If I am standing in 2022, then I am not dreaming about how
much salary will be increased by the government from 2021.
So in that case, nothing will be taxable on the due basis.
Whatever will be taxable will be taxable on the receipt
basis.
This is written in this example.
Pay commission is appointed by the central government and
it recommends revision of salaries with retrospective date.
Retrospective means going to a back date from retrospective
date.
So what will happen in this case?
Arrears received in that connection will be charged on
receipt basis.
When you will get increased salary, then it will be taxable
on receipt basis.
We will talk about its relief in section 89 later.
Let's move on to the next topic.
We are talking about the definition of salary here.
What is the definition of salary?
We don't need to know the definition of salary.
We had discussed it well in the last lecture.
But still, in salaries, the cash component, kind,
allowances, wages, everything will be covered.
Basically, because of being in that job, the benefits that
the employee is getting,
What did I say?
Because of being in that job, the benefits that the
employee is getting, maybe he is getting full salary in his
bank, maybe he is getting a car, some allowances, some
perks, all that will become a part of his salary for the
purpose of income tax.
And on top of that, he will have to pay income tax.
Gradually, as its envelope will open, you will enjoy more
in discussion.
Right now, there is only one envelope.
We are discussing on that only.
Let's move on.
He is saying that the meaning of the term salary,
What is there in it?
It is much wider than what is normally understood.
Salary for the purpose of income tax act includes monetary
requisites, monetary payments like basic salary, bonus,
commission, allowances, and non-monetary facilities like
housing accommodation, medical facility, interest-free
loan, all these become a part of your salary.
The benefits that you get because of being in the job, from
your employer, those also become a part of your salary.
See, list, wages, annuity, gratuity, fees, commission,
leave encashment, advance of the salary.
What is leave encashment?
Let's discuss about leave encashment.
Like a company, it says that it wants to take care of its
employees.
We give you 4 Sundays leave every month.
Apart from that, if there is any emergency in your house,
you can take one leave and we will not deduct money from
you.
They do not deduct money from your salary.
Now, suppose there is a hardworking person like me, who
works 15-16 hours a day.
He enjoys working.
He went to office 365 days a week.
I mean, he did not go on Sundays.
And he did not take any leave.
He was allowed one leave in a month, that you take one
leave and your money will not be deducted.
According to 12 months, he got 12 leaves.
That person did not take any leave.
At the end of the year, he said,
Sir, these are my 12 leaves, which I could have taken.
And I did not take.
So, do one thing, I have not taken.
Now, what should I do?
Give me the money for 12 leaves.
Now, if this employer gives him money for 12 leaves, then
that is also part of salary.
There was a benefit.
He got a benefit.
There is a benefit.
He got a benefit because of staying in a job.
That is part of salary.
If there is a contribution of a provident fund, then that
is also a part of salary.
Friends, this was the point.
We are talking about wages.
Wages are the same.
Regular payment earned for work or services.
Wages, salary, basic salary, these are all the same things.
Friends, the names are different.
The things are the same.
Say salary, say wages, say commission, say something.
Payment, you are understanding, right?
You are understanding payment, right?
Wages, salaries, commission, whatever name you give, it is
the same.
Whether you say Ram or Krishna, it is the same thing.
Friends, let's come to the next topic.
Allowances.
Friends, let's talk about allowances.
Allowances is an important topic.
Let's start our discussion about allowances.
Friends, what are allowances?
Allowances means, the person, the employee, the company
where he is working,
the employer gives him some money apart from salary.
One is monthly salary, which is of basic type, which you
will get.
Basic salary.
Apart from basic salary, you get some allowances.
It is possible that you live in a rented house
and the employer is a very kind person and gives you house
rent allowance.
The amount of rent you will pay, that much allowance you
take from us.
Dearness allowance.
In India, inflation is increasing little by little.
So, as inflation is increasing, little by little, you take
money from me apart from basic salary.
It is possible that the employee is working for example, in
Ghaziabad.
The employer posts him in Bombay.
Now, think and tell me one thing, there is no difference
between
Ghaziabad's inflation and Bombay's inflation.
