Personal Taxation in India
Taxation Assignment | Divyangana Rakesh | 18104 |
Contents Section A 2 Answer 1. 2 Section B. 5 Answer 1. 5 Answer 2. 9 Answer 3. 11 Answer 4 13 Section C 16 Answer 1 16 Answer 2 16 Answer 3. 16 Answer 4. 17 Answer 5. 18 Answer 6. 19
Section A
Answer 1.
Your salary consists of many components. This article explains what each component means. It also discusses the income tax applicability of each component. There are many components in a salary structure that form your salary – some components are monthly, whereas some are yearly.
Basic
As the name suggests, this forms the very basis of your salary. This is the core of your salary, and many other components may be calculated based on this amount.
Basic usually depends on your grade within the company’s salary structure.
Many deductions are also dependent on the basic – for example, your contribution (and the matching component by your employer) to provident fund is 12% of your basic. It is taxable.
Dearness Allowance (DA)
The Dearness Allowance is paid out to compensate for increase in the general cost of living due to inflation.
DA is paid out every month. It is a taxable component of your salary. Incentive / Bonus
Incentives or bonuses are paid out depending on your performance (and, at times, depending on the company’s / division’s performance as well). This is to reward employees for their better performance.
Incentive is usually paid out monthly. A bonus can be paid out monthly or can be paid out once a year.
Incentive and bonus are fully taxable. Conveyance Allowance
Conveyance allowance is paid out to meet your expenses on commute related transportation.
Conveyance allowance is paid out every month.
Conveyance allowance upto Rs. 800 per month (Rs. 9,600 per year) is tax-free. Any amount over it is taxable.
House Rent Allowance (HRA)
House Rent Allowance (HRA) is paid out to meet full or part of your expenditure on renting a house.
HRA may be
Contents Section A 2 Answer 1. 2 Section B. 5 Answer 1. 5 Answer 2. 9 Answer 3. 11 Answer 4 13 Section C 16 Answer 1 16 Answer 2 16 Answer 3. 16 Answer 4. 17 Answer 5. 18 Answer 6. 19
Section A
Answer 1.
Your salary consists of many components. This article explains what each component means. It also discusses the income tax applicability of each component. There are many components in a salary structure that form your salary – some components are monthly, whereas some are yearly.
Basic
As the name suggests, this forms the very basis of your salary. This is the core of your salary, and many other components may be calculated based on this amount.
Basic usually depends on your grade within the company’s salary structure.
Many deductions are also dependent on the basic – for example, your contribution (and the matching component by your employer) to provident fund is 12% of your basic. It is taxable.
Dearness Allowance (DA)
The Dearness Allowance is paid out to compensate for increase in the general cost of living due to inflation.
DA is paid out every month. It is a taxable component of your salary. Incentive / Bonus
Incentives or bonuses are paid out depending on your performance (and, at times, depending on the company’s / division’s performance as well). This is to reward employees for their better performance.
Incentive is usually paid out monthly. A bonus can be paid out monthly or can be paid out once a year.
Incentive and bonus are fully taxable. Conveyance Allowance
Conveyance allowance is paid out to meet your expenses on commute related transportation.
Conveyance allowance is paid out every month.
Conveyance allowance upto Rs. 800 per month (Rs. 9,600 per year) is tax-free. Any amount over it is taxable.
House Rent Allowance (HRA)
House Rent Allowance (HRA) is paid out to meet full or part of your expenditure on renting a house.
HRA may be