TDS ON SALARY M. V. DAMANIA & CO 07/01/2012 SANJAY CHOKSHI

TDS ON SALARY SYNOPSIS 1. Tax Deduction as required u/s What salary is charged to Tax u/s15 3. Deductions in Salary as allowable u/s Salary as Defined u/s 17(1) 5. Perquisites as Defined u/s 17(2) 6. Profit in lieu of Salary as defined u/s 17(3) 7. Valuation of Perquisites under rule 3 SANJAY CHOKSHI

TDS ON SALARY U/S. 192 SS (1) Person responsible for Payment of Salary At the time of Payment Average rate of Tax as per the Rates in Force Estimated income under this head SANJAY CHOKSHI

TDS ON SALARY U/S. 192 SS (1A) and (1B) In case of Perquisites Payment of the whole or part of the tax without deduction of Tax To be deducted on the basis of other salary at the time of such payment SANJAY CHOKSHI

TDS ON SALARY U/S. 192 SS (2) If the Employee is employed with more than one employer Simultaneously Successively Employee may provide the details of his salary and TDS thereon Rule 26 Form 12B Employer to account for that income for TDS SANJAY CHOKSHI

TDS ON SALARY U/S. 192 SS (2B) Relief to be granted u/s 89(1) if applicable by: Government Company Co-op. Society Local Authority University Institution Association or Body Rule 21 Form 10E Employee to account for such relief and deduct tax accordingly SANJAY CHOKSHI

TDS ON SALARY U/S. 192 SS (2B) If the Employee has income other than Salary Income should not be a loss Loss in case of House Property Provide information of such income and TDS thereon to the Employer Rule 26B Form No. 12C Employer to account for such income for the Purpose of TDS Result should not reduce the TDS otherwise deductible SANJAY CHOKSHI

TDS ON SALARY U/S. 192 SS (2C) Employer to furnish to the employee statement giving correct and complete details: Particulars of Salary Particulars of Perquisites Profit in lieu of Salary Rule 26, Form 16 and 12BA SANJAY CHOKSHI

TDS ON SALARY U/S. 192 SS (3) Permits adjustments to be made during the F. Y. in relation to excess or shortage in deduction during the earlier deductions SANJAY CHOKSHI

TDS ON SALARY U/S. 192 SS (4) Trustees of Recognised Provident Fund to deduct TDS On payment of accumulated balances as per Rule 9(1) of Part A of Fourth Schedule TDS as provided in Rule 10 of Part A of Fourth Schedule SANJAY CHOKSHI

TDS ON SALARY U/S. 192 SS (5) Trustees of Recognised Superannuation Fund to deduct TDS On payment of accumulated balances from such fund in relation to contribution made by the employer and interest thereon TDS as provided in Rule 6 of Part B of Fourth Schedule SANJAY CHOKSHI

TDS ON SALARY U/S. 192 SS (6) In case the salary is paid in Foreign Exchange, the same is to be converted to rupees as per the rates prescribed under RR 26 and 115 SANJAY CHOKSHI

ISSUES ON TDS ON SALARY U/S. 192 Internal Private Agreement between Employer and Employee that The Employer need not deduct Tax and that the employee shall take care of his IT dues TDS on Judgment Debts Payment made for securing services of a person Furlough Pay Tax on Tax Exclusive Income SANJAY CHOKSHI

SECTION 15 – CHARGING SECTION IN CASE OF SALARIES Salary due from an employer or former employer in the previous year Advance Salary Arrears of Salary Salary shall not be taxed on accrual if the same is taxed on the basis of advance payment. Salary paid to partner is taxable as business income and not salary SANJAY CHOKSHI

SECTION 16 – DEDUCTIONS FROM SALARIES Entertainment allowance paid to government employees 1/5 th of salary (inclusive of any allowance, benefit or other perquisites Tax on Employment (Profession Tax) Lower of the two above SANJAY CHOKSHI

DISTINCTION BETWEEN EMPLOYEE AND AGENT SANJAY CHOKSHI Instructions with not only what he has to do but also how he has to do More direct control No authority to enter into contract on behalf of the employer Payment in terms of wages and salaries Instructions with only what he has to do and not how he has to do More indirect control Normally enters into contract on behalf of the principal Payment by commission EMPLOYEE AGENT

WHETHER EMPLOYEES OR OTHERWISE Director of a Company Managing Director of a Company Whole time Director of a company Financial Advisor Official Liquidator Film Artist Lawyer or professional A doctor working in a hospital A Chauffer driving a car SANJAY CHOKSHI

WHETHER SALARY OR OTHERWISE Director Sitting Fees Professional Fees Paid to Director for services rendered Salary paid to Managing Director Salary paid to Whole time Director Temporary Labour on daily wages SANJAY CHOKSHI

WHETHER SALARY OR OTHERWISE Payment on piece rate to employees Payment to Professional on time basis Salary to part time workers SANJAY CHOKSHI

