Salary Solution

Salary

SALARY

Problem 1

As per this schedule initial payment is Rs.7000 p.m. This will increase by Rs.2000 every year until salary reaches to Rs.13000. Once salary reaches to Rs.13000 then increment will be Rs.2500 every year till salary reaches the scale of Rs.18000. As per the slab Mrs. Jaiswal's basic salary will increase as under:

Period	Basic salary p.m.
From 1/1/07 to 31/12/07	7000
From 1/1/08 to 31/12/08	9000
From 1/1/09 to 31/12/09	11000
From 1/1/10 to 31/12/10	13000
From 1/1/11 to 31/12/11	15500

Basic salary for the period from 1/4/10 to 31/3/11

(9 months * Rs.13000) + (3 months * Rs.15500) = Rs.163500

If salary falls due on the next day of the end of month

Mrs. Jaiswal's basic salary slab shall be same as above.

Computation of Basic salary for the period from 1/4/10 to 31/3/11

Period	Salary	Working	Amount
March' 2010 to December' 2010 (As salary for March' 10 falls due on 1/4/10)	Rs.13000 p.m.	10 months * Rs.13000	Rs.130000
January' 2011 to February' 2011 (As salary for March' 10 falls due on 1/4/11)	Rs.15500 p.m.	2 months * Rs.15500	Rs.31000
Basic salary			Rs.161000

Problem 2

Working

Completed year of service is 30 years.
Salary here means Basic + Dearness Allowance + Commission on turnover, being last 10 months average just preceding the month of retirement, as shown below:

Particulars	1	2	3	4	5	6	7	8	9	10	Total
Particulars	Oct' 09	Nov	Dec	Jan' 10	Feb	Mar	Apr	May	June	July	Total
Basic	9000	9000	9000	10000	10000	10000	10000	10000	10000	10000	97000
D.A.	4500	4500	4500	5000	5000	5000	5000	5000	5000	5000	48500
Commission	2000	2000	2000	2000	2000	2000	2000	2000	2000	2000	20000
Total											165500
Average salary = Rs.165500 / 10 months											16550

Computation of taxable gratuity of Mrs. Garib for the A.Y. 2011-12

Particulars	Details	Amount
Gratuity received		200000
Less : Minimum of the following is exempted as per Sec 10(10)(iii):
Actual gratuity received	200000
Statutory Amount	1000000
* completed year of service * salary p.m. [ ¹/₂ * 30 * 16550]	248250	200000
Taxable Gratuity		Nil

Problem 3

Working :

Completed year of service is 27 years (fraction in excess of 6 months shall only be considered).
Salary here means Basic (Rs.5000) + Dearness Allowance (Rs.3000), last drawn. i.e. [5000 + 3000] = 8000

Computation of taxable gratuity for the A.Y. 2011-12

Particulars	Details	Amount
Gratuity received		600000
Less : Minimum of the following is exempted as per Sec 10(10)(ii):
Actual gratuity received	600000
Statutory Amount	1000000
¹⁵ / ₂₆ * completed year of service * salary p.m. [ ¹⁵ / ₂₆ * 27 * 8000]	124615	124615
Taxable Gratuity		475385

Problem 4

Computation of taxable gratuity in hands of Mr. Roy for A.Y.2011-12

Particulars	Details	Amount
Particulars	Details	Case 1	Case 2
Total Gratuity received		280000	280000
Less : Minimum of the following is exempted as per Sec 10(10)(iii):
a) Actual gratuity received	280000
b) Statutory Amount	1000000
c) 1/2 * completed year of service * salary p.m.
Case 1: 1/2 * 25 * Rs.6680 ^$	83500	83500
Case 2: 1/2 * 25 * Rs.6840 ^#	85500		85500
Taxable Gratuity		196500	194500

