Automated Income Tax Preparation Excel based Software with New and Old Tax Regime Introduced in Budget 2020

Boost Indian taxpayers were hoping for lower tax rates and increase tax limit deductions, in budget 2020, our finance minister surprised everyone by announcing a new tax regime. This new tax regime did have lower tax rates but took away all the deductions and exemptions available to the taxpayers, and it was announced that the taxpayer can choose between the old and the new tax regime U/s 115 Back.

So now, most of us have to decide which regime to opt through the new option Form 10-IE  for. And that can be confusing. So if you are wondering which tax regime, the existing or new works best for you. This article helps you decide that.

You may like: - Automated Income Tax Preparation Excel Based Software All in One for the Non-Government (Private) Employees for the Financial Year 2020-21 as per the New and Old Tax Regime U/s 115 BAC

So, let's start. while our current tax system has high tax rates. As per the Income Tax Act many of the tax exemptions section to reduce your tax. The Government of India through the addition of clauses to the Income Tax Act has given Indian taxpayers 70 exemptions and deduction options, through which they can bring reduce their taxable income and hence pay less tax.

While exemptions are part of your salary that you don't pay taxes on like HRA, LTA deductions involve investing, saving, or spending on specific items. In fact, by claiming deductions under Section 80C, you can bring down your taxable income by rupees 1.5 lakh. Apart from this, there are several other sections that let you claim deductions on things, ranging from interest on your home and education loans to premiums you pay for health insurance.

Here are the most common exemptions and deductions availed by Indian taxpayers, these exemptions and deductions together can bring down your taxable income by lakhs. However, it also means that every year, you have to find ways to optimize your salary and investments, so as to keep your taxable income to the minimum.

 You may like: - Automated Income Tax Preparation Excel Based Software All in One for the West Bengal Government Employees for the Financial Year 2020-21 as per the New and Old Tax Regime U/s 115 BAC

Now, let's look at the new tax regime. The new tax regime is different from the existing system in two aspects, 1st in the new tax regime, the tax labs have increased and the tax rates have lowered in the sub rupees 15 lakh range. 2nd, all the exemptions and deductions that were being used by taxpayers in the existing regime won't be available in the new regime.

Here is a comparison between the existing, and the new tax slabs.

So now that you have learned the difference between the regimes arises the question, which one should you pick. Unfortunately, there is no single answer to this as Indian tax rules are complex in nature. While figuring out what options to go for might look complicated if you approach it in a systematic way, it is not quite difficult to figure out. Here is what you need to do.
Step one, calculate all the exemptions that you are availing like HRA, LTA, phone bills, etc. Remember, all these become taxable. If you are willing to choose to revert to the new tax regime.
Step two, look at the deductions that you claim as a salaried employee to deductions that you automatically get or the standard deduction of rupees 50,000, and your contribution towards your employee provident fund that is EP Fin the new regime, you won't be able to claim deductions, even on EP F, even though you will continue putting money in it. Moreover, you cannot claim deductions on home loan repayments for a premium paid for insurance policies which still now have helped to reduce your taxable income.

Now, combine these exemptions and deductions and subtract them from your salary to see what is the taxable income and what it would be. If you let go of these deductions and exemptions. This should be the deciding factor for which regime, you should go for wondering how deductions and exemptions will impact taxes in both regimes.

You may like: - Automated Income Tax Arrears Relief Calculator U/s 89(1) with Form 10E for the Financial Year 2020-21(Updated Version)

 Let us understand with an example. First, let us take the example of someone who is availing, very few exemptions and deductions. This is Permit Sing is a bank employee who earns rupees 8 lakh, a year being salaried, he contributes towards CPF, and also gets HRA and LTA. In this Financial Year 2020-21, he availed rupees 25,000 on his travelling, and he will be claiming it due to his family obligations. He is not able to save anything beyond his CPF contribution.

Now let's take out the tax amount he has to pay in the existing regime, and the new regime. As you can see, in this case to the new tax system works better. In fact, in the existing tax regime, Arijit will end up paying rupees 4,763 more in taxes. Lastly, let us take the example of someone who avails all major exemptions, as well as deductions. Here is Permit. He earns rupees 20 lakh annually. avails the full rupees 1.5 lakh limit of Section 80C through a combination of contribution to EP F, and l SS mutual funds. Besides this, he has bought health insurance, for which he paid a premium of rupees 25,000, that he claims as a tax deduction, under Section 80 D. Also, to save more taxes from his salary. He made additional investments of rupees 30,000 in NPS similar to them it. He also claimed the LTA amount of rupees 25,000, which is tax-exempt.

