Download CIRCULAR TDS ON SALARY – Financial Year 2013

CIRCULAR
TDS ON SALARY – Financial Year 2013-14 (01.04.2013 to 31.03.2014)
This Circular is proposed for the Current Financial Year 2013-14 with respect to Exemptions /
Deductions in determining TDS on Salaries which will be
Part – I: Based on actual submission of documentary proof
Part –II: Based on Declaration
Part – I: Allowances / Deductions to be provided based on actual submission of
documentary proof:
Following allowances / deductions will be allowed in arriving at the taxable salary in the
month of submission of necessary documents supporting exemption/ deduction.
1. House Rent Allowance
2. Car Scheme Reimbursement ( if applicable )
3. Medical Reimbursement
4. Telephone Reimbursement ( if applicable )
5. Professional Pursuit ( if applicable )
6. Leave Travel Allowance ( if applicable )
7. Deduction for Interest on Housing Loan
Part – II: Deductions / Exemptions to be provided based on Declaration:
Following Savings and Investment Schemes are allowed as deduction in arriving at the taxable
salary provided the proof for such savings and investment are submitted within the cut-off
date specified by each employee in their declaration. The cut-off date shall in no case exceed
25th January 2014.
1. L I C Premium, N S S, PPF, N S C (u/s. 80 C)
2. Tuition fees for children (u/s. 80 C)
3. Tax Saver Fixed Deposit (5 Years u/s.80 C)
4. Investment made under an Rajiv Gandhi Equity Savings Scheme (u/s. 80CCG)
5. Medical Insurance (u/s. 80 D) – Includes Health Preventive Checks upto Rs.5,000 p.a.
6. Educational Interest (u/s. 80E)
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7. Interest on New Housing Loan (u/s. 80EE)
Conditions for Proof Submission for Part-II:
1) Each employee shall specify a cut-off date within which he / she could submit the
necessary proof for investments.
The cut-off date shall be not be later than 25th January 2014. However review will be
made in the month of January 2014 and if still necessary documents are not submitted
within such time, then investments would be considered to the extent proofs are
submitted and if no proofs are submitted as of the cut-off date, then investment would
be considered “Nil”.
2) Proofs submitted after the said cut-off date will be considered prospectively for the
month following the month of submission of proof for the purpose of TDS Calculation.
(There will be no question of retrospective effect for proofs submitted on / after the cut
off date.)
3) TDS if deducted from salary in any months will not be refunded under any circumstances.
Therefore employees are advised to plan well in advance.
4) The annexure to this circular details the procedure to be adopted for Computing TDS on
various heads of payments.
5) The declaration screen for the above will be available in the Employee Portal only upto
30th JULY 2013.
6) Employees are requested to select and update only on appropriate declaration portion
available in PART II of Deductions / Exemptions above, as provided in the employee
portal.
7) IF INAPPROPRIATE DECLARATION IS GIVEN IN PART II (OR) ERONEOUS DECLARATION IN
INAPPROPRIATE FIELDS IS GIVEN IN TAX DECALARATION, THEN SUCH DECLARATION
AMOUNT WILL NOT BE CONSIDERED IN THE TAX CALCULATION.
Nature of Income
Basic
When allowed as deduction/ exemption
Always fully taxable
OPE
Always fully taxable
Treatment of
House Rent Allowance (HRA)
1. Employee must have classification as HRA in his salary.
2. Employee must pay the rent
3. Exemption is not available if employee stays in his own
house.
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If the employee claims the Interest on Housing loan (u/s
24 as self occupied property), HRA exemption will not be
allowed under any circumstances
4. Exemption is subject to the conditions specified in the
IT Act.
5. Employee should submit copy of Lease / Rental
Agreement. In case agreement is not executed, then
ORIGINAL Rent Receipts with Revenue stamp shall be
submitted.
6. Rent receipt should contain the Name, phone number of
land lord and address of the rented property.
7. Employee must submit ‘Rent Payment Declaration’
(declaration enclosed). Without this declaration, the HRA
exemption will not be considered.
8. If the employee has house on which housing loan is
taken and his family (spouse and children only) stays in
such house and the employee stays in a rented house in a
another place due to his employment, in such case he can
claim both the housing loan interest and HRA exemption if
it is authorized by HR department in writing.
Interest on Housing Loan u/s
24 (To be considered as
deduction from Income under
head House Property)
1. Employee should have taken housing loan in his name or
along with his / her spouse. If, along with his / her spouse
loan taken, the spouse should not claim tax exemption on
his / her Income Tax Computation, if any.
2. Such house must be occupied by the employee.
3. Bank certificate on Interest on Housing Loan must be
submitted by the employee.
4. for Tax Exemption - Self Occupied Property acquired
/constructed before 01-04-1999 - Rs.30,000/- eligible &
Self Occupied Property acquired /constructed after 01-041999 - Rs.150,000/- eligible)
5. This deduction is not available if the employee claims
HRA exemption.
6. Employee must produce declaration for claiming this
deduction
(declaration
enclosed).
Without
this
declaration, exemption will not be considered.
Interest on NEW Housing Loan Additional Deduction in respect of interest on loan
(u/s.
80EE
(Additional sanctioned DURING financial year 2013-14 for acquiring
deduction – deduction to be residential house property to the extent of Rs.1 lakh.
