Explanation of sec 192(1a) and 1(b) of income tax act
This query is : Resolved
14 November 2014
I am having trouble understanding the following example relating to Sec 192(1A) and 192 (1B):
Example: An employee gets a salary of Rs. 3,20,000 from his employer. Apart from the salary he also gets a non monetary perquisite of Rs. 80,000.The employee invested Rs. 60,000 in PPF. Calculate the monthly tax required to be deducted by the employer under section 192.
Answer: Computation of TDS Shall be made as under:
Annual Salary 3,20,000
Add: Non monetary perquisite 80,000
Gross Salary 4,00,000
Less: Deduction under Ch VIA 60,000
Total taxable income 3,40,000
Tax on total taxable income 14,000
Less: Rebate under Sec 87A 2,000
Add: Education cess @ 3% 360
Total tax 12,360
Monthly TDS (12360/12) 1,030
If in the above example the employer wants to exercise the option referred to in Sec 192(1A) what would be the consequences of the same?
Ans: In terms of Sec 192(1B) the average rate of tax on the income under the head "Salaries" shall be calculated as under:
Gross Salary 4,00,000
Tax on above 18, 540
Average rate of tax 4.635%
Tax on perquisites at an average rate of tax shall be 4.635% of 80,000= Rs. 3708. Employer has an option of paying this amount from his own pocket @ 309 per month as per Sec 192(1A)
Now my question is, how is the amount of tax 18,540 arrived at?
I understand from back calculation that 18,540 is the amount of tax on 3,80,000. In relation to this question 3,80,000 can be arrived at by adding 3,20,000( amount of salary excluding non monetary perquisites)and 60,000 (amount of deduction under Ch. VIA for PPF). But what is the logic behind adding these two when I had not made any deduction from 3,20,000 to begin with?
Can someone please explain the reason behind this with respect to the provisions of 192(1A) and (1B)?
Any help in this regard will be highly appreciated.
Example: An employee gets a salary of Rs. 3,20,000 from his employer. Apart from the salary he also gets a non monetary perquisite of Rs. 80,000.The employee invested Rs. 60,000 in PPF. Calculate the monthly tax required to be deducted by the employer under section 192.
Answer: Computation of TDS Shall be made as under:
Annual Salary 3,20,000
Add: Non monetary perquisite 80,000
Gross Salary 4,00,000
Less: Deduction under Ch VIA 60,000
Total taxable income 3,40,000
Tax on total taxable income 14,000
Less: Rebate under Sec 87A 2,000
Add: Education cess @ 3% 360
Total tax 12,360
Monthly TDS (12360/12) 1,030
If in the above example the employer wants to exercise the option referred to in Sec 192(1A) what would be the consequences of the same?
Ans: In terms of Sec 192(1B) the average rate of tax on the income under the head "Salaries" shall be calculated as under:
Gross Salary 4,00,000
Tax on above 18, 540
Average rate of tax 4.635%
Tax on perquisites at an average rate of tax shall be 4.635% of 80,000= Rs. 3708. Employer has an option of paying this amount from his own pocket @ 309 per month as per Sec 192(1A)
Now my question is, how is the amount of tax 18,540 arrived at?
I understand from back calculation that 18,540 is the amount of tax on 3,80,000. In relation to this question 3,80,000 can be arrived at by adding 3,20,000( amount of salary excluding non monetary perquisites)and 60,000 (amount of deduction under Ch. VIA for PPF). But what is the logic behind adding these two when I had not made any deduction from 3,20,000 to begin with?
Can someone please explain the reason behind this with respect to the provisions of 192(1A) and (1B)?
Any help in this regard will be highly appreciated.
14 November 2014
while your query is very elaborate, the answer to it is simpler.
The tax rate is to be computed as follows:
Total gross income including the perquisite: Rs 400000 (Rs 3.2 lakhs plus 80 thousand)
Tax thereon: Rs 20000 (10% on Rs 2 lakhs)
less 87A exemption: Rs 2000
Net tax: Rs 18000
plus 3% edu cess: Rs 540
total tax liability: Rs 18540
tax rate" Rs 18540/Rs 400000
there is no need to back calculation. 192(1A) computation has nothing to do with Chapter VIA deductions
The tax rate is to be computed as follows:
Total gross income including the perquisite: Rs 400000 (Rs 3.2 lakhs plus 80 thousand)
Tax thereon: Rs 20000 (10% on Rs 2 lakhs)
less 87A exemption: Rs 2000
Net tax: Rs 18000
plus 3% edu cess: Rs 540
total tax liability: Rs 18540
tax rate" Rs 18540/Rs 400000
there is no need to back calculation. 192(1A) computation has nothing to do with Chapter VIA deductions
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14 November 2014
Now that I read your answer my question seems pretty silly. Anyways, thanks a lot for taking time out to reply to my query.
14 November 2014
you are welcome Tamanna...take care..
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