INCOME TAX ON SALARIES – FINANCIAL YEAR 2011-12 (ASSESSMENT YEAR 2012-13)

           Notification No. 36/2011 F. NO. 142/09/2011 (TPL), Dated 23-6-2011 issued by Income tax department exempts Tax payers in the salaried class from filing Income tax return if the tax payer's salary income and interest received from bank not exceeding Rs.10,000/- both put together did not exceed Rs.5,00,000
during the financial year 2011-12 (Assessment year 2012-13).

                As per the Finance Act, 2011, income-tax is required to be deducted under Section 192 of the Income-tax Act 1961 from income chargeable under the head "Salaries" for the financial year 2011-2012 (i.e. Assessment Year 2012-2013) at the following rates:

RATES OF INCOME-TAX

                              A. Normal Rates of tax:

1. Where the total income does not                                                         Nil

exceed Rs. 1,80,000/-. 

    

2. Where the total income exceeds                                           10 per cent of the

Rs. 1,80,000 but does not exceed                                               amount by which the

Rs. 5,00,000/-.                                                                            total income exceeds  

                                                                                                    Rs. 1,80,000/-

3. Where the total income exceeds                                           Rs. 32,000/- plus 20

Rs. 5,00,000/- but does not exceed                                            per cent of the amount

Rs. 8,00,000/-.                                                                            by which the total

                                                                                                    income exceeds

                                                                                                    Rs. 5,00,000/-.

4. Where the total income exceeds                                            Rs. 92,000/- plus 30

Rs. 8,00,000/-.                                                                            per cent of the amount by                 

                                                                                                    which the total income   exceeds Rs. 8,00,000/-.

B. Rates of tax for a woman, resident in India and below sixty years of age at any time during the financial year:

1. Where the total income does not                                                                Nil

exceed Rs. 1,90,000/-.

2. Where the total income exceeds                                                 10 per cent, of the

Rs. 1,90,000 but does not exceed                                                    amount by which the

Rs. 5,00,000/-.                                                                             total income exceeds  

                                                                                                     Rs. 1,90,000/-

3. Where the total income exceeds                                                  Rs. 31,000/- plus 20

Rs. 5,00,000/- but does not                                                                per cent of the

exceed Rs. 8,00,000/-.                                                                 amount by which the

                                                                                                      total income exceeds

                                                                                                      Rs. 5,00,000/-.

4. Where the total income exceeds                                                 Rs. 91,000/- plus 30

Rs. 8,00,000/-.                                                                               per cent of the

                                                                                                       amount by which the

                                                                                                                total income exceeds  Rs. 8,00,000/-.

             As per the explanations given in the Income tax Act “Salary” includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites.

“As per explanation given under Rule 3 of IT Rules which clearly stipulates that ” salary includes the pay, allowances, bonus payable monthly or otherwise but does not include the following viz., :- (i) Dearness Allowance or Dearness pay unless it enters into the computation of superannuation or retirement benefits of the assessee concerned

As per our extant Pension Rules 1972 pay plus DP will only form part for the retirement benefits. Whereas in the New Pension Scheme it is otherwise (i.e) 10% of pay + DA + DP is the subscription by the employee and contribution by the employer.

New in Income tax  details  for  2011-12 (Assessment Year 2012-13)

Contribution to New Pension System (NPS) by employer (in the case of government employee it is 10% of pay in pay band and grade pay) is to be included in the income like we did in the previous years. However, in order to encourage investments in NPS, this amount has been exempted from payment of any Income tax. In other words, while the entire Contribution to NPS to the employee has to be included in the income of employee, the same to the extent of 10% of salary can be deducted from the income. Hence, in the case of a Government Employee, 100% of Government Contribution to NPS is exempted..

Savings/Deductions under Chapter VI-A:

Section 80C (Amount paid towards life insurance premium, contributions in GPF, CPF, PPF, NPS, NSS etc, tuition fees, payment, Housing Loan principal repayment)

Section 80CCC (Deduction in respect of contributions to certain pension funds)

Section 80CCD (Deduction in respect of contributions to pension scheme of Central Government)

Note: Section 80CCE restricts aggregate amount of deduction under section 80C, 80CCC
and 80CCD to one lakh rupees). The subscribers in New Pension Scheme (NPS) are
allowed to deduct the entire government contribution in NPS without any ceiling.

            In the last year (financial year 2010-11) Government contribution in NPS was also subjected
to Rs. one lakh restriction under Section 80 CCE.

           Deductions under Sec. 80D for Health Insurance of parents. (Max. Rs. 20,000/- if parents are Senior Citizen, otherwise Rs. 15,000/-).

          Section 80DD (Deduction in respect of maintenance including medical treatment of dependent who is a person with disability- Maximum amount- Rs. 1 lakh)

Section 80DDB (Deduction in respect of medical treatment. Maximum amount – Rs.40,000)

Section 80E (Deduction in respect of interest on loan taken for higher education)

Section 80G (Deduction in respect of donations to certain funds, charitable institutions, etc.)

Section 80GG (Deduction in respect of rents paid subject to ceiling if HRA not received)

Section 80GGA (Deduction in respect of certain donations for scientific research or rural development)

Section 80GGC (Deduction in respect of contributions given by any person to political parties)

Section 80U (Deduction in case of a person with disability-An amount of Rs.50,000 and Rs. 1 lakh in the case of self is physically disabled and severely physically disabled respectively)

Other aspects of HRA :

In the case of employee residing in his own house, is the HRA exempt from Tax ?

No. As he is not paying any rent, so exemption from tax with regard to H.R.A. is restricted to ‘Nil’.

Should Rent receipt compulsorily be given to DDO ?No. salaried employees drawing house rent allowance upto Rs.3,000 pm will be  exempted from giving rent receipt to DDO. But in the regular assessment  of the employee, the Assessing Officer is free to make enquiry or request proof  of payment of rent by assessee.

The exemption from tax with regard to HRA is restricted to the least of the following amounts:-

(i) Actual amount of  H.R.A.

(ii) The amount by which actual rent paid by the employee exceeds 10% of his salary;

(iii) 50% of salary if the rented house is situated at Delhi, Bombay, Kolkata or Chennai, or 40% of the salary in the case of other cities.

A new section 80CCF has been inserted by the Finance Act, 2010, wef 01.04.2011. The section 80CCF provides for deduction available to an individual or a HUF, the whole of the amount, to the extent such amount does not exceed Rs 20,000, paid or deposited during financial year 2010-11, as subscription to long-term infrastructure bonds as notified by the Central Govt for the purpose of this section.

(Board Notification no 48/2010 dated 09.09.2010)

Deduction under this section can not exceed Rs 20,000 and are available only for  current financial year 2011-12. The deduction under this section will be in addition  to overall limit of deduction of upto Rs one lakh under section 80C, 80CCC and  sub section (1) of Section 80 CCD.

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