SECTION 17(1)– DEFINITION OF SALARIES INCLUDES Wages Annuities and/or Pension Gratuity Fees, commission, perquisites or profit in lieu of or in addition to any salary or wages Advance salary Leave encashment SANJAY CHOKSHI

SECTION 17(1)– DEFINITION OF SALARIES INCLUDES Annual accretion to the balance of the credit of the employee participating in a recognised provident fund to the extent to which it is chargeable to tax under Rule 6 of Part A of the Fourth Schedule Contribution by Employer in excess of 12 % Interest accrued in excess of that declared by the Government SANJAY CHOKSHI

SECTION 17(1)– DEFINITION OF SALARIES INCLUDES The aggregate of all sums that are comprised in the transferred balance as referred to in sub rule 2 of rule 11 of Part A of the For the Schedule of an employee participating in a recognised provident fund to the extent to which it is chargeable to tax under sub rule 4 thereof. SANJAY CHOKSHI

SECTION 17(1)– DEFINITION OF SALARIES INCLUDES Calculation of taxable transferred balance: Recognisation is granted to an existing unrecognised Fund Calculation of the taxable amount as per the earlier subsection as if the fund was a recognised fund since inception for each year till date The sum of such taxable amount is taxable in the current year SANJAY CHOKSHI

SECTION 17(1)– DEFINITION OF SALARIES INCLUDES Contribution by an employer to a pension fund referred to in section 80CCD SANJAY CHOKSHI

SECTION 17(2)– DEFINITION OF PERQUISITES INCLUDES Value of Rent Free Accommodation provided to the assessee by his employer Value of any concession in the matter of rent in relation to any accommodation provided to the assessee by his employer SANJAY CHOKSHI

SECTION 17(2)– DEFINITION OF PERQUISITES INCLUDES The value of any benefit or amenity granted or provided free of cost or at a concessional rate in any of the following cases: To an employee director To an employee who is substantially interested in the company Employee whose salary per annum exceeds Rs. 1 lac. Vehicle provided for journey from residence to office and return is not included as perquisite SANJAY CHOKSHI

SECTION 17(2)– DEFINITION OF PERQUISITES INCLUDES any sum paid by the employer in respect of any obligation which but for such payment, would have been payable by the assessee any sum payable by the employer, whether directly or through a fund, other than a recognised provident fund or an approved superannuation fund or a Deposit-linked Insurance Fund established under section 3G of the Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948 (46 of 1948), or, section 6C of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952)], to effect an assurance on the life of the assessee or to effect a contract for an annuity SANJAY CHOKSHI

SECTION 17(2)– DEFINITION OF PERQUISITES INCLUDES the value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer, or former employer, free of cost or at concessional rate to the assessee. SANJAY CHOKSHI

SECTION 17(2)– DEFINITION OF PERQUISITES INCLUDES Explanation : For the purposes of this sub- clause, (a) "specified security" means the securities as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and, where employees' stock option has been granted under any plan or scheme therefor, includes the securities offered under such plan or scheme; (b) "sweat equity shares" means equity shares issued by a company to its employees or directors at a discount or for consideration other than cash for providing know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called; SANJAY CHOKSHI

SECTION 17(2)– DEFINITION OF PERQUISITES INCLUDES (c) the value of any specified security or sweat equity shares shall be the fair market value of the specified security or sweat equity shares on the date on which the option is exercised by the assessee as reduced by the amount actually paid by, or recovered from the assessee in respect of such security or shares; (d) "fair market value" means the value determined in accordance with the method as may be prescribed; (e) "option" means a right but not an obligation granted to an employee to apply for the specified security or sweat equity shares at a predetermined price; SANJAY CHOKSHI

SECTION 17(2)– DEFINITION OF PERQUISITES INCLUDES the amount of any contribution to an approved superannuation fund by the employer in respect of the assessee, to the extent it exceeds one lakh rupees; and the value of any other fringe benefit or amenity as may be prescribed SANJAY CHOKSHI

EXCLUSION FROM FRINGE BENEFIT OR AMENITY the value of any medical treatment provided to an employee or any member of his family in any hospital maintained by the employer ; SANJAY CHOKSHI

EXCLUSION FROM FRINGE BENEFIT OR AMENITY any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family a. in any hospital maintained by the Government or any local authority or any other hospital approved by the Government for the purposes of medical treatment of its employees; b. in respect of the prescribed diseases or ailments in any hospital approved by the Chief Commissioner having regard to the prescribed guidelines : Provided that, in a case falling in sub-clause (b), the employee shall attach with his return of income a certificate from the hospital specifying the disease or ailment for which medical treatment was required and the receipt for the amount paid to the hospital. SANJAY CHOKSHI

EXCLUSION FROM FRINGE BENEFIT OR AMENITY any portion of the premium paid by an employer in relation to an employee, to effect or to keep in force an insurance on the health of such employee under any scheme approved by the Central Government or the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999), for the purposes of clause (ib) of sub- section (1) of section 36 ; any sum paid by the employer in respect of any premium paid by the employee to effect or to keep in force an insurance on his health or the health of any member of his family under any scheme approved by the Central Government or the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999), for the purposes of section 80D ; SANJAY CHOKSHI