Now, let's see which tax regime will benefit him. In this case, the existing tax lab works better. It will result in lower taxes, with the difference of rupees 24,960. So, this is how you decide which regime to choose.

Download Automated Income Tax Preparation Excel Based Software All in One for the Government & Non-Government (Private) Employees for the F.Y.2020-21 and A.Y.2021-22

Feature of this Excel Utility:-

 1) This Excel utility prepares and calculates your income tax as per the New Section115 BAC (New and Old Tax Regime)

 2) This Excel Utility has an option where you can choose your option as New or Old Tax Regime

 3) This Excel Utility has a unique Salary Structure for Government and Non-Government Employee’s Salary Structure.

 4) Automated Income Tax Arrears Relief Calculator U/s 89(1) with Form 10E from the F.Y.2000-01 to F.Y.2020-21 (Update Version)

 5) Automated Income Tax Revised Form 16 Part A&B for the F.Y.2020-21

 6) Automated Income Tax Revised Form 16 Part B for the F.Y.2020-21

 7) Individual Salary Sheet

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May Relief to Hither Payees Salaried Persons opting the New Section Section 115BAC Introduced in Budget 2020

During the Financial plan 2020 speech, the Account Pastor Nirmala Sitharaman reported the inclusion of a new section called 115BAC into the Income Tax Act in the Association Spending plan 2020. Section 115 BAC, successful from FY 2020-21, manages the new and discretionary income tax regime for people and Hindu Unified Families (HUFs). Let us understand the new piece rates, qualification rules for the new regime and the deductions that are permitted or prohibited under Section 115BAC.

What is Section 115BAC?

Section 115BAC is the newly embedded section in the Income Tax Act, 1961 that manages the new income tax regime. This section and interchange tax regime was presented in Association Spending plan 2020 and is pertinent to people and Hindu Unified Families (HUFs) as it were. A key element of this new regime is that the income tax piece rates have been altogether decreased. Notwithstanding, the new rates come at the expense of different key income tax exclusions and deductions, which areas of now accessible under the old (existing) income tax regime. 

The accompanying the table shows the new chunk rates according to Section 115BAC

Download Auto Calculate IncomeTax Calculator All in One for the Govt and Non-Govt Employees for theF.Y.2020-21 as per the New and Old Tax Regime as per the New Section 115 BAC

$ This Excel Utility can prepare at a time your Tax Computed Sheet

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What are the rules for the new tax regime? 

In AY 2021-22, people and HUFs will have the choice to pay income tax according to the new (decreased) income tax piece rates gave their absolute income to the applicable FY fulfils the accompanying conditions.

The pronounced income does exclude any business income.

•           It is determined with no exclusions or deductions gave under the accompanying

•           Chapter VI-An aside from those u/s 80CCD/80JJAA,

•           Section 24b,

•           Clause (5)/(13A)/(14)/(17)/(32) of Section 10/10AA/16,

•           Section 32(1)/32AD/33AB/33ABA,

•           Section 35/35AD/35CCC,

•           Clause (iia) of Section 57.

•           It is determined without setting off misfortunes from any previous appraisal year (AY) because of the previously mentioned deductions or from house property.

•           It is determined without guaranteeing any deterioration understatement (iia) of Section 32.

•           It is determined with no exception or deduction regarding any stipends or perquisites.

Deductions and exclusions not permitted under Section 115BAC

The accompanying the table shows the significant income tax deductions and exclusions that have been refused under the new income tax regime. If you don't mind note that the new the regime is discretionary in FY 2020-21 and you may pick the old (existing) the regime, where the entirety of the accompanying deductions can be asserted.

