salary

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

27 May 2011 please let me know in the following case:
if i want to pay my employee a salary of Rs. 20000, and i want him to recieve maximum cash in hand without and tax deduction. so as per my knowledge Rs. 180000/annum salary is tax free. Also let me know what is the maximum limit of allowances that i can offer to my employee like travel, medical etc...also lemme know the taxes that the employer has to pay

CS Bijoy

CS Bijoy (Expert)
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27 May 2011
4. Exemption Limits for Certain Items of Salary and Allowances

A. Leave Salary or Leave Encashment
Leave salary received at the time of retirement or at the time of superannuation or at the time of termination of service is exempt from tax up to the least of the following amounts. (Routine encashment of earned leave during the course of employment is fully taxable.)

a. Leave salary actually received.
b. Eight months average salary.
c. Amount specified by Govt. i.e. Rs. 2,40,000/- (retired after 1 July 1997)
d. One month average salary for every completed year of service after deducting leave availed while in service.

Note:
I. -For calculating Completed years of service, any fraction of year is to be ignored.
II. Average salary is worked out from the salary drawn by employee during the ten months before his retirement.

-Salary = Basic Salary + Dearness Allowance

B. Gratuity
Gratuity received at the time of retirement or superannuation or termination of service is exempt from tax up to the least of the following amounts-

a. Gratuity actually received
b. Amount specified i.e. Rs. 3,50,000/-
c. 15 days salary based on 26 days in a month for every completed year of service.

Note:
-Completed year of service includes part of the year in excess of six months.
-Salary refers to the last pay drawn.
-Salary = Basic Salary + Dearness Allowance

C. Compensation received under VRS
Under an approved scheme of Voluntary Retirement Scheme, the maximum amount of exemption is Rs. 5,00,000/-.

D. House Rent Allowance (HRA)
House rent allowance received by an employee is exempt from tax up to the least of the following:

a. House Rent Allowance actually received
b. 50% of salary if HRA received in Mumbai, Calcutta, Delhi, Chennai and 40% of salary if HRA in other cities.
c. Rent paid in excess of 10% of salary.

Note:
-Salary = Basic Salary + Dearness Allowance
-Exemption for HRA is not available if employee is staying in his own house or not paying any rent for occupying house .

E. Leave Travel Allowance
Leave travel allowance not exceeding the amount of actual travel fare incurred by the employee for self and family to travel to any place in India while on leave is exempt.

Note:
-Exemption can be claimed only for two trips during the block of four calendar years (1998- 2001).
-Air fare is also allowable
-Tickets, etc. should be preserved by the employee and produced on demand by the assessing tax officer.

F. Conveyance Allowance
Exempt up to Rs.800/- per month.

G. Children's Education Allowance
This allowance is exempt from tax to the extent of Rs. 50 /- per month per child up to a maximum of two children.

Querist : Anonymous

Querist : Anonymous (Querist)

27 May 2011 THANK YOU BIJOY FOR THE REPLY...BUT IM A LILL CONFUSED....SEE AS I HAVE UNDERSTOOD....I CAN PAY HIM RS10000 AS BASIC SALARY....RS5000 AS HRA...RS 800 AS CONVEYANCE ALLOWANCE.....WHAT ELSE CAN I INCLUDE IN IT? PLZ HELP

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Querist : Anonymous

Querist : Anonymous (Querist)

27 May 2011 what is the tax paying responsibility of the employer and also let me know more about tax(tds and professional tax)