Archive for Income Tax

Reckoning of Running Allowance as pay for the purpose of deduction of Income Tax

GOVERNMENT OF INDIA
MINISTRY OF RAILWAYS
(RAILWA BAORD)

No. F(X)I-91/23/3                           New Delhi, Dated 28-12-2010

As per Standard List I, II, III

Sub: Reckoning of Running Allowance as pay for the purpose of deduction of Income Tax.

**************

In continuation of Board’s letter of even number dated 13.07.2000, a copy of the Notification of Ministry of Finance (Central Board of Direct Taxes) No. S.O. 2820(E) dated 22nd November 2010 regarding substitution of the letters figures and words "Rs.6,000/- per month" with letters, figures and in sub rule (2) in the table against serial number 4 in column 4 is enclosed for information and guidance.
Receipt of this letter may please be acknowledged.

s/d
(V.Rama Manohar Rao),
Joint Director, Finance (Exp.)-I,
Railway Board

DA : As Above

 

With the Efforts of AIRF, Railway Board has issued orders for reckoning of Running Allowance as pay for the purpose of deduction of Income Tax.

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No Income tax on additional interest on EPF money

No tax on additional interest on EPF money (diff. of 9.5 and 8.5 %)

The additional quantum of interest on Employees Provident Fund deposits would be exempted from income tax, the LokSabha was informed today. The provident fund trustees had on September 15 decided to raise the EPF interest rate by 1% to 9.5 for 2010-11.

However as per income tax rules interest on EPF is exempted only upto 8.5 % only .so as per present rule though the interest payable is 9.5% but interest exempted is only 8.5% means additional 1 % is taxable in employee’s hand .But now in Lok sabha Govt has declared that in rate given in income tax for exemption for interest on EPF will also be increased to 9.5 %

"The matter has been discussed with Finance Ministry and they have informed that they will revise the notification to 9.5% once it is approved by the Government," Minister of State for Labour and Employment Harish Rawat said in a written reply. The decision taken by the Central Board of Trustees of EPF to raise the interest rate would benefit 4.71 crore employees in both public and private sectors.

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Due to Efforts By AIRF, Running Staff Tax Free Mileage Limit increased to Rs.10000/- retrospective effect from 01-09-2008

Hot smile Due to Efforts By AIRF, Running Staff Tax Free Mileage Limit increased to Rs.10000/- w.e.f. 01-09-2008
Personal expenditure Allowance to transport system employee’s exemption Increased
As per Income tax Act section 10(14) exemption limit of various allowances has been prescribed under rule 2BB of income tax rules. One of them is allowance to transport system employee to meet personal expenditure during his duty performance.
Present rule is given as under Allowance description: Any allowance granted to an employee working in any transport system to meet his personal expenditure during his duty performed in the course of running of such transport from one place to another place, provided that such employee is not in receipt of daily allowance
Exempted Amount :70 % of the allowance subject to `.6000/- Maximum

Now as per Income-tax (Eighth Amendment) Rules, 2010 – Amendment in Rule 2BB vide NOTIFICATION  NO. 85/2010 [F. NO. 149/45/2010-SO (TPL)], DATED 22-11-2010 the maximum amount has been increased to ` 10000/- with effect from 01.09.2008 (retrospectively effected)
complete Notification is given below:
Income-tax (Eighth Amendment) Rules, 2010 – Amendment in Rule 2BB
NOTIFICATION NO. 85/2010
[F. NO. 149/45/2010-SO (TPL)], DATED 22-11-2010
In exercise of the powers conferred by section 295 read with clause (14) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rule further to amend Income-tax Rules, 1962, namely :—
1. (1) These Rule may be called the Income-tax (Eighth Amendment) Rules, 2010.
(2) They shall be deemed to have come into force retrospectively with effect from 1st day of September, 2008. 2. In the Income-tax Rules, 1962, in rule 2BB, in sub-rule (2), in the Table, against serial number 4, in column 4, for letters, figures and words “`. 6,000 per month” the letters, figures and words, `. 10,000 per month” shall be substituted.

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Central Govt taken back net Rs1,400 crore + Education cess as tax (TDS) from pay arrears to staff