You go to Ghaziabad to eat momos and you go to Bombay to
eat momos, will the rate of sky and earth make any
difference to you?
So, in another city, because of his posting in another
city, the employer is giving him some extra allowance.
What is he giving extra?
Hold the word, what am I saying?
Allowance.
He is giving some allowances apart from basic salary.
We are discussing taxability on that.
In those allowances, what is taxable and what is taxable is
not there.
Come, friends.
I will show you a chart.
Some allowances are like this.
Some are fully taxable.
Some allowances are,
I will tell you which are which.
Some allowances are fully taxable.
They are fully taxable.
Fully taxable allowances.
Some are completely exempt.
If you give anything to your employee,
if you give any allowances to your employee apart from
basic salary, if you give any allowance to him, then no tax
will be imposed on him.
This is one such category.
Which all employees are covered in this?
I am just giving you an introduction.
Some are fully taxable.
Some are exempt.
Some are exempt to a particular category.
Partly taxable.
Means, employer has given allowances and government has
said that if you go beyond this limit, then taxable.
Did you understand?
Allowances are basically
given by cash or cheque.
Facilities are not called allowances.
We will talk about facilities later.
Here, you are only getting payment.
Some expenses are being given to an employee.
We are talking about that.
What is taxable and what is exempt in that.
Come friends, let's try to understand this.
Is the point clear?
Let's talk about fully taxable.
Allowances which are fully taxable.
Means, employer will give allowances to his employee.
These allowances, if employer gives to his employee, then
all will be taxable in the hands of the employee.
His salary will be taxable in the hands of the employee.
What are these?
City compensatory allowance.
City compensatory allowance is that you live in Ghaziabad
and your posting is done.
Let's say Bombay, it's a little expensive city
So because of that, your employer is also smart and tells
you that your salary is Rs 50,000 per month
But because you are going to an expensive city
Your expenses for living will increase
Now your salary, Rs 50,000 is basic Apart from that, I will
give you an allowance of Rs 5,000 per month
So that you can cover your extra expenses
So that Rs 5,000 will be 100% taxable
In whose hands?
In the hands of the employee
Come on guys, these are very important concepts
When you go to a job in real life, you will face a lot of
such issues
When you go to your own job, you will also get such
allowances
What should be their treatment?
Try to understand these things
These are very important things
Entertainment Allowance
Sir, what is Entertainment Allowance?
Entertainment Allowance
In India, only three things are famous And in our class
also, only three things are famous
Entertainment, Entertainment and Entertainment
What is Entertainment Allowance?
Friends, Entertainment Allowance means
For example, there are banks
The customers of the bank, who have a wealth of thousands
of crores
The bank wants to build a relationship with them
That these are big customers, their accounts should run
properly in our bank
They should not face any problems
So for that, the bank appoints relationship managers
Now what will the relationship manager do from time to time?
He will try to take care of his accounts
He will say, sir, there is a new film, please buy the ticket
There is an IPL match going on here, please buy the ticket
Banks get it The relationship managers of the banks
They become a type of salesman
They give them movie tickets
Or if your hotel bill comes, we will pay the bill up to Rs.
Now the relationship manager will get the movie tickets
Or the money he gets
He will say, take our customer to eat
Don't take the bill from him
Pay the bill from our bank
And take Rs.
Now the Rs.
1000 given by the employer
Will be 100% taxable in the hands of the employee
Any problem?
No problem?
Then there is Transport Allowance
Transport Allowance means
You go to the office from your home
And come home from the office
For that, if your employer gives you money
That your house is a little far
Here is Rs.
200 to come in the morning
And Rs.
200 to go
Rs. 400 per day
So what is this?
In a way, it will become a part of the salary
If you are not in the salary
If you are not in the job
Will you get any money? No
So it becomes a part of your salary
But blind and deaf people
Have got some exemptions
For Rs.
3200 per month
Let's go ahead and see
What is that?
Come on
I am leaving a point in between
Let's come back
Did you understand the fully taxable ones?