Major Deductions under Chapter VIA (u/s 80C, 80CCC, 80CCD, 80DD, 80DDB, 80E, 80EE, 80EEA, 80G, 80IA, etc)	House Rent Allowance (HRA) u/s 10(13A)	Home Loan Interest u/s 24(b)
Standard Deduction	Leave Travel Allowance u/s 10(5)	Deduction for Donation or Expenditure on Scientific Research
Allowances u/s 10(14)	Deduction for Entertainment Allowance and Employment/Professional Tax u/s 16	Depreciation u/s 32(iia)
Deductions u/s 32AD, 33AB, 33ABA, 35AD, 35CCC	Exemption for SEZ unit u/s 10AA	Deduction from Family Pension u/s 57(iia)

Download Automated Income Tax House Rent Exemption Calculator U/s10(13A) in Excel Format

Deductions permitted under Section 115BAC 

The accompanying the table shows the significant income tax deductions and exclusions that have been refused under the new income tax regime. If you don't mind note that the new the regime is discretionary in FY 2020-21 and you may pick the old (existing) the regime, where the entirety of the accompanying deductions can be asserted.

Deductions allowed under Section 115BAC

While the majority of the income tax deductions have been ceased under the new income tax regime (as referenced in the previous section), the accompanying deductions are permitted.

Deduction u/s 80CCD(2) (employer’s contribution to your pension account)	Deduction u/s 80JJAA (additional employee cost)	Transport Allowance for Differently Abled Employees (Divyang)
Conveyance Allowance for Performance of Office Duties	Any Allowance for the Cost of Travel/ Tour/ Transfer	Daily Allowance is given to Employees under Certain Conditions

Focuses to consider about the new tax regime

Section 115BAC of the Income Tax Act manages the new income tax piece rates, which are relevant just for people and Hindu Unified Families (HUFs).

•           Although the new regime accompanies essentially decreased piece rates, it removes a a significant lump of tax deductions and exclusions that could be profited under the old regime.

•           The new income tax regime is discretionary, and you can, in any case, select the old (existing) regime.

•           You can't decide on the new regime on the off chance that you have any business income in the relevant FY.

•           The rates of overcharge and cess in the new income tax regime are equivalent to those in the old (existing) regime.

•           The the alternative to paying income tax according to the new regime can get invalid for the important financial year if the individual or HUF neglects to fulfil any of the conditions referenced in Section 115BAC.

Auto Prepare Income Tax Revised Form 16 Part A&B For the Financial Year 2020-21and Assessment Year 2021-22 [This Excel Utility can prepare One by One Form 16 Part A&B and PartB in Revised Format]

Old tax regime vs. the new tax regime 

The old (existing) tax regime allows for a variety of income tax deductions and exemptions, and hence is suitable for most of the taxpayers. However, the new tax regime may prove beneficial to those who have not significantly invested in various tax-saving schemes, such as Employee Provident Fund (EPF), Equity Linked Savings Scheme (ELSS), Life Insurance, National Pension Scheme (NPS), National Savings Certificate (NSC), tax-saving Fixed Deposit (FD), etc. Moreover, a standard deduction of Rs. 50,000 for salaried individuals and HRA allowance also do not apply under the new tax regime. 

Let us understand how the total tax payout is affected under the two regimes through the following table. We have considered an income tax deduction of Rs. 1.5 lakh u/s 80C, Rs. 25,000 u/s 80D and Rs. 50,000 as a standard deduction when computing tax using the existing income tax slab rates. Thus, the total deduction amounts to Rs. 2.25 lakh.

 

Thus, the new regime u/s 115 BAC may prove beneficial for the high-income group with minimal investment in tax-saving investments. However, the old (existing) regime may be better suited to the low-to-middle income group if they make sufficient investments in various tax-saving schemes. Hence, there is no set formula to decide between the two regimes. One must calculate the total tax outgo as per both the old and new slab rates before deciding whether to adopt Section 115BAC slab rates or not.

Download Auto Calculate Income Tax Calculator All in One for the West Bengal Govt Employees for the F.Y.2020-21 as per the New and Old Tax Regime as per the New Section 115 BAC

$ This Excel Utility can prepare at a time your Tax Computed Sheet

$ Individual Salary Structure

$ Individual Salary Sheet as per the W.B.Govt Employees Salary Structure after ROPA 2019

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Download Up to date Arrears Relief Calculator U/s 89(1) with Form 10E From F.Y.2000-01 to F.Y.2020-21, With New Income Tax Section 115 BAC for F.Y.2020-21