$ Case1: Calculation of Average Salary

Particulars	1	2	3	4	5	6	7	8	9	10	Total
Particulars	Sept'09	Oct	Nov	Dec	Jan'10	Feb	Mar	Apr	May	June	Total
Basic	5000	5000	5000	5000	5000	5000	5000	6000	6000	6000	53000
D.A.	1200	1200	1200	1200	1200	1200	1200	1800	1800	1800	13800
Total Salary											66800
Average Salary Rs.66800/10											6680

# Case 2: Calculation of Average Salary

Particulars	1	2	3	4	5	6	7	8	9	10	Total
Particulars	Oct'09	Nov	Dec	Jan'10	Feb	Mar	Apr	May	June	July	Total
Basic	5000	5000	5000	5000	5000	5000	6000	6000	6000	6000	54000
D.A.	1200	1200	1200	1200	1200	1200	1800	1800	1800	1800	14400
Total											68400
Average Salary Rs.68400/10											6840

Problem 5

Computation of taxable leave encashment of Mr. Raghu for the A.Y. 2011-12

Particulars	Details	Amount
Leave encashment received		60000
Less : Minimum of the following is exempted as per sec. 10(10AA)(ii):
Actual amount received	60000
Statutory Amount	300000
10 months * Av. Salary p.m. (10 * 5800 ^#)	58000
[{30 days * completed year of service - Leave taken} * Avg. salary p.m. ^# ]/ 30 days
[{30 * 16 340 ^$ } * Rs.5800 ^# ]/30	27067	27067
Taxable Leave Encashment		32933

# Average salary for 10 months ending on 1 st January 2010 is {(6000 * 6) + (5500 * 4)}/10 = 5800

$ Computation of availed leave:

Particulars	Days
40 days for each completed year of service (40 days * 16 years)	640
Less : Unavailed leave at the time of retirement	300
Availed leave	340

Problem 6

Computation of taxable leave encashment of Mr. for the A.Y. 2011-12

Particulars	Details	Amount
Leave encashment received		775000
Less : Minimum of the following is exempted as per Sec 10(10AA)(ii):
Actual amount received	775000
Statutory Amount	300000
10 months * Av. Salary p.m. (10 * 24300 ^# )	243000
[{1* completed year of service Leave taken}* Avg. salary p.m.]
[{1 month * 26 8 months} * Rs.24300]	437400	243000
Taxable Leave Encashment		532000

# Average salary for 10 months ending on 31 st December 2010 is {(24000 * 7) + (25000 * 3)}/10 = 24300

Problem 7

Working

Completed year of service: 20 years
Salary here means Basic + Dearness Allowance + Commission on turnover (last 10 months average from the date of retirement)

Particulars	1	2	3	4	5	6	7	8	9	10	Total
Particulars	Oct	Nov	Dec	Jan	Feb	Mar	Apr	May	June	July	Total
Basic	4000	4000	4000	5000	5000	5000	5000	5000	5000	5000	47000
D.A.	2000	2000	2000	2000	2000	2000	2000	2000	2000	2000	20000
Commission	2000	2000	2000	2000	2000	2000	2000	2000	2000	2000	20000
Total											87000
Average salary i.e. Rs.87000/10 months											8700

Statement showing balance of leave lying to the credit of Miss Asin

Total Leave Allowed 20 days * 20 years	400 days
Less : Leave actually availed during service	160 days
Balance Leave lying to her credit at the time of retirement	240 days
Balance Leave lying to her credit (in terms of months) [240 days/30 days]	8 months

Computation of taxable Leave encashment of Miss Asin for the A.Y. 2011-12

Particulars	Details	Amount
Leave Encashment received		300000
Less : Minimum of the following is exempted as per Sec 10(10AA)(ii):
Actual amount received	300000
Statutory Amount (Rs.300000 Rs.40000) ^$	260000
10 months * Avg. Salary p.m. (10 * 8700)	87000
[{20 days * completed year of service - leave taken} * Avg. salary p.m.]/30 or 8 months 3 leave (8 * 8700)	69600	69600
Taxable Leave Encashment		230400

$ While claiming the statutory amount (i.e. Rs.300000) any deduction claimed earlier as leave encashment shall be reduced from Rs.300000.

