Sep 292014
 

House Rent Allowance (HRA) Vs. Rent Free Accommodations (RFA)

House Rent Allowance (H.R.A.) results in tax savings because accounting under Income tax act is direct exemption based. However, accounting of Rent Free accommodation is valuation based taxation and added to total income of employee presumptive basis.

The principles of valuations are explained below:-

House Rental allowance
(Section 10(13A) of Income tax act, 1961 &Rule 2A of Income Tax rules, 1962)

Rent Free accommodation
(Rule 3(1) of Income Tax rules, 1962

Components of salary:

  • Basis Salary.
  • Dearness Allowance (Only the DA which forms part of the salary).
  • Percentage bases commission.


Extent of taxation:-

Exemption based:- HRA is taxable if received more than least of the following :

  • H.R.A received
  • 50% of salary
  • Rent Paid – 10% of salary

Examples:-

  • If the rent paid is zero,exemption will be zero and whole HRA received will become taxable.

Conclusion:-

Taxability under this is dependent upon the following factors:

  • H.R.A received
  • Rent Paid by the employee for hiring the accommodation out of HRA received.
  • Salary Computed for this purpose.
Components of salary:

  • Basis Salary.
  • Dearness Allowance (Only the DA which forms part of the salary).
  • All allowance to the extent taxable.
  • Leave salary received during employment.
  • Bonus (on receipt basis)
  • Commission (both Percentage based as well as fixed commission)

Extent of taxation:-

No separate exemption under this,

Least of the following is taxable

(In case accommodation is hired by the employer) :

  • Hire chargesOR
  • 15% of Salary

Conclusion:-

Taxability under this is dependent upon the following factors:

  • Hire charges paid for the accommodation by the employer.
  • Salary computed for this purpose.

Now, above factors may help a good tax planning tool for the employees and CTC planning for employer. In the following examples we shall explain this. Total outflow of the employer assumed to be Rs. 100/-

House Rental Allowances

Rent Free Accommodation

Basis salary = Rs. 50/-
HRA = Rs. 25/-
Other allowances = Rs 25/-Computation of Taxable HRA

HRA received = Rs. 25/-

Deduction will be least of the following:

  • 50% of salary i.e. Rs. 25/-
  • HRA received i.e. Rs.  25/-
  • Rent Paid – 10% of salary i.e.

Rs. 25 – Rs. 5 = Rs. 20/-

The taxable HRA comes out to be Rs. 5/-

Income under the head salary = Rs. 80/-

Basis salary  = Rs. 50/-
RFA(Hire charges paid) = Rs. 25/-
Other allowances = Rs. 25/-Computation of Taxable RFA

No tangible receipts to employee.

Least of the following will be taxable:

  • 15% of salary i.e. Rs. 11.25/-

OR

  • Hire charges i.e. Rs.  25/-

The taxable RFA comes out to be Rs. 11.25/-

Income under the head salary = Rs. 86.25/-

Analysis and fund planning:-

Total CTC of the employee (or outflow of employer) in both the cases will be Rs. 100/-

House Rental Allowances

Rent Free accommodation

Income taxable under the head salary :Rs. 80/-.

  • Extra income that can be avoided from being taxed: Rs. 6.25/-.
  • So it’s a tax advantageous.
Income taxable under the head salary : Rs. 86.25/-.

  • Extra income that is taxed: Rs. 6.25/-.
  • So the taxes disadvantage.


By: Sensys Technologies

For more tools on tax planning and CTC planning please refer to our blogs on http://www.sensystechnologies.com/blog

For any further information or query you can be reached to experts of our panel at contact@sensysindia.com

Sep 292014
 

Due dates for the Month of October 2014

05-10-2014
Service Tax
- Service Tax payments by Companies for September
– Service Tax payments by Other than Companies for July to September
06-10-2014
Central Excise
- Payment of Excise Duty for all Assessees (including SSI Units)
10-10-2014
Income Tax
- TDS Payment for September
10-10-2014
Central Excise
- Filing ER-1 Return (Other than SSI Units)
– Filing Quarterly ER-2 Return by 100% EOUs
– Filing Quarterly ER-3 Return by SSI units availing small scale exemptions.
– Filing Quarterly ER-8 Return by the units paying 2% duty.
– Filing monthly ER-6 Return by specified class of Assessees regarding principal inputs.
15-10-2014
Income Tax
- TDS / TCS Quarterly Statements (Other than Government Deductors) – July to September.
Providend Fund
- PF Payment for September
Cetral Excise
- Filing Quarterly Return (Ann. 13B) by the registered dealers.
20-10-2014
Cetral Excise
- Filing Quarterly Return (Annexure 75) by the units availing area-based exemptions.