As per the Budget 2020 has introduced a New Income TaxSection 115 BAC for the Financial Year 2020-21, also the CBDT declare A Notification about this New Section that how to calculate your Income Tax under this Section. You can choose your option that you can get the Old Tax Regime or New Tax Regime. It also appears that if you choose the New Tax Regime, you can not availed any Income Tax benefits except the NPS benefits by the employer to the employees and no additional Tax Slab for the Senior Citizen in this New Tax Slab. But if you choose the Old Tax Regime you can get all benefits of all Income Tax Sections and you also availed the Old Income Tax Slab Rate as per the F.Y.2019-20. Then it is questioned how to choose the Tax Benefits, read the article How to Choose your Option New or Old Tax Regime.

 As the Financial Year 2020-21 and Assessment Year 2021-22 has already started from 1^st  April 2020 which will be the end of 31^st March 2021, So you can calculate for the Taxable Income for the Financial Year 2020-21. by the  Income Tax Calculator for F.Y. 2020-21. 

If you have got any Arrears Amount of Salary from the Previous Financial Years, you may obtain how to Relief from Tax through the Income Tax Arrears Relief Calculator U/s 89(1) and prepare the Form 10E From the Financial Year 2000-01 to Financial Year 2020-21 ( Updated Version)

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How to calculate income tax for F.Y 2020-21 U/s 115BAC As per the Budget 2020 ( Old and New Tax Regime) With Automated Income Tax Revised Form 16 for the F.Y.2020-21 and A.Y.2021-22

The new income taxdiscipline came into effect on April 1, 2020. It gives an individual the option to continue with existing tax duties (with tax rebates and exemptions) or to opt for the 70 new tax rebates and tax exemptions. For the convenience of salaried persons who have no business income, they have to choose between the existing and new tax system every financial year.

On the other hand, those who have business income should carefully evaluate whether they want to continue the existing tax discipline or choose the new one. This is because once they choose the new tax system, they can return to the existing tax system once in a lifetime.

To choose between two tax structures, it is important that you know how much your tax liability falls under both rules.

Below is the income tax slab that applies to the new tax system for individuals:

The figure for tax slab for A.Y.2021-22

Under the new tax, a person is only eligible for a waiver under section 80CCD (2). This section allows the employer's contribution to the NPS account to be deducted for a maximum of 10 per cent of the employee's salary (here the salary means basic additional value-added allowance).

Other Exemptionsavailable exemptions such as Section 80C, 80D, etc., and tax exemptions such as HRA, LTA, etc. are not available in the new tax structure.

This can be explained by an example of the income tax liability that you have under the new tax. Suppose your total income in the financial year 2000-2011 is 1 lakh rupees. In addition, your employer has contributed Rs.60,000 to your NPS account during the year, which is eligible for exemption under Section 80CCD (2). Therefore, your net taxable income will be Rs. 15,40,000 (Rs. 16 lakh minus Rs. 60,000).

In the new tax the system, the income tax liability will be calculated at Rs 15.40 lakh. There will be no tax on the first two and a half lakh rupees from the above mentioned 15.40 lakh rupees. Now the income that still has to be taxed will be Rs 12.90 lakh (15.40 lakh minus Rs 2.5 lakh).

From the next Rs 2.99 lakh mentioned in the second phase of the table above, the next 2.5 lakh rupees (2.5 Lakh rupees under the exemption certificate) will be taxed at five per cent. The tax amount here will be Rs 12,500.

The applicable income for tax will be Rs. 10,40,000. The next two and a half lakh rupees (.5.5 lakh minus five lakh rupees) will be levied on the ten per cent tax as mentioned in the 3rd clause. The amount of tax comes out to Rs 25,000.

Adding taxliability from points 1, 2 and 3, at the moment, the total tax liability comes to Rs 37,500 (0 12,500 25,000).

At the moment, the tax that is still taxable is Rs 7,90,000. From the 4th point, two and a half lakh rupees (minus one lakh rupees Rs. 5 lakh) will be 15 per cent and the tax liability will be 3,500 rupees.

After the fifth point, the amount of taxable income is Rs 5,40,000. From the fifth point, the next two and a half lakh rupees (12.5 lakh minus 10 lakh rupees) will be taxed at 20 per cent. The duty liability comes out as Rs 50,000.

