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Income from head salary

Priya Kashyap (Student) (7053 Points)

31 August 2019

Mr Ram is employed with basic salary of 20,000 p.m from the employer. He also received children education allowance of 3,000 for 3 children. and transport education allowance of 1,800 p.m The amount of salary chrgeable to tax for AY 19-20 is ?

2,22,600

or 2,22,200 ??

is it necessary that education allowance provided will be 1,000 per children?

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7 Replies

Pranav Aggarwal (525 Points)
Replied 31 August 2019

taxable salary will be

2,40,000 + 3,000+21,600 -100*2*12-40,000 = 2,22200

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Priya Kashyap (Student) (7053 Points)
Replied 31 August 2019

@ Pranav

the taxable part of Children Education Allowance is?

restricted to 2,000 for 2 children not 2,400?

Pranav Aggarwal (525 Points)
Replied 31 August 2019

yes we can also calculate eduction allowance exemption by 3000/3/12*2*12

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Shivam RC (Student) (23683 Points)
Replied 01 September 2019

A). Basic Salary ( 20,000 ×12 ) = Rs. 2,40,000
B).Children Education Allowance = Rs. 3,000
Less : Exempted u/s 10(14)
Rs. 100 p.m. per child upto 2 children = (2,400)

Taxable CEA =. Rs. 600

C). Transport Allowance (Fully Taxable) = Rs.21,600
( 1,800 × 12 = 21,600; deduction u/s 10(14) of Rs. 1,600 withdrawn by Finance Act 2018 ).

GROSS SALARY = Rs. 2,62,200
( A+B+C)

Less : Standard Deduction U/s 16(ia) = 40,000

NET SALARY = Rs. 2,22,200/-

NOTE:

1). Children Education Allowance is Exempted upto Rs. 100 p.m. per child upto a maximum of 2 children. Hence exemption u/s 10(14) will be restricted for 2 children only i.e. Rs. 100×12×2 = Rs. 2,400/-

Understood ???

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Priya Kashyap (Student) (7053 Points)
Replied 01 September 2019

I also had the same amount of taxable part of Children education allowance(CEA) i.e 600.

but most of us restricted the exempted part to 2,000 being the CEA received lower than exemption allowed if taken 1,000 for each children( which is not mentioned in the question)

Still, thank you very much @ Shivam for you time and nice presentation.

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Shivam RC (Student) (23683 Points)
Replied 01 September 2019

Yes you can assume that the CEA received for each children is Rs. 1,000. Then you can restrict the Exemption available u/s 10(14) to Rs. 2000 ( i.e. Rs. 1000 per child upto to maximum of 2 ) since exemption cannot exceed income.

Both the methods are correct. Now it is upon you which assumption you go for since the question is silent regarding the same.

Always mention your assumption in the form of foot note to your answer.

Warm Regards.

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