b) employer鈥檚 contribution to the provident fund account of the employee;
(c) allowances which are exempted from payment of tax;
(d) the value of perquisites specified in sub-section (2) of Section 17 of the Income Tax Act;
(e) any payment or expenditure specifically excluded under proviso to sub-clause (iii) of clause (2) or proviso to clause (2) of Section 17.
Standard Deduction
One of the important deductions allowed to every salaried employee is known as standard deduction. There are other deductions which are also allowable but they are very rarely applicable to most of the salaried employees. However, standard deduction is uniformly available and can be enjoyed by every salaried taxpayer. After the gross total income is computed there are certain deductions admissible while computing total income. If there is any loss under any head of income that loss is admissible as deduction while computing the taxable income of the salaried employee. For example, from AY 2004-2005, the loss of Rs. 1,50,000 relating to interest in respect of loan (if loan taken on or after 1.4.1999), etc. in relation to a self-occupied house is admissible as a deduction in computing the total income under the provisions of Section 71 of the I.T. Act. Likewise, if there is a loss under the head 鈥渋ncome from house property鈥?or under the head 鈥渋ncome from other sources鈥?or a business loss then such loss also can be set off against salary and the salaried taxpayer is ultimately liable to pay income tax on the reduced total income. If no tax is payable he would become eligible to get refund of the tax deducted at source. Even the employer can adjust the loss of house property against salary for the purpose of TDS.
Other Deductions
Once, the standard deduction and other deductions under Section 16 of the I.T Act have been made, the resultant figure is the amount of taxable salary. It is the estimated income under the head 鈥渟alaries鈥?which is subject to the deduction of tax at source by the employer during the concerned financial year. A salaried employee may have income from other sources as well like rental income, dividend income, interest income, etc. The income under the different heads has to be computed and then the gross total income determined. Certain items under Section 80L are deductible from the gross total income, like bank interest, interest on government securities, etc. up to Rs. 15,000. Loss, if any, like loss from business or profession or loss under the head 鈥淚ncome from other sources鈥?or loss under the head 鈥淚ncome from house property鈥?up to Rs. 1,50,000 in relation to payments of interest in respect of borrowings relating to a self-occupied house property and any loss from rented property can be deducted and the taxable salary income can be further reduced. On the resultant total income, the tax payable or refundable is computed. Under the provision of Section 88 of the I.T. Act a salaried employee is also eligible to get rebate of income tax at 20% or 15% (depending on the income) on the amount contributed towards P.F., repayment of housing loan, shares in infrastructure companies, etc. LIP, etc. up to Rs. 1,00,000.
Special Tax Concessions for Salaried Women and Senior Citizens
A woman salaried employee below 65 years is also entitled to tax rebate of Rs. 5,000 under Section 88C from tax in respect of total tax payable by her on her total income.
In case the salaried employee is a senior citizen (male/female) he/she enjoys tax rebate of Rs. 20,000 from A.Y. 2004-05.
For every assessment year the return of income known as I.T. Return must be filed by every salaried taxpayer whose income exceeds the maximum amount exempt from income tax which is Rs. 50,000 in the case of A.Y. 2005-2006. It has become compulsory for all salaried taxpayers to file income tax return voluntarily by 31st July of the relevant assessment year, even if full income tax has been deducted at source in their case. This provision of voluntary compliance has to be noted by every salaried taxpayer carefully.
Vide Notification No. 551(E) dated 12-1-2004 the government has announced a new scheme for filing of Returns by Salaried Employees through Employer 2004 whereby no separate income-tax return is to be filed by employees having salary income not exceeding Rs. 1,50,000 pa. you can download simple to use excel file for salary tax calculation from the link:
http://ynithya.com/taxcalc |
