Computation Format of  Taxable Income From Salary [Important]

Computation format of  Income From Salary

Important Notes

1. Basic salary is fully taxable under the head Income From Salary.
2. Dearness Allowance is fully Taxable whether it is terms or not in terms.
3. Commission  is fully taxable whether it is Turnover commission or any other commission.
4. Bonus is  taxable on receipt basis. It is only declared is given then it should be ignored.
5. Advance  Salary  and Arrears Salary is taxable on the basis of receipt basis.

Pension  [Note-6]

Uncommuted pension means Monthly Pension -Taxable for all employees.

Commuted Pension

For Government employees it is fully exempt.

Other Employees

• Gratuity also received, then Exempt amount=  Total pension x  1/3
• Gratuity not received then, Exempt amount = Total Pension x  1/2

Professional tax [Note-7]

• If professional Tax paid by employer then, first it is added to the income and then deduction allowed under section 16.
• If Professional Tax paid by employee then, it is eligible for deduction directly under section 16.

Entertainment Allowance [Note-8]

It is fully taxable for all employees . But deduction allowed to government employees u/s 16 as follows

• 20% of Basic Salary
• Actual amount received
• Maximum deduction Rs 5,000

Which ever is lower.

Note-9. Standard deduction is allowed Rs: 50,000  or the amount of salary  which ever is lower.