MVAT

– TDS Payment for September
21-10-2014
ESIC
- ESIC Payment for September
MVAT *
– MVAT Monthly Return for September (TAX>1000000/-)

- MVAT Quarterl Return for July to September (TAX>100000/- and <=1000000)
– Monthly & Quarterly Payment till September
25-10-2014
Service Tax
- Service Tax Return for April to September for all Assessees
30-10-2014
Income Tax
- Issue of TDS Certificate(Form 16A) by non Government deductor for Quarter 2
31-10-2014
Profession Tax
- Payment of September
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Sep 242014
 

Holding Period of flat shall be calculated back from date of allotment and payment of first installment

This paper is written to high light the impact of recent High Court decision in Ms Madhu Kaul & CIT w.r.t. point of time when an assessee starts holding a real estate property.

The decision will beneficially impact those assessee who are entering into real estate transactions as it may lead to Long Term Capital Gain which previously claimed as short terms capital gain and thereby lower their income tax burden and availability of more avenues of tax exemption.

The whole case may be understood with the help of illustration:-

A flat was allotted to the assessee on 7-6-1986 vide letter conveyed on 30-6-1986. Assessee paid the first installment on 4-7-1986. The possession of flat was delivered on 30-11-1988. Thereafter assessee sold the flat on 5-7-1989.

The question here is, whether flat shall be deemed to hold wef 4-7-1986 treating it as long terms capital gain or from the date of actual possession and taxed normally as short term capital gain.

Rules of determination:

Section 2(14) defines capital asset.

Under Section 2(29A) long term capital asset is one which is not a short term capital asset.

Section 2(42A) short term capital asset at the relevant time meant, a capital asset held by an assessee for not more than thirty-six months immediately preceding the date of its transfer.

Conclusion: A capital asset which is held by the assessee for 36 months would be termed as a long term capital asset and any gain arising on account of sale thereof would constitute long term capital gain.

The analysis of case is as under:

Points of consideration Situation before HC decision Tax impact as per HC decision
Effect of allotment and payment of first installment, i.e. 04-07-1986 The mere allotment and or payment of the first installment without identification of the flat or delivery of possession has been rightly held not to confer any right.Further, allotment letter could be cancelled at any time.It does not confer any right in any specific unit but merely confers a right to be allotted a unit. Conferred a right upon the assessee to hold a flat.The allotment of flat may be cancelled only in exceptional circumstances and hence can safely be said to have right over property.
Payment of balance installments, identification of a particular flat and delivery of possession, i.e., 30-11-1988 It confers a right of assessee in specific unit and can be claimed as holder of property. These are consequential acts and relate back to and arise from the rights conferred by the allotment letter.

 Conclusion:-

Since the High Court decisions are mandatory for AO falling under their respective jurisdictions, hence all assessee of Panjab and Haryana can claim benefit of above decision. However, other assessee may take guidance from the above case and claim property to be hold back from date payment of first installment. Benefits of treating flat as long term capital gain are:

  1. Concessional rate of taxation
  2. Under few circumstances sale of house property will not be included in his total income
  3. Benefit of indexation – Here cost of acquisition and construction is enhance to some extent at par with inflation.
  4. Exemption benefit u/s 54. 54B etc.

By: Sensys Technologies

For any further information or query you can be reached to experts of our panel at contact@sensysindia.com

Sep 182014
 

GRATUITY – Taxation Issues

Income tax assumes gratuity as capital receipts and exempts gratuity receipts up to Rs 10,00,000. This means that you need not to pay tax, subject to some conditions,  for gratuity receipts up to Rs 10 Lakhs. Gratuity beyond this limit is paid by employee under ex-gratia head and always taxable.

Calculation of tax empmption:

Categorization of employees for exemption Under Section 10(10) Are:-

  • Government employee and employee of local authorities.
  • Employee covered under the Payment of Gratuity Act, 1972
  • Other employees not covered under the Payment of Gratuity Act, 1972. (Gratuity payments under this category is hardly seen and hence not discuss in this paper)

 Exempted amount should be Minimum of the Following:

i) Actual gratuity received
ii) 15 days Basic and DA for each completed year of service or part thereof in excess of six months considering 26 days in a month
iii) Rs 10 Lakhs

How Are Gratuity Accounted for Government Company and Non-Government Company?

Government Company Non- Government Company
TaxExemption

 

The Entire Amount You Get is Exempted (under Section 10(10)(i) 

 

 

Amount should be Minimum of the Following:i) Actual gratuity received
ii) 15 days Basic and DA for each completed year of service or part thereof in excess of six months.
iii) Rs 10 Lakhs

(Under Act 1972)


Issues :-

-> Whether TDS is to be deducted by employer on payment of Gratuity to Employees?

Only where the Gratuity amount exceeds the Exemption Amount as calculated under section10(10) of Income tax Act, TDS shall be deducted otherwise no.