Which ones were fully taxable?
Did you understand or not?
You don't speak
And when you don't speak
I feel like
I am talking to the walls
Come on
Allowances which are fully exempt
Transport Allowance
City Compensatory Allowance
Fully taxable
Now come on
Those allowances
No matter how much you give
Even if you give Rs.
50,000 crores
Even then it will not be taxable
What is that? If you give any allowance to whom?
To whom?
To High Court or Supreme Court Judges
From whom will you get allowances?
United Nations Organization Compensatory Allowance
You get this under Constitution
Article This is Sumptuary Allowance
Which High Court Judges get
These are some allowances
If you have read all these
Or if you feel so
These are all Government Allowances
First Allowance to Supreme Court
High Court Judges Second, United Nations
United Nations
Compensatory Allowance
If a person gets this
Then he is exempt
After that High Court and Supreme Court Judges
After that
Government Judges
I told you in the beginning
What I said in the beginning
A person always dies with a private job
If you want to do a job Government job
All the allowances they get, are they exempt?
Are they all exempt?
Will these Judges pay tax on these allowances?
They will not Even if the Government is giving them an
allowance of Rs.
100,000 per month In their hands, everything is taxable
Everything is exempt And this poor person will have a
private man in his hands
His income will be taxed
If he is a Government Employee
Then everything in his hands will be exempt Do you see the
difference?
This is the government's policy
That is why I say
Go to the Government job
That is why people say that a Government job should be done
These are all benefits
Do you understand fully taxable?
Do you understand fully exempt?
Now let's go to them
Let's talk about those allowances
Which you will get
But the Government has set a limit
If you pay more than this
Then it is exempt up to here If it is above that
Then in your hands it will be taxable
In your hands it will be taxable
If you exceed a limit
Then And what are those?
These are
Special Compensatory Hilly Area Allowance 800 or 300 per
month
Depending upon the location
These are like this
For example, I will tell you about the transport allowance
Allowance granted to an employee
Who is working in a transport system To meet his personal
expense
During his duty Performed in the course of
Running such transport Provided that such employee is not
in the receipt of
Daily Allowance
In that case If you give anything to that employee
Who works in a transport company
For example, DTC bus
There a person works
He is a helper, a conductor
Or These roadways buses Go from one city to another
The poor conductor Will sit in the bus today
The next day morning or evening
He will reach another city
From there he will reach somewhere else
After 5-6 days He will come back home
For 5-6 days he will spend
On food and drinks
He will spend something
His employer will give him money
Take this son 500, 1000, 2000 Till the time you come back
He will give you food
To eat
Water bottle
Expenses of those things
Expenses of his personal expenses
His employer is giving him
So that is part of the salary But the government said
He is roaming like this because of his job
Because of his job
He has to eat outside food
So he should get some exemption
Because if his job
Is to go to one place in the morning
And come back home from there
Everyday So this extra expense of his food and drinks is
not there This extra expense is also
Because of the job
If he sits from Delhi to Haridwar Then maybe he will go to
Dehradun
Then after 6-7 days
He will come back to Delhi
At this time a person will not remain hungry
He will drink water and eat food So for that the government
Will give him 70% exemption
If for example His employer gives him 1000 rupees
Then 700 rupees is exempt 300 rupees is taxable
This is it Maximum 10,000 rupees per month
We will give him this much exemption 10,000 rupees per month
On that your salary
Will be taxable
Let's see more Are you getting this?
Children Education Allowance I say this in every lecture
That education is not
A big asset You have thousands of crores of rupees
If you are an uneducated person
You don't know how to manage your money
You don't even know
If someone does something wrong
You don't even know
Education is very important
An employer understood this
He said
Suppose a peon works here
The salary of a peon is 6000 rupees per month
And a peon works
For 6000 rupees per month
And says
I don't want my children
To grow up and become peons
I want them to get good education And because of this, I
have got them admitted in a government school next to mine,
because I cannot pay them in private fees, because you
don't pay me so much salary.
I have got them admitted in a government school.
And I want them to study well and become great people, and
one day become an employer like you.
