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Income
under the head of Salaries :
Deductions
from salary income
The
income under the head 'salaries' is computed after making certain
deductions from the gross salary income of the taxpayer. These deductions
are standard deduction, entertainment allowance and professional
tax. Besides this, the tax rebate to the persons having salary income
is also allowed. This tax rebate is provided under Section 88 of
the Income Tax Act.
Standard
Deduction
- All
salaried employees are granted a standard deduction from their
gross salary income.
- For
the Assessment Year 1998-99 the standard deduction in case of
all the salaried persons is 33.33% of gross salary or Rs.20,000/-
whichever is less.
- From
the Assessment Year 1999-2000 the standard deduction for persons
having salary income shall be:
- Where
the salary income of a taxpayer after allowing deduction for entertainment
allowance and professional tax does not increase more than Rs.
100,000/- (One Hundred Thousand), the standard deduction is restricted
to 1/3 rd of the salary or Rs. 25,000/- whichever is less.
- Where
the salary exceeds Rs. 100,000/- but does not exceed Rs. 500,000/-
(Five Hundred Thousand) the standard deduction shall be restricted
to Rs.20,000/-.
- Where
the salary income exceeds Rs. 500,000/- the standard deduction
shall be NIL.
- Standard
deduction is even allowed from pensions received by a person.
It is also allowed from the family pensions received by the legal
heirs of a deceased employee. Although, the family pension is
taxable under the head ' income from other sources' the deduction
is allowable under that head.
Deduction
of entertainment allowance.
Professional
Tax.
In
India, the State Governments are authorised to levy and collect
professional tax on any income earned by an individual. A deduction
of sum paid by the taxpayer on account of professional tax is allowed
as a deduction from the income of the individual. However, the deduction
is allowed in the year in which the tax is actually paid by the
individual.
Rebate
under Section 88 of the Income Tax Act
- Under
Section 88 of the Income Tax Act is available to an individual
or to an Hindu Undivided Family. This tax rebate is allowed @20%
of the specified payments subject to a maximum limit of Rs.12,000/-
of tax payable by the taxpayer. The maximum payment that can be
invested in specified saving schemes is restricted to Rs.60,000/-
- However,
if an individual or an HUF invests in eligible shares or debentures
a higher limit of qualifying investment of Rs.70,000/- shall be
available as against Rs.60,000/- in normal case. Here the tax
payer has to invest only in specified shares or debentures for
claiming a tax rebate of Rs.14,000/-.
- Eligible
issue of capital means an issue made by a public company formed
and registered in India and the issue is wholly and exclusively
for the purposes of developing, maintaining and operating an infrastructure
facility or for generating and distributing power.
- Subscription
to any units or any mutual fund, referred to in clause (23D)of
sec.10 of the Income Tax Act and approved by the Central Board
of Direct Taxes.
- Rebate
u/s 88 is allowed only when the specified payments have been made
out of the income chargeable to tax. If the payment is made out
of any income which is exempt from tax, no rebate shall be allowed.
- The
rebate is allowed only when the specified amount has been actually
paid during the previous year.
Tax
rebates for Authors, Playwrights, Artists etc.:
The
Income Tax Act provides for higher tax rebate of 25% of the gross
qualifying amount of Rs.60,000/- to individuals whose income is
derived from the exercise of profession as authors, playwrights,
artists, musicians, actors or sportsmen, including athletes. These
individuals are eligible for tax rebates at the enhanced rate of
25% but the overall rebate is limited to a maximum of Rs.17,500/-.
In other words the gross qualifying amount would be Rs. 70,000/-.
The maximum limit in the case of such persons cannot be increased
beyond Rs.70,000/- even if such persons make investments in specified
shares or debentures for the purposes of developing, maintaining
and operating an infrastructure facility or for generating and distributing
power.
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