EXCLUSION FROM FRINGE BENEFIT OR AMENITY any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family other than the treatment referred to in clauses (i) and (ii); so, however, that such sum does not exceed fifteen thousand rupees in the previous year. SANJAY CHOKSHI

EXCLUSION FROM FRINGE BENEFIT OR AMENITY any expenditure incurred by the employer on 1. medical treatment of the employee, or any member of the family of such employee, outside India; 2. travel and stay abroad of the employee or any member of the family of such employee for medical treatment ; 3. travel and stay abroad of one attendant who accompanies the patient in connection with such treatment, subject to the condition that (A) the expenditure on medical treatment and stay abroad shall be excluded from perquisite only to the extent permitted by the Reserve Bank of India; and (B) the expenditure on travel shall be excluded from perquisite only in the case of an employee whose gross total income, as computed before including therein the said expenditure, does not exceed two lakh rupees. SANJAY CHOKSHI

EXCLUSION FROM FRINGE BENEFIT OR AMENITY any sum paid by the employer in respect of any expenditure actually incurred by the employee for any of the purposes specified in clause (vi) subject to the conditions specified in or under that clause. SANJAY CHOKSHI

SECTION 17(3)– DEFINITION OF PROFIT IN LIEU OF SALARY INCLUDES The amount of any compensation due to or received by an assessee from his employer or former employer at or in connection with the termination of his employment or the modification of the terms and conditions of his employment; SANJAY CHOKSHI

SECTION 17(3)– DEFINITION OF PROFIT IN LIEU OF SALARY INCLUDES any payment [other than any payment referred to in clause (10), (10A), (10B), (11), (12) (13)] or (13A)] of section (10)], due to or received by an assessee from an employer or a former employer or from a provident or other fund, to the extent to which it does not consist of contributions by the assessee or interest on such contributions or any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy. SANJAY CHOKSHI

SECTION 17(3)– DEFINITION OF PROFIT IN LIEU OF SALARY INCLUDES any amount due to or received, whether in lump sum or otherwise, by any assessee from any person A. before his joining any employment with that person; or B. after cessation of his employment with that person. SANJAY CHOKSHI

R ULE 3– VALUATION OF PERQUISITES Valuation on the basis amount paid or cost of manufacture, or cost of providing such services: Sweeper, Gardner, Watchmen or Personal Attendant Gas, Electric Energy or Water Education to any member Carriage of passengers Travel, tour and accommodation. SANJAY CHOKSHI

R ULE 3– VALUATION OF PERQUISITES Valuation in case of Loans: Interest on similar loans charged by SBI as on 1/4 of that FY on the maximum outstanding monthly balance No interest on loan given for medical treatment of diseases specified in rule 3A. If Loans are reimbursement against Mediclaim, interest on such outstanding shall be considered as perquisites. SANJAY CHOKSHI

R ULE 3– VALUATION OF PERQUISITES Valuation on the basis amount paid or cost of manufacture or of provision of services: Food and non alcoholic beverages provided by employer if the same is in excess of Rs. 50/- per meal or tea or snacks provided during working hours Value of gifts or vouchers on ceremonial occasions if the same exceeds Rs. 5000/- p.a. SANJAY CHOKSHI

R ULE 3– VALUATION OF PERQUISITES Valuation on the basis amount paid or cost of manufacture or of provision of services: Personal Expenses paid through credit card including membership and annual fees. If exclusively for official purpose, the valuation shall be nil. Proper records to be maintained and a certificate to that effect to be given by employer SANJAY CHOKSHI

R ULE 3– VALUATION OF PERQUISITES Valuation in case of club membership: Actual expenditure incurred or reimbursement In case of corporate membership, initial fees paid for acquiring such membership not to be included If exclusively for official purpose, the valuation shall be nil, provided proper records to be maintained and a certificate to that effect to be given by employer Not applicable to use of sports, health club or similar facility provided uniformly to all employees SANJAY CHOKSHI

R ULE 3– VALUATION OF PERQUISITES Valuation of use of moveable asset other than furniture and computers: In case owned by employee – 10% of cost In case rented – actual rent paid SANJAY CHOKSHI

R ULE 3– VALUATION OF PERQUISITES Valuation in case of transfer of moveable asset: Actual cost of asset reduced by 10% for each completed year on WDV method In case of Computers the rate of Depreciation shall be 50% In case of Cars the rate of Depreciation shall be 20% SANJAY CHOKSHI

R ULE 3– VALUATION OF PERQUISITES Valuation of any other benefit, amenity, right or privilege: Cost to employer under an arms length price Not applicable in relation to telephone and mobile phone. SANJAY CHOKSHI

THANK YOU SANJAY CHOKSHI