The remaining amount of tax income is Rs. 2,90,000. As mentioned in the point clause, Rs 2.5 lakh (minus Rs 12.5 lakh) will be taxed at 25 per cent. The tax liability will be Rs 62,500

Only Rs 40,000 is left which is still taxed. As mentioned in the table above, from point M it will be taxed at 30 per cent. Tax liability will be Rs 12,000

The new tax comes out as a total tax liability of Rs 1,99,500 (0 12,500 25,000 37,500 50,000 62,500 12,000). Health and education will be added at a rate of 4 per cent. The amount of cess is Rs 7,980.

Thus, the total tax liability under the new tax system will be Rs 2,07,480.

Now you need to compare it with the tax liability under your existing tax. The calculation of income tax under the existing tax duty works in the same way. First, you must deduct all tax deductions and deductions that you are entitled to from your total income, and then calculate your tax liability on net taxable income. Click here to read more about it.

Another way to compare the new and existing tax systems is to have the same tax liability in both tax systems so as to examine how many exemptions and/or tax exemptions are required.

Download Automated Income Tax Revised Form16 Part A&B for the Financial Year 2020-21 & Assessment Year 2021-22, as per the New Introduce Tax Section 115BAC in the Budget 2020 ( New & Old Tax Regime)

[This Excel Utility can prepare at a time 50 employees Form 16 Part A&B for the F.Y.2020-21]

Feature of this Excel Utility:-

1)    This Utility can prepare at a time 50 Employees Form 16 Part A&B as per new Rules of Income Tax U/s115BAC which introduced in the Budget 2020 ( New & Old Tax Regime)

2)    This Excel Utility can prevent the double-entry of Employee’s Pan Card No.

3)     This Excel Utilitycalculate the perfect Tax for each employee

4)      This Excel Utility can use Govt and Private Concerned

5)      All the Updated Income Tax Amended Section have in this Utility as per Budget 2020

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Download Automated Income Tax Preparation Excel Based Software All in One for Govt and Non-Govt Employees for F.Y.2020-21 as per Budget 2020 With New Section 115BAC as Old tax regime and Analyses the benefits before making your choice U/s 115BAC

Under the straightforward system, it's impossible to say some concessions and exemption.

In the Budget 2020 has introduced a simple personal tax system to reduce the tendency of income tax income of individuals. This new regime provides an option for individuals to pay taxes at a reduced rate subject to certain discounts and rebates.

The following is a quick comparison of tax rates.

As the new financial year begins, many individual taxpayers are in the process of analyzing whether they will continue to pay taxes under the existing old regime or opt for a simplified personal tax system. Individuals can consider the following to decide which system will work best for them. Under simplification, it is not possible to claim specific exemptions and rebates. There are discounts and rebates widely used by the people listed below and which will not be available under the new tax regime.

In addition to the above for the tax regime. The loss under the heading ‘Income from House Property’ (probably due to interest from a home property) cannot be set against the income under the other head, but it appears to have been set up.

For those who have business income, deductions, investments in new plants and equipment, tea, coffee, rubber development, certain businesses, agricultural extension projects and scientific research expenses cannot be taken under the new tax system. Application of this option for persons who do not have business / professional income during the year.

Although this option can be used by individuals when filing returns, it was not clear until recently whether they could decide on new measures for employers to deduct taxes. The lack of activation of amendments to the tax exemption provisions in the Finance Act 2020 has created confusion among employers as to whether they can apply the new tax system at the time of tax exemption.

Subsequently, the Central Board of Direct Taxes (CBDT) issued a clarification on April 13, 2020, to avoid inconvenience to individual the taxpayers wishing to adopt the new tax option.

According to the specification, an employer can apply the tax at the rates fixed under the new tax rate while withholding tax from the salary. However, the employer must be notified if the employee chooses to opt for the new rules.

If no investigation is arranged, the employer will be able to withhold the tax under the old system. In addition, the employee may notify the employer only once per financial year and the information may be provided at any time during the financial year.

For people with business / professional income: People with business income can use this option before the due date for filing the tax return. If a person with a business / professional income prays for a new tax, he will have to continue with the new government for all his subsequent years. He can withdraw the used option and return to the old regime only once. Once withdrawn, he will be ineligible to use the new government option for any future year, unless his business / professional income ceases. Can employees change the regime while filing tax returns?