-> Whether Insurance / earmarked investment is mandatory for Gratuity Fund?

Not Mandatory, The Act does not force you to make any provision or any gratuity fund. You are to make the payment of gratuity to the eligible employee as and when is due to be paid.

-> If we show the Gratuity as Part of salary How we Manage and do Accounting?

It cannot be stated as part of salary.

-> If an employee whose gratuity is withheld pending completion of the proceedings is he entitled to interest on gratuity ?

The employee is entitled to interest also from the date of Gratuity till the payment of gratuity. Case law:- Supreme Court ruled in Y.K. Singla v. Punjab National Bank.

Practical application:-

Mr. X receives following amount in previous year:

1)       Gratuity receive 3,00,000
2)       Year of service 30 years 7 months( excess of 6 month should be taken as full year)
3)       Average salary 20000

Calculation:

1)        3,00,000
2)       (31 * 20,000 * 15/26) = 357692.31
3)       10,00,000

Therefore3,00,000 shall be  exempted .

Case Study:- 

Employer has resigned after working for more than 5 years. Employer signed the full and final settlement letter stating he has no dues pending from company. Full and final settlement letter does not mention anything about gratuity, Now after 3 months employee has submitted a letter claiming for gratuity. Is Employer liable to pay gratuity to employee?

Employer is liable to pay gratuity to the employee even after full and final payment, mere by signing that he/she receive all payment does not effect his /her right to claim gratuity.

For any further information or query you can be reached to experts of our panel at contact@sensysindia.com

Sep 172014
 

GRATUITY – DEFINED BENEFIT RETIREMENT PLAN

Job-hopping can increase your pay, but good old loyalty also has its perks. Stay on with your employer for five years or more, and you are entitled to gratuity when you resign, retire or are retrenched. If your thinking for your retirement plan GRATUITY is also one of important tool.

 Gratuity means:-

  • For employee:- Gratuity is a reward for long and meritorious service.
  • For legal dept / labour laws / labour unions:-In 1972 the government passed the Payment of Gratuity Act that made it mandatory for All employers with more than 10 employees to pay gratuity.
  • For employer:- Gratuity shall be payable to an “employee” on the termination of his employment after he has rendered continuous service for five years or more.
  • For accountant:- A defined benefit plan to be accounted as per GAAP given in IAS 19.

Here we are discussing GRATUITY from employee and employer point of view.

Who Are The Establishment Covered Under Gratuity Act

  • Every factory, mine, oil field, plantation
  • port, railways, shop & Establishments  OR
  • educational institution

 Employing 10 or more persons on any day of the preceding 12 months.

 In short provisions of gratuity act applicable to all commercial establishment having 10 employees in any time in its life. Once Gratuity act applies to an establishment, it shall continue to apply irrespective of change in performance, size and no of employees.

 Pre – Conditions for claiming gratuity:-

  • Gratuity is payable only if you have been with the employer for five years or more.
  • But this rule is waived if an employee dies or is disabled, superannuation, retirement or resignation.
  • In such cases, gratuity is paid to the nominees or to the employee, even if the tenure is less than 5 years.

Caution:- Here employees are defined as those hired on the company’s payroll. Trainees and interns are not eligible for this compensation. However, training period of permanent employees are covered under the act.

Further, in case of contractual employment, primary liability for payment of gratuity is of contractor. However, in case contractual employer is not able to pay gratuity,liability rest on employer in whose premises employee in working.

 Payment of Gratuity:-

  • Gratuity is normally payable to the employee himself.
  • In the case of death of the employee it shall be paid to his nominee & nomination has been made to his heirs.
  • In case the nominee is a minor; share of the minor shall be deposited with the controlling authority who shall invest the same for benefit of the minor, until he/she attains majority.

Formula For Gratuity:-

i) Actual gratuity received
ii) 15 days Basic and DA for each completed year of service or part thereof in excess of six months taking 26 days in a month.
iii) Rs 10 Lakhs

 Consequences of non-payment:-

It is the duty of the employer to determine the amount of gratuity as soon as it becomes payable and to give notice of the same to the person to whom gratuity is payable and also to the Controlling Authority. The employer shall also provide to pay the amount of gratuity to the person to whom it is payable. Failure to do so shall render him liable to pay the interest at the prevailing rate from time taken. In case the employee is not paid the due amount of gratuity he should apply, ordinarily within thirty days, in Form-I to the employer. Is an employer fails to pay due gratuity even after the receipt of notice in Form-1, the claimant employee or his nominee or legal heir, may within ninety days of the occurrence of the case for the application, should apply in Form-IV, to the Controlling Authority for issuing direction to the employer. After conducting the enquiry as prescribed, the Controlling Authority will determine the amount payable and direct the employer to make the payment. If the employer fails to comply with the direction the Controlling Authority can direct the Collector to recover the amount due and pay to the applicant.