Problem 8

Computation of taxable leave encashment of Mr. Nigam for the A.Y. 2011-12

Particulars	Details	Amount
Leave encashment received	270000 + 24000	294000
Less : Minimum of the following is exempted as per Sec 10(10AA)(ii)
Actual amount received	294000
Statutory Amount	300000
10 months * Av. Salary p.m. (10 * 10000) + (10 * 9600)	196000
{1* completed year of service Leave taken}* Avg. salary p.m.
[{1 month * 25 18 months 5 months} * Rs.10000] + [{20 days * 28 260 days 180 days} * 9600/30]	20000 + 38400	58400
Taxable Leave Encashment		235600

Problem 9

Computation of taxable pension of Mr. Johar for the A.Y.2011-12

Particulars	Details	Amount
Uncommuted Pension
(Rs.5000 * 4) ¹	20000
(Rs.1000 * 5) ²	5000	25000
Commuted Pension	200000
Less : Exempted u/s 10(10A)(ii) ¹/ ₃^rd of Rs.250000 ³	83333	116667
Taxable Pension		141667

From 1/7/09 to 31/10/10: 100% pension is in uncommuted form
From 1/11/10 to 31/3/11: 20% pension is in uncommuted form as 80% pension being commuted.
Commuted amount for 80% of pension = Rs.200000

Therefore, commuted amount for 100% of pension = Rs.250000

Problem 10

Computation of taxable commuted pension of Radha for the A.Y.2011-12

Particulars	When she receives gratuity	When she does not receive gratuity
Commuted Pension	90000	90000
Less : Exempted u/s 10(10A)(ii) [ ¹ / ₃^rd of 150000] ^# [ of 150000] ^*	50000 ^#	75000 ^*
Taxable Pension	40000	15000

# Commuted amount for 3/5 th of pension = Rs.90000

Therefore, commuted amount for 100% of pension = Rs.150000

Problem 11

Computation of taxable retrenchment compensation of Sri Vinay for the A.Y. 2011-12

Particulars	Details	Amount
Retrenchment compensation received		700000
Less : Exempted u/s 10(10B) being minimum of the following
a) Actual Amount Received	700000
b) Statutory amount	500000
c) Amount as per Industrial Dispute Act	350000	350000
Taxable Retrenchment Compensation		350000

Problem 12

Computation of gross taxable salary of Miss Sanjana

Particulars	P.Y.2009-10		P.Y.2010-11
Particulars	Details	Amount	Details	Amount
Basic Salary		60000		55000
Advance Salary		5000		-
House Rent Allowance Received	48000		48000
Less : Exempted u/s 10(13A) shall be minimum of -
a) Actual Amount Received Rs.48000
b) 40% of Salary1 (i.e.40% of Rs.60000) Rs.24000
c) Rent paid 10% of salary (Rs.36000Rs.6000) Rs.30000	24000	24000	24000	24000
Gross Taxable Salary		89000		79000

For the purpose of HRA, salary shall always be taken on due basis.

Problem 13

Computation of income under the head 'Salaries' of Koyal for A.Y. 2011-12

Particulars	Working	Amount	Amount	Amount	Amount
Basic	23000 * 12				276000
Advance salary					46000
Commission on turnover	1800000 * 3%				54000
Allowances
Dearness Allowance	7000 * 12			84000
HRA	5000 * 12		60000
Less : Min. of the following
Actual allowance		60000
50% of salary	414000 * 50%	207000
Rent paid over 10% of salary	(7200 * 12) - 41400	45000	45000	15000	99000
Taxable Salary					475000

Salary for the purpose of HRA

Basic	276000
Dearness Allowance	84000
Commission on turnover	54000
Total	414000

Problem 14

Valuation of rent free furnished accommodation

Particulars	Details	Amount
Rent free accommodation	15% of salary 1	10710
Furniture	10% of cost of furniture	2000
Taxable Perquisite		12710

Salary for the purpose of

Particulars	Rent free accommodation
Basic salary	54000
Dearness Allowance	15000
Uniform allowance (6000 60% of 6000)	2400
Total	71400