It can happen that the person can opt for the new year and notify the employer at the beginning of the financial year. However, as the year went on he realized that the old regime could work better for him because of the projected income and discounts/discounts. In such cases, it is not necessary for the employee to continue with the elected and declared regime with his employer.

According to the provisions of the law, he has the right to change his option while filing the income tax return. Things to keep in mind when choosing a government The individual taxpayer needs to make an informed decision about whether to choose the new personal tax condition, as it can help in tax optimization. In addition, although it is possible to change from one scheme to another at the time of filing the tax return, it may happen that the additional taxes are deposited by the employer as the government-appointed at the beginning of the financial year.

These additional taxes have to be claimed as refunds from the tax authorities which can lead to cash flow problems for the individual. Although the individual will be aware of his or her salary income, the following factors should be considered for the administration to administer fairness: - Income other than salary income (e.g., interest income, dividend / mutual fund income, etc.) – Unexpected increase in the year and bonus money year with being acceptable for-expectations for the fiscal year-for estimating the appropriate home rent allowance in the case of rent payable for the year

The year in which he expects the travel plan to claim a leave travel allowance is a welcome amendment to simplify the new tax system.

However, thoughtful analysis is required to select the appropriate measures for the individual.

Download Automated Income Tax Preparation Excel Based Software All in One for Govt & Non-Govt ( Private) Employees for the Financial Year 2020-21 and Assessment Year 2021-22 with the new tax section 115BAC ( New Tax Regime and Old Tax Regime) As per the Budget 2020.

Feature of this Excel Utility:-

1)    Automated calculate your Tax in Tax Computed Sheet as per the New Section 115BAC ( New Tax and Old Tax Regime)

2)    This Excel Utility can prepare at a time your Tax Computed Sheet

3)     Automatic Income Tax House Rent Exemption Calculation U/s 10(13A)

4)     Automated Income Tax Revised Form 16 Part A&B and Form 16 Part B

5)    This Excel Utility can prepare Automated Income Tax Arrears Relief Calculation U/s 89(1) With Form 10E from the F.Y.2000-01 to the F.Y.2020-21( Updated Version)

6)    Easy to install and easy to generate, just like as an Excel File.

7)    All in the amended Income Tax Section have in this Excel Utility as per Budget of 2020.

8)    This Excel Utility have a Salary Structure as per all Govt and Non- Govt ( Private ) Concerns Salary Patterns.

 

 

 

 

 

 

 

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How to get exemption and tax relief on leave encashment calculated U/s 10(10AA) With Automated Income Tax Arrears Relief Calculator U/s 89(1) with Form 10E from the F.Y.2000-01 to F.Y.2020-2021 ( Updated Version)

Based on eligibility, employee can avail different types of leave. If the company has a policy to carry it forward, then unavailed leave remained for a year can be carried forwarded to the next financial year. Based on employer’s policy, an employee is allowed to encash accumulated unavailed leave either during the service or after retirement / resignation. It’s known as leave encasement.

In this article we will be discussing tax on leave encasement. You will also get answers to following questions generally asked by many taxpayers:

·               How is exemption on leave encasement calculated?

·               What is 10 months average salary?

·               How do you claim leave encasement?

Leave encasement during the tenure of service with the same employer is fully taxable in the hands of an employee under the head income from salaries. However, in this case, the employee can claim relief under section 10(10AA) of income tax act, 1961.

Accumulated leave can be encased at the time of retirement. If employee has encased it at the time of retirement, then exemption is available under section 10(10AA) based on the type of employment.

Exemption on Leave encasement to government employees

For government employees entire leave encasement received at the time of retirement, whether in superannuation or otherwise, is fully exempted from tax. Government employees, in this case, mean only state and central government employees.

This means employees of local authority and public sector undertaking will not be getting full exemption.

Due to full exemption, for government employees, leave encasement will not be included in the calculation of gross salary.

Leave encasement exemption for all other employees

In case of all other employees including employees of local authorities and public sector undertakings, least of the following will be exempted;

·               Actual leave encasement received;

·               Last 10 month’s average salary

·               Rs 3,00,000

·               Cash equivalent of unavailed leave

Cash equivalent of unavailed leave has to be calculated on the basis of maximum 30 days leave for every year of actual service rendered to the employer / completed year of service. It has to be calculated on the basis of average of last 10 months salary. The example given below will help you understand the provision better.

