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Unit 7: Income under the Head Salaries

Perquisite value of accommodation provided Notes
at concessional rent Nil
Gross Salary 1, 05,400

Net Income from Salary 1, 05,400
Less: Deduction under Section 80C (7,592 + 10,298) 17,890
Total Income 87,510
Tax liability Nil

Note: Salary for the purpose of calculation of perquisite value of accommodation provided at
concessional rent is 91,000 + 14,400 = 1,05,400. The value of the house perquisites shall be:
15% of salary 15,810

Less: Rent actually paid by B 30,000
Perquisite value Nil

Example: Mr. A, the General Manager of XYZ Ltd., retired on 31.12.2012 after 30 years of
service.
The particulars of his income are as follows:

1. Salary 10,000 per month from January 1,2012. House rent allowance ` 4,000 per month
from January 1, 2012.
2. Medical expenses reimbursed by employer: ` 7,200 for the period from April 1, 2012 to
December 31, 2012.
3. Mr. A and his family also availed LTC - they visited Mumbai and the expenses of ` 5,600
being the cost of air conditioned second class rail tickets were reimbursed by the employer.
4. The employer provides him a car for personal purposes and expenses are incurred by the
employer amounting to ` 9,900.
5. Mr. A contributes 22% (12% regular and 10% additional voluntary contribution) to
recognised provident fund and the company matches his regular contribution of 12%.

6. Mr. A has invested ` 20,000 in ULIP Scheme of UTI and ` 10,000 in public provident fund.
He paid 8,000 towards life insurance premium on policy for a sum assured of ` 60,000.
7. He lives in his own house. The annual municipal value of the house is ` 15,000.

8. Payment of club bills to the extent of ` 2,700 for the year being monthly subscription @ 300
per month was reimbursed by the employer.
9. Mr. A received 1, 50,000 as gratuity. He is not covered by the Payment of Gratuity Act.

10. He received 1, 60,000 for encashment of leave, being 16 months’ leave not availed of.
Compute A’s income for the assessment year 2013–14.
Solution:
(a) Salary (10,000 x 9) 90,000
HRA (4,000 x 9) 36,000

Payment of club bills (300 x 9) 2,700
Gratuity (See note 7) —

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