Central govt to net Rs1,400 crore as tax from pay arrears to staff

The government will mop up Rs 1,400 crore (Rs 14 billion) this fiscal by taxing the second installment of arrears due to central government employees, who were awarded increased salaries by the Sixth Pay Commission.
The first installment of arrears (representing 40 per cent of the increased pay) was disbursed during financial year 2008-09.
The employees will also have to pay two per cent education cess on the total amount of the arrears.
"The total arrears for this fiscal is Rs 18,000 crore (Rs 180 billion). The arrears that would fall in the tax net would be about Rs 9,000 crore (Rs 90 billion). Barring the grade-IV employees, and according to calculations, around 15 per cent of this amount– about Rs 1,400 crore (plus education cess) would go into government’s coffers during this fiscal as tax," a senior finance ministry official said.
"The Central and State government and various organisations under them are advised to compute the correct tax liability of every employee on second installment of arrears drawn by him and immediately recover the full tax liability along with education cess thereon at the rates in force," a recent CBDT circular asked all government employers.
Distribution of the remaining 60 per cent of arrears has already begun. The I-T department has received the TDS on arrears from various government departments, while the rest would be received soon, the official said.
"The deduction of tax at source on such arrears payment should not be deferred in any circumstance. They (employers) should further ensure that the tax so recovered is paid to the account of Central government account immediately as per the Income Tax Rules, 1962," the CBDT circular said.
The total arrears, accumulated after the Sixth Pay Commission recommendations, were Rs 12,000 crore (Rs 120 billion) during 2008-09 fiscal, the official said.
The government has also said that employers "should ensure that the PAN details of the deductees (recipient of arrears) are correctly quoted in the relevant quarterly e-TDS returns filed by them so that government servants get proper credit of their tax deducted in their respective income tax returns."
Those who (employers) fail to comply with the provisions of Section 192 of the Income-tax Act, 1961 would be liable to pay interest under section 201 of Income Tax Act along with other penal consequences.

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Central trade unions to oppose taxing of withdrawals from savings schemes

Central trade unions to oppose taxing of withdrawals from savings schemes

The central trade unions will press for shelving of a proposal, that wants to tax withdrawals from savings schemes, including provident funds, at the pre-Budget meeting with Finance Minister Pranab Mukherjee on January 14. “(The) Finance Minister has invited trade unions for pre- budget consultations on January 14,” All India Trade Unions Congress Secretary D L Sachdev told media.
Although the central trade unions are meeting here next week to prepare their charter of demands, he said, “we would definitely raise the issue of Exempt, Exempt Tax (EET) mode for savings schemes”.
The draft Direct Taxes Code (DTC), on which the government has invited comments from public, proposed to tax all long-term savings schemes at the time of withdrawal by the subscribers.
Currently, there are no taxes on long-term savings and pension schemes. Besides EET issue, Hind Mazdoor Sabha (HMS) Secretary A D Nagpal said, “We will also demand for higher income tax slabs to provide relief to the working class.”
As part of the budgetary exercise, the minister meets the representative of different interest groups like economists, industrialists, trade unions etc to get their views on the budget. The trade unions, Sachdev said, would also press for the creation of a National Security Fund for urorganised workers in the country.
In view of unionists the funds should have a corpus of a size equal to three per cent of Gross Domestic Product of the country for the welfare of these workers.
The other major issue which could rock the meeting, is imposing service tax on the contributions made to the Employees Provident Fund scheme being run by the country’s largest retirement fund manager Employees’ Provident Fund Organisation (EPFO).
The issue came to light when some months ago, the Central Board of Excise and Customs slapped EPFO with a notice for not paying service tax on the contributions to these scheme. The scheme has around 4.7 crore subscribers across the country.

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TAX BENEFIT ON HRA AND HOME LOAN -AVAILABLE OR NOT?

 

HRA – allowance is one of the components of salary package, which is normally offered to employees by their employers to meet the higher cost of renting a home. Tax exemption under Income Tax Act for HRA is allowed to salaried persons who are occupying a rented accommodation. It is being regulated by 2A of Income Tax Rules, 1962 and Section 10(13A) of the Income Tax Act, 1961. Accordingly, least of the following three options will be exempt from tax

  • [a.) 50% of the basic salary and DA, where the residential house is situated at Mumbai, Kolkata, Delhi or Chennai and an amount equal to 40% of above salary where residential house is situated in any other place. 
  • [b.] HRA actually received by the employee in respect of the period during which rented accommodation is occupied by the employee during the financial year
  • [c.] the excess of rent paid over 10% of the salary. 

Some times, salaried persons who avail home loan for acquisition or construction of residential house properties but could not stay in such properties owing to employment or other reasons and they stay in rented houses. In such circumstance, when they are receiving a HRA – allowance from their employer, a question often arises

whether they can get exemption of HRA under section 10(13A) of the Act?, based on the rent actually paid by them as well as the interest payable on the housing loan taken by them towards acquisition or construction of a property.

To avail HRA benefit,

  • salaried employee who is in receipt of HRA from his employer
  • should be actually paying house rent for the rented premises which he has occupied and
  • such rented premises must not owned by him. 

It is evident from the above section the exemption of HRA is available to an assessee so long as he occupies the rented premises which is not owned by him. At the same time, the assessee is not barred from claiming exemption under section 10(13A) read with rule 2A, because he be the owner of any other house property, which was acquired through housing loan. It is to be noted that provisions of deduction of interest on borrowed capital for the acquisition or construction of house property and exemption of house rent allowance are two different issues under the Act, as one would not influence other. The benefits accrue on account of availing home loan are interest payments which is exempted under section 24(b) and the principal repayment is exempted under section 80C of the Income Tax Act. Conversely, HRA benefit can also be availed by the assessee on fulfillment of certain circumstances depicted above.

Courtesy: http://www.simpletaxindia.org

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