Problem 15

Taxable value of rent-free accommodation

Particulars	Basis of determination	Taxable value
Valuation shall be computed from the date the assessee occupies the property i.e. from 1/10/2010	15% of Salary 1	7770

Salary for the purpose of rent-free accommodation:

Particulars	Details	Amount
Basic Salary: From October to January (with Zinc Ltd.) (Rs.5000 * 4 months)	20000
From February and March (with Zinc Ltd) (Rs.6000 * 2 months)	12000
From January to March (with Y & Co.) (Rs.4000 * 3 months)	12000	44000
Dearness allowance from October to March (Rs.2000 * 6 months * 40%)		4800
Education Allowance from October to March (Rs.600 * 6 months)	3600
Less : Exempted (Rs.100 * 6 months)	600	3000
Total		51800

It is assumed that population of Pune exceeds 25 lakh.

Problem 16

Valuation of perquisite for the A.Y. 2011-12

Particulars	Working	Amount
Perquisites u/s 17(2)
Interest free loan -
For residential flat	500000 * 8% * 6/12	20000
For education	15000 * 11.25% * 6/12	844
Loan for purchase of computer	30000 * (16 - 8)% * 6/12	1220
Value of perquisites		22044

Problem 17

Calculation of WDV of Computer

Particulars	Amount
Purchase value	100000
Less : Depreciation from May 2008 to April 2009 @ 50%	50000
WDV as on May 09	50000
Less : Depreciation from May 2009 to April 2010 @ 50%	25000
WDV as on May 10	25000
Less : Depreciation from May 2010 to 1/3/11 (as not being a complete year)	Nil
WDV as on the date of sale	25000
Less : Amount paid	21000
Taxable perquisite	4000

Problem 18

Computation of taxable perquisite of Mr. Lucky for the A.Y.2011-12

Particulars	Working	Amount
Period during which furniture facility was provided for personal use	500000 * 10% * 7/12	29167
Concession in sale price over WDV of the furniture	WDV Sale value i.e. Rs.300000 Rs.60000	240000
Total taxable perquisite		269167

Calculation of WDV of furniture

Particulars	Amount
Purchase value	500000
Less : Depreciation from 17/8/06 to 16/8/10 @ 10%	200000
WDV as on the date of sale	300000

Problem 19

Computation of gross salary of Mr. Ram for the A.Y.2011-12

Particulars	Working	Details	Amount	Amount
Basic	25000 * 12			300000
Perquisites u/s 17(2)
Rent free accommodation	15% of Salary		45000
Loan at concessional interest	500000 * (8 - 6)% * 9/12		7500
Gift on birthday			Nil
Video Camera	Note 1
For use (from April to July)	60000 * 10% * 4/12		2000
For sale: Original cost to employer		60000
Less : Depreciation @ 10%	3 completed years	18000
		42000
Less: Amount recovered		30000	12000
Perquisite on sale of car	Note 2		80000
Payment of telephone bills	Exempted		Nil	146500
Gross Salary				446500

Notes

1. Video camera is treated as furniture being a house-hold item and not as electronic equipment

2. Computation of taxable value of perk on sale of car

Particulars	Amount
Cost of car to employer on 16/7/07	250000
Less : Depreciation for 2 nd year @ 20% (from 16/7/07 to 15/7/08)	50000
Written down value on 16/7/08	200000
Less : Depreciation for 2 nd year @ 20% (from 16/7/08 to 15/7/09)	40000
Written down value on 16/7/09	160000
Less : Depreciation for the period 16/7/09 to 14/7/10: No depreciation for part of the year	Nil
Written down value as on date of sale	160000
Less : Amount recovered	80000
Taxable perquisite	80000