Conditions to avail the tax benefitsmade from Total Income)
(i)
the loan SHALL BE sanctioned by the financial
institution during the period beginning on 1st
April, 2013 and ending on 31st March, 2014;
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Conveyance allowance
(ii)
the amount of loan sanctioned for acquisition
of the residential house property shall not
exceed twenty-five lakh rupees;
(iii)
the value of the residential house property
shall not exceed forty lakh rupees;
(iv)
THE ASSESSEE DOES NOT OWN ANY
RESIDENTIAL HOUSE PROPERTY ON THE DATE
OF SANCTION OF THE LOAN.
1. Employee must have classification as conveyance
allowance in his salary.
2. Exemption is based on the conditions specified in the
IT Act. ( at present Rs. 800 per month or actual allowance
from his salary whichever is lower)
3. This allowance is not eligible for Employees claiming
Car reimbursement and for trainees.
4. Employee need not produce any supporting documents
for this allowance.
Education allowance
1. Employee must have classification as Education
allowance in his salary
2. Exemption is allowed for Rs.100 per child per month
subject to a maximum of two children.
3. Employee may provide Self Declaration to this effect.
Food allowance
1. Employee must have classification as Food allowance in
his salary
2. Exemption is allowed to the maximum of Rs.2,000/- per
month or actual food allowance received from his salary
whichever is lower
Academic,
Research
Professional Pursuit
Telephone reimbursement
and 1. Employee must have classification as Professional
pursuit in his salary
2. Employee must get approval from HR Department for
higher studies for which he/she claims the exemption.
3. Exemption is allowed based on eligible courses and
production of copy of proper receipts from the Recognized
Institutions.
1. Employee must have classification as Telephone
reimbursement in his salary.
2. Employee must produce the copy of the telephone bills.
(payment receipts for “prepaid” mobile service are not
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eligible for this exemption).
3. Maximum eligible amount is based on cadre of
employee.
Variable Pay
Always fully taxable
Additional Pay
Always fully taxable
Site Allowance
Always fully taxable
Car Scheme Reimbursement
1. Employee must receive Reimbursement under Car
scheme from the company.
2. The amount of exemption will be restricted to the
actual value of bills produced towards Petrol, Chauffer
Salary, Maintenance and Insurance. Perquisites value will
be added to the Income as per IT Act.
If the employee is covered
under the Company owned
Car scheme and if the car is
transferred to the employee
at any time (either at the
time of resignation or after
completion of 4 years)
This transaction will be taxable as perquisites in the hands
of the employee for the difference in the Written Down
Value of Car in the books of company less security deposit
paid by the employee, if any, for the Car scheme.
Medical
scheme
Reimbursement
/ 1. Exemption is available for Medical Reimbursement Upto
Rs.15,000 p.a and balances, if any, is fully taxable even it
is certified by the third party.
2. Employee may opt to split a portion of Additional Pay as
Medical Reimbursement.
3. Actual Original medical bills have to be produced.
4. This amount will be Reduced from Additional Pay and
paid separately.
Earned Leave Encashment
Always fully taxable.
Housing loan interest subsidy
Always fully taxable.
Bonus / Ex-gratia / Loyalty
Always fully taxable.
Bonus
ESOP
ESOP will be taxable as perquisites in the hands of
employee at the time of allotment / transfer of shares to
the employee from the trust. The taxable value will be
the difference between the market value of the share at
the time of allotment / transfer to the employee and the
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face value on which the shares actually transferred /
allotted to the employee.
Leave travel Allowance (LTA)
1. Employee must receive the LTA reimbursement. If not
Employee may opt to split a portion of Additional Pay as
LTA. This amount will be Reduced from Additional Pay and
paid separately.
2. Exemption is based on the conditions specified in the IT
Act.
3. Employee has to take leave minimum of 7 days
continuously as per company’s norms.
4. Only 2 Journeys in a block of 4years is exempt. Current
block 2010 - 2013 (Jan1,2010 to Dec31,2013) and next
block is Jan 1,2014 to Dec 31,2017
5. Exemption is strictly limited to expenses on air fare,
rail fare, and bus fare only. No other expenses allowed.
Travel should be within India.
6. Employee must submit the tickets to claim the
exemption.
7. Mere declaration for the travel will not be allowed for
the LTA exemption.
Rajiv Gandhi Equity Savings REGSS- Investments in the eligible securities of REGSS is
Scheme
eligible for deduction. The scheme is designed exclusively
for the first time retail individual investors in securities
market, whose gross total income for the year is less than
or equal to Rs. 12 lakh.(previously Rs.10 lakh). The
Maximum Investment under this scheme is Rs.50,000/- and
the investor would get 50% deduction on the amount so
invested.
Educational Interest
1. There is NO tax benefit on the principal amount of the
Loan. However actual interest paid by the assessee on the
loan is allowed as deduction, provided it is a full time
course and the entire amount of Interest paid during FY
2013-14 can be claimed as deduction.
2. Letter / Certificate from the Bank / Financial
Institution specifying the Educational Loan with breakup of
Principal and Interest paid during FY 2013-14.
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3. Deduction is allowed on Interest paid for the first 8
years on Education loan taken for Higher Education such as
Engineering / Medical etc.
Tax exemption is applicable only if loan is availed by the
Assessee / children for pursuing his / her higher
education.
Education Loan availed from Financial Institution / Bank
are only eligible for deduction.
8) This circular is meant for the purpose of better understanding on the basis of computation
of TDS and all exemptions will be allowed after scrutiny of the documents submitted for
claiming exemptions.
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