Income Tax 2015-16 - Calculation Method in respect of Salaried Employees

Income Tax 2015-16 – Calculation Method in respect of Salaried Employees – Rebate of Rs. 2000 for individuals having total income up to Rs. 5 lakh (Section 87A)

Finance Act 2013 provided relief in the form of rebate to individual taxpayers, resident in India, who are in lower income bracket, i. e. having total income not exceeding Rs 5,00,000/-. The amount of rebate is Rs 2000/- or the amount of tax payable, whichever is lower. This rebate is available for AY 2014-15 and subsequent assessment years.

Salary income for the purpose of section 192 shall be computed as follow:-

(a) First compute the gross salary including all the Profits in lieu of Salary if any and excluding the income under the head salaries which are exempted

(b) Allow deductions under Section 16 of the Act from the figure arrived at (a) above and compute the amount to arrive at Net salary of the employee

(c) Add income from all other heads- ‘House property’, ‘Profits & gains of Business or Profession’, Capital gains and Income from other Sources to arrive at the Gross Total Income. However it may be remembered that no loss under any such head is allowable by DDO other than loss under the Head “Income from House property”.

(d) Allow deductions under Chapter VI-A of the Income Tax Act, from the figure arrived at (c) above ensuring that the relevant conditions are satisfied. The aggregate of the deductions subject to the threshold limits applicable to deductions under Chapter VI-A, shall not exceed the amount at (b) above and if it exceeds, it should be restricted to that amount.

This will be the amount of total income of the employee on which income tax would be required to be deducted. This income should be rounded off to the nearest multiple of ten rupees.

Income-tax on such income shall be calculated at the rates applicable for Financial Year in which income is received keeping in view the age of the employee and subject to the provisions of sec.
206AA, as discussed in para 4.8 of the income tax circular. Rebate as per Section 87A upto Rs 2000/- to eligible persons (see para 6) may be given. Surcharge shall be calculated in cases where applicable (see para 2.2).

The amount of tax payable so arrived at shall be increased by educational cess as applicable (2% for primary and 1% for secondary education) to arrive at the total tax payable.

The amount of tax as arrived at para 9.3 should be deducted every month in equal installments. Any excess or deficit arising out of any previous deduction can be adjusted by increasing or decreasing the amount of subsequent deductions during the same financial year.