Page 81 - DCOM508_CORPORATE_TAX_PLANNING

Corporate Tax Planning

Notes

()
`

Assumptions given:

1. All employees receive the same gross income of ` 200,000. The payment method is
different. The savings remain the same. For instance, all employees save:
(a) ` 4,000 in EPF payment,

(b) ` 2,000 for purchase of one notebook (computer),
(c) ` 1,000 for donations to the Government, and
(d) All employees claim that the entertainment allowance (EA) was fully spent on
entertaining company’s clients.

2. Employee 1 (E1) gets his gross salary in two forms: ` 190,000 as salary and ` 10,000
as EA.
3. Employee 2 (E2) gets ` 154,000 as salary, ` 10,000 EA and requests that his employer
contribute to his approved provident fund account the sum of ` 3,000 monthly.
4. Employee 3 (E3) receives ` 118,000, ` 10,000 and ` 36,000 as salary, EA and Rent Free
Accommodation (RFA) and also requests his employer to contribute to his approved
provident fund account the sum of ` 3,000 monthly.
5. Employee 4 (E4) receives House Rent Allowance (HRA) instead of RFA for the same
value as employee 3.
6. Employee five (E5) gets the same allowances as E4 but RFA and his salary is further

reduced as he gets Travelling Allowance (TA) of ` 24,000 for private purposes.
7. Employee six (E6) gets the same allowances as E5 but gets HRA instead RFA.
8. Employee 7 (E7) receives RFA and a car valued ` 130,000 (company charges ` 10,000
pa for the car), fuel and driver for ` 28,000 instead of travelling allowance.
9. Employee 8 (E8) receives HRA instead of RFA and the same emoluments as E7.

10. Employee 9 (E9) receives RFA and reimbursement of his personal car expenses, fuel
and driver valued at ` 28,000.
11. Employee 10 (E10) receives HRA instead of RFA and the same emoluments as E9.

The Assignment
Ravi was really confused with the above data and was not sure whether there could be any
tax savings. He requested that Khir to give a more detailed calculations and explanations
on the relevant income tax sections that allowed those deductions and reliefs. Ravi wanted

Contd...

76 LOVELY PROFESSIONAL UNIVERSITY