So that the heart of the employer could melt, he said, son,
do one thing, your salary is also less, Rs.6000.
So what will you pay the fees and what will you eat and
earn?
I will do one thing, the fees of your children are going
for a month, I will pay that.
Rs.6000 is your salary, apart from that Rs.50, Rs.60,
Rs.70, Rs.80, Rs.100, the fees of the government school
will go, I will pay that.
In this case, should we do something taxable in the hands
of that poor employee?
He is taking money for his studies.
In that case, the government said, no, there is no need, we
will make an exempt limit, what is that limit?
Rs.100 per month for one child, and how many children are
allowed maximum?
Two children are allowed.
Suppose if that poor child had two children, then the
allowance of Rs.200 per month would have been exempted.
No tax would have been imposed on him for Rs.200 per month.
Suppose if it was Rs.250, then the tax would have been
imposed on him.
Any problem?
Okay.
Hostel Expense.
The employee has put his children in a hostel.
Now suppose that child has grown up, has passed 12th
standard and has gone for engineering.
He has put his children in a hostel.
The employer said, your son is talented, I will pay the
expense of his hostel.
In that case, the government said, very good, there should
be no issues.
We will give you an exemption of Rs.300 per month per
child, and how many children are allowed maximum?
Two children.
So that poor peon will be exempted from the allowance of
Rs.600 per month if he has two children.
What allowance is that?
It is the allowance of the hostel.
Before this, what allowance was there?
It was for education.
Come friends.
There are many other allowances.
The list is quite long.
A transport allowance, as I was telling you.
We just read a while ago, that in the case of transport
allowance, it used to be fully taxable.
What was the transport allowance?
For example, I live in Delhi.
I have an office in Ghaziabad.
I have to travel 50 km daily.
In that case, the employer's heart melted.
He said, brother, when you spend Rs.200 for coming and
Rs.200 for going, you can take that money from me.
So it became taxable in my hands.
In the hands of the employee.
But suppose, friends, a person is handicapped, blind, deaf.
Despite that, he has the passion to go somewhere and get a
job.
No matter how far that job is.
I still want to go there and get a job.
So the government will first tell that person, son, you
have hats off.
Applause for you.
And we give you a special gift for you.
Your gift is that your allowance up to Rs.3200 per month is
exempt.
Whatever is on it will be taxable.
A blind or a deaf person.
Or if that person has any other disability.
If he gets any transport allowance, then we will exempt him
up to Rs.3200 per month.
This is the point, friends.
This transport allowance.
Granted to an employee who is blind, deaf, dumb.
He is not able to speak.
He is orthopedically handicapped.
To meet his expenditure for commuting between residence and
place of duty.
He will get an exemption up to Rs.3200.
If there is anything on it, then it will be taxable.
You can read some more lists.
Because allowances are very high, friends.
Friends, are these points clear?
Are they clear?
One more allowance is left, our last.
House Rent Allowance.
Some people find it difficult to understand.
I will show you what it is and how to get it.
See, what is House Rent Allowance, friends?
For example, you live in a rented house.
So your employer says that you are living in a rented house
because of my job.
You are not able to buy a house.
For example, you are a person from Delhi.
You live in Delhi.
And you have got a job in Meerut.
And you are living in a rented house in Meerut.
Because of your job.
So the employer says that we are in search of such people
who will have so much determination to leave their house
and family
and live in a rented house.
They are coming to work for us.
We are looking for such people.
So in that case, we give you some allowances.
You can take as much rent as you want from us.
If you have a monthly rent of Rs.
then your employer pays you Rs. 10,000.
So in that case,
in the hands of that employee,
is it taxable or exempt?
Friends, if it is an allowance, it should be taxable.
But there is a compulsion of that person
that he is living in search of a job.
If he had a job in Delhi,
then he would not have to rent a house.
He is spending his rent somewhere.
If you increase his income by Rs.
if you make those allowances taxable,
his income will increase.
His tax will also increase.
And he is spending double that he is paying the rent.
Here is extra tax and there is rent.
