Salary - Cash component ... (in progress)

Direct Tax – Salary

1.      Leave Encashment for non-govt. employees (other than central and state govt.) will be exempt as least of the following four figures :- [1] Rs. 3,00,000/=, [2] 30 days x (no. of years of completed service), [3] 10 months average salary, [4] Amount actually received.

 Fully exempt for govt. employees.

2.      Gratuity for non-govt. employee (other than central, state, local authority and statutory body) will be exempt as least of the following three figures :- [1] Rs. 10,00,000/=, [2]15 days salary x (no. of years of completed service), [3] Amount actually received.

Fully exempt for govt. employees.

Note: completed years of service will be actual complete year in case of employees not covered under Payment of  Gratuity Act whereas completed year means only 6 months or more in case of employees covered under Payment of Gratuity Act.

3.      Commutation of Pension for non-govt. employee (other than central, state, local authority and statutory body) will be exempt [1] One-third of normal pension if employee also received gratuity, [2] One-half of normal pension if employee does not receive gratuity.

4.      Contribution to NPS : is exempt as [1] Employer’s contribution - Up to 10% of salary, [2] Employee’s contribution – up to 10% of salary (pay + DA)

5.      Provident Fund : Employer’s contribution up to 10% of salary and interest up to notified rate (9.5%) will be exempt.

6.      Retrenchment compensation : least of [1] amount calculated u/s 25F of the Industrial Dispute Act, [2] Rs. 5,00,000/=

7.      VRS  Compensation :  exempt up to Rs. 5 lakh but it should not exceed more of [1] 3 months salary x no. of completed years of service, [2] salary for the months remaining months before normal retirement date.

8.      Salary from UNO or up to 2 years only for  teacher/ researcher from a SAARC  member Countries are exempt.

9.      HRA : Exempt up to least of [1] 50% (for metros) or 40% (for other cities) of salary,  [2] Rent paid – 10% of salary, [3] Actual HRA received

10.   Entertainment allowance : Exempt as least of [1] Rs. 5,000/= , [2] 20% of salary, [3] entertainment allowance

11.   CEA : Exempt up to Rs. 100 p.m. per child up to two children only. Hostel All. Of Rs. 300 p.m. each is in addition to this.

12.   Transport Allownace: Rs. 800/= p.m. in normal case and Rs. 1,600/= p.m. in case of blind or orthopaedically handicapped.  But for transport employees, allowance is exempt up to being lesser of [1] Rs. 10,000/= [2] 70% of the allowance.

13.   Tribal Area Allowance : Up to Rs. 200/= p.m.

14.   Other exemptions : [1] Foreign allowance is exempt if amount is paid to Indian citizen for rendering service outside of India. [2] Sumptuary all. To serving chairman/member of UPSC  are exempt but for retired chairman/member it is exempt up to Rs. 14,000/= only.