Income from Salary by Green Ever ACC303 D

TO THE

PRESENTATIONON

INCOME FROM SALARY

Group: Green EverGroup Members

Topic NameIncome From Salary

Overview

Introduction Definition of Salary Chargeability of Income Under Salary Definition of Salary Related Items Element of Salary and Explanation Provident Fund Specimen Form For Computing Illustration 6-4

Question ????????????????1.Definition of salary (SN)2.Discuss chargeability of income under salary. (SQ)3.Definition of Salary related items (BQ)4.Problems:

Illustration 6-4 (page- 151)Illustration 6-1 (page- 148)Illustration 6-3 (page- 150)Illustration 6-5 (page- 152)

Introduction Salary: Wages received on a regular basis, usually weekly , be weekly or monthly, sometimes the term include the other benefits including insurances and a retirement plan.

Any income received by a employee is chargeable under head “ income from salary” and tax on salary levied in the manner. Income would be taxable under head income from salaries only when an employer-employee relationship exists.

Definition of Salary

Section 20 of the ITO, 1984 specifies 7 heads of income. Of these 7 heads “salaries” is the first one. generally salary means periodical payment made for work to an employee from an employer for the service rendered to him , according to section 2(58) , salary is includes:

a.Any pay or wages.b.Any annuity , person or gratuity.c.Any fees , commission, allowance, or profits in lieu of or in the addition to salaries or wages.d.Any advance of salary.e.Any leave encashment.

Chargeability of income under salary: The touchstone of chargeability of an amount as salary

is the relationship of an employer-employee between the person making the payment and the person reeving such payment:

The following income shall be chargeable to income tax under the head "salaries” as per section 21(1) of the ITO , 1984.

I. Any salaries due from an employer or a former employer to an assesse in the income year whether paid or not

II.Any salary paid or allowed to him in the income year, by or on behalf of an employer though not due or before it become due to him , and

III.Any arrears of salary paid allowed to him in the income year by or behalf of an employer, if not charged to income for any income year.

ELEMENTS OF SALARY AND EXPLANATIONS

Based on the various provision of the ITO,1984 and practical situation, elements of salary are:

1.Basic salary: Basic salary is the most important element

of salary since some allowances and contribution to various funds are determined

on the basis of this.

2.Dearness Allowance: Dearness allowances the most popular allowance being given to employees these days.3.Bonus:It means the payment of extra salary based on the salary or otherwise for festivals like Eid, christmas etc.

There are many examples of elements of salary and explanations.4.Special Allowance.

5.Medical Allowance.

6.House rent allowance in case.

7.Rent free accommodation.

8.Accommodation at a concession rate.

9.Entertainment allowance.10.Conveyance allowance received in case with no conveyance facility.

11.Fees and commission.12.Servant allowance.13.Compensation14.Annuity15.Outstanding salary.16.Advance against salary.17.pension.18.Gratuity19.Employer’s contribution to recognized provident fund.

20.wages.21.Lunch /Tiffin allowance.22.Profession allowance.23.Overtime24.Other benefits. etc.

SPECIMEN FORM FOR COMPUTING “ INCOME FROM SALARY “Name of the tax prayer Assessment year 2014-2015: income year 2013-201

Income from salary (section- 21) Tk. Tk.1.Basics Salary xx 2.Dearness allowance xx 3.Annuity xx4.Festival bonus xx5.Leave enhancement xx6.Employer contribution to recognized provident fund xx7.Interest on recognized provident fund xx Less: Exempted- lower interest xx xx8.Advance salary xx9.Retirement allowance xx Less: Exempted –full xx xx10.Entertainment Allowance xx11.Medical Allowance xx Less : exempted – Tk 60000 or 10% of basic salary whichever is lower xx xx12. House rent – Allowance Less : exempted – lower of 50% of basic salary or tk 240000 (annually ) xx xx13 Rent free accommodation (furnished or not furnished): The rental value or 25% of basic salary whichever is lower 14 Accommodation at concessional rate : The rental value or 25% of basic salary whichever is lower xx less: rent paid by the employee xx xx 15.Conveyance facility :5% of basis salary xx Less exempted – (up to Tk , 30000) xx xx16. Conveyance facility : 5% 0f basic salary xx17. Conveyance facility and allowance xx18. Servants allowance xx19. Overtimexx20. Charge allowance xx21. Resident telephone bill xx22. Other benefits xxTotal income from salaries xx

Illustration: Mr. Zahid the Additional secretary of the ministry of finance, government of the peoples republic of Bangladesh receive basic salary of tk 40000 per month in the income year 2013—2014. besides basic salary he received house rent allowance @60% basic salary a full time car medical allowance tk 2000 per month during year he received two bonuses each equal to one month basic salaries. He contribute 10% basic salaries into a statutory provident found (SPF) from that fund he also received interest of tk 8000 at an interest of tk 8000 at interest rate per 16% per annum . Computer taxable income of Mr. zahid under income from salary for the income year 2013-2014.SOLUTION:

Assessee : Mr ZahidAssessment year: 2014-2015: Income year 2013-2014 Determination of total income

A Basic salary ( 40000*12) 4800000B House rent (480000*60%) 2888000 Less: Exempted-Full 2888000C Conveyance facilities (480000*5%) 24000 Less: Expected –Full 24000D Medical allowance (250*12) 24000 Less: Exempted-Full 24000E Bonus (40000*2) 8000 Less: Exempted –Full 8000

Total 4800000

Income from salary ( section – 21) Tk TK

Questions and Answers

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