Problem 20

Computation of total income of Vira for the A.Y. 2011-12

Particulars	Details	Amount	Amount
Salary			120000
Production bonus			11000
Bonus			7000
Allowances
Dearness allowance		12000
Medical allowance		7200
Children education allowance	4800
Less : Exempted u/s 10(14) [Rs.100 * 2 * 12]	2400	2400	21600
Perquisites
Rent free accommodation (7.5% of salary 1 )			5535
Employer's contribution provident fund		14400
Less : Exempted (12% of salary ¹ ) (Restricted to Rs. 14400)		14400	Nil
Gross Salary			165135
Less : Deduction u/s
16(iii) Professional tax			2400
Gross Total Income			162735
Less : Deduction u/s 80C (Contribution to RPF)			14400
Total Income (Rounded off u/s 288A)			148340

Salary for the purpose of -

Particulars	RFA	RPF
Basic salary	120000	120000
Production bonus	11000	-
Bonus	7000	-
Dearness allowance	Nil	-
Medical allowance	7200	-
Children education allowance	2400	-
Total	147600	120000
For year	73800	-

It is assumed that professional tax is not paid by employer.

Problem 21

Computation of total income of Shri Kar for the A.Y.2011-12

Particulars	Working	Details	Amount	Amount
Basic	20000 * 12			240000
Allowances
Dearness Allowance	30% of basic salary		72000
Transport Allowance	2000 * 12	24000
Less : Exempted	800 * 12	9600	14400	86400
Perquisites u/s 17(2)
Motor car		36000
Less : Exempted	1800 * 12	21600	14400
Hotel accommodation	Since it was an official tour		Nil
Lunch	Assumed that it is within the exempted limit of Rs.50 per meal		Nil
Telephone bill reimbursed	Exempted		Nil
Computer facility	Exempted		Nil	14400
Taxable Salary/Gross Total Income				340800
Less : Deduction
U/s 80D Medi-claim (cash payment is not eligible for deduction)				3200
Total Income				337600

Note : Loan from RPF is not an income.

Problem 22

Taxable value of perquisite in hands of Mrs. Anu is as under:

Particulars	Workings	Details	Case 1	Case 2
Medical expenditure	Amount paid in excess of RBI permission and actual expenditure shall not qualify for exemption.	Rs.190000 - Rs.180000	Rs.10000	Rs.10000
Stay cost	Stay cost is allowed only for one patient and one care taker, hence eligible amount for exemption is (Rs.30000 * 2)/3	Rs.40000 - Rs.20000	Rs.20000	Rs.20000
Travel cost (note)	Travel cost is allowed only for one patient and one care taker, hence eligible amount for exemption is (Rs.150000 * 2)/3	Rs.200000 - Rs.100000	Rs.100000	Rs.200000

Note : Travel cost shall be eligible for exemption only if gross total income of the assessee does not exceed Rs.200000, which can be evaluated as under:

Particulars	Case 1	Case 2
Salaries
Basic	100000	100000
Add : Medical facility
Medical expenditure perquisite	10000	10000
Stay cost perquisite	20000	20000
Taxable salary	130000	130000
Add : Other income	60000	175000
Gross Total Income	190000	305000

Problem 23

Computation of taxable salary of Mr. Jagdish for the A.Y.2011-12

Particulars	Details	Amount	Amount
Basic			40000
Bonus			5000
Fees			3000
Allowance: Dearness Allowance			5000
Perquisites
Sweeper facility	Note	Nil
Gas facility	Note	Nil
Free meals		Nil	Nil
Gross Salary			53000
Less : Deduction u/s
16(iii) Professional tax		3000	3000
Taxable Salary			50000

Note : Mr. Jagdish is neither a director nor a shareholder in SOM Ltd. nor his cash salary exceeds Rs.50000 (as shown below), hence he is a non-specified employee. Though Mr. Jagdish holds 25% shares of Om Ltd still he is not a specified employee of SOM Ltd. So, sweeper facility and gas facility is not taxable.

Computation of salary for the purpose of Specified employee

Particulars	Amount
Basic	40000
Bonus	5000
Fees	3000
Allowance: DA	5000
Gross Salary	53000
Less : Deduction u/s 16(iii) Professional tax	3000
Taxable Salary	50000