In case of voluntary retirement, exemption on leave encasement can also be availed under section 10(10AA)

What is average salary

Average salary = Total salary drawn by the employee during the period of 10 months immediately preceding his retirement / 10

Salary for above exemption calculation = basic salary + dearness allowance to the extent the terms of employment so provide + commission based upon fixed perception of turnover achieved by the employee

If Mr X as an employee of ABC limited retires on 31.12.2018, then average salary for the period of 10 months started from 1.3.2018 to 31.12.2018 = (total of basic salary + DA to the extent the terms of employment so provide + fixed commission as a percentage of turnover) for the period starting from 1.3.2018 to 31.12.2018 / 10

In case the employee has already claimed exemption on leave encasement for the amount received from one or more previous years then the limit of Rs 3,00,000 shall be reduced accordingly by the amount of exemption already availed. This means your exemption for the current year may be reduced based on other limits by the amount already claimed as an exemption in earlier years.

As per circular number 309 dated 3.7.1981, leave salary received by the family of a government servant, who dies in harness, is not taxable in the hands of the recipient.

The employee can claim relief under section 89 of income tax act, 1961 in respect of leave encasement.

Example

Mr X is an employee of a private company from which he receives Rs 56,000 as leave salary at the time of retirement on 31st December 2018. Here are other details of Mr X;

·               Basic Salary – Rs 5000 since 2010

·               Duration of service – 20 years and 7 months

·               Leave to his credit at the time of retirement – 12 months on the basis of 45 days entitlement of leave for each completed year of service.

Computation:-

	Particulars	Amount in Rupees	Amount in Rupees
A	Actual leave salary		56,000
B	Less: Exemption under section10(10AA) to the extent of least of following
1	10 months salary (5,000*10)	50,000
2	Maximum limit not taxable	3,00,000
3	Actual leave salary received	56,000
4	Cash equivalent of unavailed leave (An example given below)	10,000	(10,000)
C	Taxable leave salary (A-B) to be included in gross salary		46,000

Example 1:-

·               Total eligibility of leave = 20*1 month = 20 months

·               Leave taken by employee = {(45 days*20)/30}-12 = 18 months

·               Leave to the credit of employee = 2 months

·               Cash equivalent for unavailed leave = 2 months * average of last 10 months salary = 2 * Rs 5,000 = Rs 10,000

Tax deductions for an individual

Employees are eligible for deduction under section 16 before calculating taxable salary. Following deductions from gross salary are available under section 16;

·               Standard deduction of Rs 40,000/Rs 50,000.

·               Deduction for entertainment allowance.

·               Professional tax.

 Download Automated Income Tax Arrears Relief Calculator U/s 89(1) with Form 10E from the Financial Year 2000-01 to Financial Year 2020-21 (Updated Version)

Apart from deduction under section 16, employees can also claim following deductions under chapter VI-A of the income tax act,1961 from their gross total income. But as per the Budget 2020 this exemption can entitled to those who are Opt in Old Tax Regime. New Tax Regime is not entitled this exemption as below:-

·          Section 80C – in respect of life insurance, contributions to PPF, Employee Provident Fund, Tuition fees etc Max Limit Rs.1,50,000/-

·               80CCC – Pension fund

·               80CCD – Contribution to national pension system

·         80CCD(2) – Employer’s Contribution to the Employee’s Pension Fund (NPS)

·               80CCD(1B) :- Max Rs. 50 thousand , this exemption can only entitled by the Sr.Citizen above 60 Years

·               80D – in respect of medical insurance premium, Max Rs.25,000/- for below 60 Years and Rs. 50,000/- for above 60 years of age.

·       80DD – maintenance of a dependent being a person with disability including medical treatment

·               80DDB – in respect of medical treatment

·               80E – interest on loan taken for higher studies

·               80EE – interest on loan taken for residential house property

·               80G – donation to certain funds, charitable institutions etc.50% or 100%

·           80GG – Deduction in respect of rent paid Max Rs. 60,000/- P.A. who have not get any House Rent Allowance from the Employer.

·          80TTA – in respect of interest on deposits in savings accounts Maximum Amount Rs. 10,000/-

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