Income tax deduction

POSTED BY isenthilkumar ON September 1, 2012 12:00 pm COMMENTS (6)

Hi Jagon Investor,

I am very big fan of jagoninvestor .

Question: 

 My CTC is 4,80,000 ,basically government provides 2,00,000 INR excemption to all ( am not sure about this number ) so i have to pay the tax 10 % to the remaining 2.8 L and the company is providing some Flexible benefit pay (FBP ) like HRA ,Medical bill submission , Telephone bill submission . Assume am claiming 15,000 for medical per year and 60,000 per year for HRA ,so 15 + 60 = 75 thousand is tax excempted and GOVT is giving TAX excemption limit of 1 Lakh rupees to all ( apart from the initial 2 lac ) so my question is whether HRA , medical claim will also come under the 1 Lac excemption limit or it will cover only PF + gradutity + Other tax saving options ( like LIC , PPF , house loan interest ) .

6 replies on this article “Income tax deduction”

  1. MUTHAMIZHAN says:

    Hi JagoInvestor,

    I am fresher out from college, i am selected in a IT company. They are give me the salary package details. actually i am fresher so i don’t know about the CTC. I am search more about it from internet, but i did not understand. So will you please help me?

    My salary package,

    Salary comp: (monthly & Yearly)
    Basic 6500 & 78000
    House Rent Allowance 3250 & 39000
    Conveyance 1600 & 19200
    Bonus 700 & 8400
    Special Allowance 1950 & 23400

    Retrial
    PF 1333 & 15996
    Gratuity 313 & 3756

    Gross Income 15646 & 187752

    Annual Group Medical Insurance Premium 4250

    Annual CTC 192002

    Flexi-Benefit Plan

    Medical 1250
    LTA 1000
    Food 2200
    Telephone 1500
    Car 5000
    Fuel 2500
    Maintenance 5000
    Driver 5000

    Total 23450

    Here, What is Salary Comp and Flexi-Benefit Plan?
    What is my take Home salary?
    Kindly explain me.

    Regards,
    Muthamizhan.R

    1. Hi MUTHAMIZHAN

      Thanks for asking your question. However, I dont think I am eligible to answer your query as its either out of scope of my knowledge or its not related to money matter directly

      Manish

  2. bemoneyaware says:

    I shall break your question in two parts:
    1. Salary , CTC
    2. Income Tax
    Usually in the campus interviews company advertise their Cost to Company (or CTC) and people mistake their salary to be based on that (CTC/12). Our post on bemoneyaware.com/blog Salary, Net Salary, Gross Salary, Cost to Company: What is the difference? explains it detail. Excerpts from it is given below:
    The salary consists of following parts.

    Basic Salary: This is the core of salary, and many other components may be calculated based on this amount. It usually depends on one’s grade within the company’s salary structure.It is a fixed part of one’s compensation structure.
    Allowance : It is the amount received by an individual paid by his/her employer in addition to salary to meet some service requirements such as Dearness Allowance(DA), House Rent Allowance (HRA), Leave Travel Assistance(LTA) , Lunch Allowance, Conveyance Allowance , Children’s Education Allowance, City compensatory Allowance etc. Allowance can be fully taxable, partly or non taxable.
    Perquisite: Is any benefit or amenity granted or provided free of cost or at concessional rate such as Rent free unfurnished house, Rent free furnished house, Motor car facility, etc

    From the salary there are deductions
    Deductions: Two type of deduction are made from salary

    Compulsory deduction such as Provident Fund, Income tax,Professional Tax (where applicable) .
    Optional deduction such as recovery for advance or loan if taken, voluntary contribution to P.F etc

    Tax affects the various components of salary for ex: Basic Salary Full amount is taxable, medical allowance If substantiated with bills, are exempt to a limit of Rs 15,000 annually

    You will get these details in your payslip and form 16.

    Income tax:
    For Financial year 2011-12 or Assessment Year 2012-13 Basic Exemption was Rs180000 for a male below 60 years who is resident (not NRI). For Financial year 2012-13 or Assessment Year 2013-14 this limit is raised to Rs 2,00,000. Our post Income Tax Overview explains about how income tax is taxed and how you can save it by investing in various tax saving options covered under 80C, 80D etc.

  3. Dear Isenthilkumar, following ‘ll be your tax calculation.

    A. Total Taxable income = 480000
    B. Non taxable allowances (Medical + HRA + Telephone) = 75000
    C. Gross Taxable Income = A – B = 405000
    D. Investment in 80C & other instruments of chapter VIA (PF + PPF + Life Insurance Prem. + Home loan principal repayment…….)= 100000

    E. Net taxable income = C – D = 305000 Rs.

    F. Zero tax limit = 200000

    G. Hence Tax on E @ 10% rate = (305000-200000) = 105000 * 10% = 10500 Rs. + Education & Hr. Education cess (total 3% of tax amount)

    Thanks

    ashal

    1. isenthilkumar says:

      Hi Ashal ,

      Great Explanation ! Really instead of saving “Yes” or “No” ,your explanation with equations is GREAT !

      your prompt response is much appreciated.

      Nice Day,

      Senthil

      1. Dear Isenthilkumar, this forum belongs to all of you. Please feel free to ask as & when you need so.

        Thanks

        Ashal

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