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Tax Calculations for an earning member in India

tax, India, income, exemption, individual

Tax is calculated based on the income earned by an employee from April to March. The Indian Income Tax department is governed by the Central Board for Direct Taxes (CBDT) and is part of the Department of Revenue managed by Indian Revenue Service (IRS), under the Ministry of Finance, Govt. of India. The government of India imposes an income tax on taxable income of individuals with minimum exemption limit. Hindu Undivided Families (HUFs), companies, firms, co-operative societies and trusts (Identified as body of Individuals and Association of Persons) and any other artificial person. Individual heads of income are categorized as income from salary, house property, business or profession, capital gains and other sources that is taxable. Levy of tax is separate on each of the persons. The levy is governed by the Indian Income Tax Act, 1961.

To save tax you should declare your investments & produce the supporting documents for the same to the finance division of your company or any private CA (chattered accountant). Any amount paid to an employee is fully taxable as per Income Tax laws. You must have received some variable earnings like bonus, incentive, variable pay etc. Any extra payout other than the normal pay components needs to be taxed fully during the same month at the prevailing rates applicable to you.

HRA exemption - It would be given only for the HRA received months. If you were on loss of pay for a particular month you will not be paid any HRA and accordingly exemption will not be allowed. HRA exemption will be provided only for those months that you have been employed with the current employer. You are eligible for tax exemption if any sum is paid as tuition fees (not including any payment towards development fees / special fees /books/donation/payment of similar nature) whether at the time of admission or otherwise to any university/college/educational institution in India for full time education. This fee paid for your two children is exempted u/s 80c up to Rs.100000/-.

Medical Expense - Disabled family members medical expense can be claimed. Dependant means the spouse, children, parents, brothers and sisters of the individual or any of them. Such person is wholly or mainly dependent upon such individual. Person with disability means a person having any “disability” of not less than 40 per cent. You can claim medical expense provided he / she doesn’t have any source of income.

Housing loan - Tax benefits that one can avail on a housing loan - Tax benefits can be claimed on both the principal and interest components of the housing loan as per the income tax act, 1961. These deductions are available to assesses, who have taken a loan to either buy or build a house, under section 24(b). If capital is borrowed on or after April 1st of the tax claiming year, for acquiring or constructing a property then interest on borrowed capital is deductible up to Rs.150000/- in case of self occupied property (If the property is occupied for the own use then it is termed as self occupied property) and without any specified limits in case of let out property ( If the property is given for rent then it is termed as let out property, the income received from let out property will be adjusted) as per applicable IT rules. Detailed calculation must be submitted to obtain the exemption. Interest on loan borrowed for repairs, renewals or reconstruction will not qualify for the enhanced deduction of Rs1.50 lakhs if the property is self-occupied. This enhanced deduction is available only if the loan is borrowed for purchase or construction of a house property.

Own Property /co- owner - If you are the co-owner of a property along with your spouse/parent, both of you will be entitled to tax benefits. The deduction under section 80C and under section 24 in respect of the principal repayment and the interest payment can be claimed by you in the proportion in which you own the property. You can claim benefits of own property and rented accommodation, provided rented accommodation is in the office location and the location of the own property is elsewhere. If you do not avail company transport then your conveyance allowance will be exempted from tax.

If you fail to produce the tax proof supporting, the same will not be considered while computing tax for the year. If you have not provided supporting on time to finance or chattered accountant, which is usually during the last 10 days during March and the benefit for the same can be claimed at the time of filing the returns with the IT department.
Published: 2010-05-07
Author: Sanjana Uthappa. N

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