Pre-computation steps “Income Under Head Salary”
As we know that majority of person assessed comprised of salaried employed and hence economic significance of correct computation can not be undermine. As we know in last hour we got confused what to consider in computation of salary. Here, an attempt is made to highlight basic points to be kept in mind before computing salary:-
Why required to be considered?
|Person – assessable||Never changes – Its always being “Individual – Natural Person||Selection of correct forms|
|Selection of financial year and assessment year||Year in which income is earned is Previous Year.Year next to previous year is Assessment year.In few exceptional cases previous year and assessment year can be same.||Relevant act, rules, principles and basis of calculation of income.|
|Date of Birth / Sex||Date of Birth of Assessee.||Used to ascertained tax slab rates applicable on him.|
|Contractual nature of services rendered||If nature of services falls within the scope of salary – than only can be computed under head “Income under the head salary”.However, in practical scenario, what happens even nature of work done is same / similar but terms of contact are like job work or professional services. In such cases income is computed under head “Income under the head Business & Profession”.||Whether income earned falls under salary head for computation perpose.|
|Country jurisdiction in which salary is earned||In almost all cases, it is based on the place where services are rendered. However, there are few exception in case of government employees, where even if services are being rendered outside are included in computation.||Determines the applicability of salary definitions under income tax act.|
|Residential status||Mainly depends upon presence in India, exception apart. From income tax point of view all salaried Assessee can be sub-divided into three category:-1) Resident asseesee2) Non-resident assessee3) Not – ordinary resident||Determines the gross income to be considered for computing salary income.|
|Application / Diversion of Income or expenses for earning income||These three are technical words of income tax act and can be understand with the table:-
In complex cases this division shall be made carefully.
|Person to whom income shall be included.|
|Income (Most of the Assessee error in considering it correctly)||Be caution, apart from salary you get from employer, you have some other incomes which are needs to be disclosed while filling income tax return:-
||Needs different data sources to secure correct amount of income.|
|Donations given||All donation given by assessee shall be accompanied with following documents:-
– 80G or other relevant registration certificate of trust
– Registration certificate shall be effective for the year in which payment is made
– Proof of paymentCaution :- Employer never consider donation you given while calculating your tax deduction at source (TDS).
|For claiming correct amount of donation|
|Tax return forms applicable||Selection of correct return form is necessary for correct processing of income. Tax return forms for AY 2014-15 are based on source of income for individuals and for easy selection of relevant forms this can be summarized as under:-
In case of Individuals having small business units with ownership of one house property ITR 4S can be filled.
|Correct submission of forms|
|Form 26AS||This is the assesses ledger in the department’s account. All payments made by assessee, directly or indirectly (TDS / TCS / Advance Tax etc.) and all refunds made by department are recorded in this statement.||Verifies your claims for TDS and advance tax payments.|
|Why return is being filed||
||So even if you are not required for file your return it is better to file your return.|
The above points are basic points which every person shall have in mind for computing his salary income.