So in this case, the government said,
there are two aspects.
Here it can be made taxable.
Here it can be exempted.
But if you exempt it,
then there is a possibility of being in debt.
A person can live in his relative's house.
He can live in his parents' house.
And suppose his parents' house is in Meerut.
He can live in his parents' house
and show that he has paid the rent.
So there were two possibilities.
So the government said that
if both the possibilities are possible,
then let's set a limit.
If it is above this limit, then it is taxable.
And if it is below this limit, then it is exempt.
Let's talk about the limit.
The limit is that HRA
is exempt to the extent of least of the following.
What is it?
HRA actually received.
How much did you actually get?
For example, you got HRA of Rs. 10,000 per month.
Okay friends?
How much is HRA actually received?
Rs. 10,000 per month.
What is the second one?
Rent that you have paid,
minus 10% of the salary.
You have paid rent more than 10% of the salary.
For example, you pay rent
and your salary is Rs. 1,00,000.
Okay?
We will discuss what all comes under salary.
Assume that your salary is Rs. 1,00,000.
What is the 10% of it?
Rs. 10,000.
And you are paying rent, for example, Rs. 15,000.
So what is the extra?
Rent paid Rs. 15,000 minus 10% of salary.
So how much is it? Rs. 5,000.
And what is the third one?
50% of the salary for the relevant period.
If we are talking about the month,
then what is the 50% of the salary? Rs. 50,000.
We are talking about the month,
not the annual salary.
We are talking about the month only.
So for all these three,
what did you do first?
The company gave you HRA.
What is the allowance given by the company? Rs. 10,000.
The second one?
Rent that you are actually paying,
more than 10% of the salary.
What is that? Rs. 5,000.
Rent paid was Rs. 15,000.
10% of the salary was Rs. 10,000.
So it is Rs. 5,000.
Or 50% of the salary.
Salary is Rs. 1,00,000.
50% of the salary is Rs. 50,000.
Now whatever is less out of these three,
will be exempted.
What becomes less out of these three?
Rs. 5,000.
So you will be exempted for Rs. 5,000.
So how much HRA did you actually get? Rs. 10,000.
Out of that Rs. 5,000 is exempted.
So in the hands of the employee, this Rs.
5,000 per month
will be taxable.
How much did you get? Rs. 10,000.
But how much will be taxable?
Rs. 5,000.
The remaining Rs.
5,000 is exempted
as per this calculation.
And this is only when
our employee lives in metro cities.
Metro cities means
the cities at the top.
Delhi, Bombay, Calcutta and Chennai.
If he stays in other cities, will there be any difference?
Is there any difference in other cities?
The difference in other cities is that instead of 50%, here
it will be 40%.
In this case, it will be 40,000.
For example, he used to live in Meerut.
In our example, he used to live in Meerut.
A person from Delhi used to live in Meerut.
In that case, here it will be 40,000.
The rest is the same.
Even then, how much will be less? 5,000.
He will be exempted there.
Is the point clear?
And because the government also had a doubt in this, that
what if people make a mistake, that if I exempt everything,
if I am the government, and I exempt all the allowances,
then there is a possibility of making a mistake.
I will go to Meerut and live in my parents' house.
And I will show them that I am giving them rent.
And I will take this exemption.
In that case, the government said, that friend, even we are
not so stupid that we could not understand your intentions.
So read these notes.
What does it say?
That exemption is not available to an SSI who lives in his
own house or in a house for which he has not paid rent.
If I live in my parents' house and have not paid rent, then
I will not get any exemption.
If I live in my own house, then will I get an exemption?
No.
When will I get it?
When I live in a rented house.
I should have a proper document.
I should have a bank statement as a proof.
Salary.
You had asked me, how is salary?
If you add basic salary plus dearness allowance, then you
will get a salary.
Basic salary plus dearness allowance.
If provided in terms of employment and commission.
Apart from this, it will come under commission.
And what will be the relevant period?
Period during which the said accommodation was occupied.
As long as he stayed in the house.
Is the point clear?
We were talking about house rent allowance.