The Act provides that whoever makes false statement for the purpose of avoiding any payment shall be punishable with imprisonment for a term which may extend to six months or with fine which may extend to ten thousand rupees or with both. An employer who contravenes any provisions of the Act shall be liable for imprisonment for a term of not less than three months but which may extend to one year or with fine which shall not be less than ten thousand rupees but which may extend to twenty thousand rupees or with both. Where the offence relates to non-payment of gratuity the employer can be punished with imprisonment for a term which is not less than six months.

For any further information or query you can be reached to experts of our panel at contact@sensysindia.com

Sep 162014
 

HOUSE RENT ALLOWANCE – How to compute exemption

What is House Rent Allowance?

-  Employees generally receive a house rent allowance (HRA) from their employers.
– This is a part of the salary package, in accordance with the terms and conditions of employment.
– HRA is given to meet the cost of a rented house taken by the employee for his stay.
– Now a days HRA is given to all employees irrespective of actual rent factor. In most of the cases it is 40% to 50% of basic pay of or 28% (approx.) of CTC and so is the major tax planning factor.
– The exemption on HRA is covered under Section 10(13A) of the Income Tax Act and Rule 2A of the Income Tax Rules.

How is HRA accounted for in the case of a salaried individual and a self-employed professional?

Basis  Salaried individual Self-employed professional
Tax accounting Under Section 10 (13A) of Income Tax Act, 1961, in accordance with rule 2A of Income Tax Rules. Under section 80GG, which resembles section to 10(13A) but is subject to certain conditions.

What is the formula for calculating HRA exemption?

Minimum of the following three options:

  1. Actual house rent allowance received from your employer
  2. Actual house rent paid by you minus 10% of your basic salary
  3. 50% of your basic salary if you live in a metro or 40% of your basic salary if you live in a non-metro

This minimum of above is  allowed as income tax exemption on house rent allowance.

Salary here means basic salary which  includes dearness allowance if the terms of employment provide for it, and commission based on a fixed percentage of turnover achieved by the employee. All the components shall be taken on due basis. Caution: salary is taxable on due or receipt whichever is earlier (sec 15) but for calculating HRA exemption all components shall be taken only on due basis.  

Caution: The deduction will be available only for the period during which the rented house is occupied by the employee and not for any period after that.

Examples for calculation of exemption/deduction of HRA

X has received following amount during the previous year.

  1. Basic Salary – Rs. (5000*12) – Rs. 60,000/-
  2. Dearness Allowance (D.A) – Rs. (1000*12) – Rs. 12000/-
  3. House Rent Allowance (H.R.A.) – Rs. (2000*12) – Rs. 24000/-
  4. Actual Rent Paid – Rs.(2000*12) – Rs. 24000/-

Calculation

The minimum of the following amount shall be exempt

  • Actual HRA received (2000*12) – Rs. 24000/-
  • Rent Paid in excess of 10% of salary ( 24000-7200) – Rs. 16800
  • 40% of Salary – Rs. 28800/-

Therefore, Rs. 16800 shall be exempt and the balance Rs. 7200 shall be included in gross salary.

Sep 162014
 

HOUSE RENT ALLOWANCE – Departmental Control

What are the dependent factors in calculating HRA exemption for the salaried individual?

Keep four aspects in mind:-

  1. HRA received,
  2. The actual rent paid and
  3. Where you reside, i.e., if it is a metro or non-metro. * caution – place of residence is significant and not place of employment.
  4. The place of residence is significant in HRA calculation.

Imp:- The above factors shall be calculated on monthly basis.

What are the conditions for availing exemption of HRA?

– He must stays in a rented house.

– He is in receipt of HRA from his employer.

– Employee must actually pay rent for the house which he occupies.

Caution – The rented premises must not be owned by him. In case one stays in an own house, nothing is deductible and the entire amount of HRA received is subject to tax.

Can I pay rent to my parents or spouse to avail HRA benefits?

Relationship parents spouse Children Other relatives
As per tax rule No restriction No restriction No restriction No restriction
Tax impact on recipient To account for the same under ‘Income from other sources’. [Sec 56] To account for the same under ‘Income from other sources’. [Sec 56] To account for the same under ‘Income from other sources’. [Sec 56] To account for the same under ‘Income from other sources’. [Sec 56]
Practical view Practically possible In view of the relationship when you take up residence together, you are expected to do so and hence such a transaction does not bear merit under tax laws. Sham transactions can only spell trouble under scrutiny, so steer clear of these. Practically possible Practically possible

What are proof for HRA claim?

– Proof of rent paid through rent receipts, for which only two need to be submitted, one for the beginning of the year and one towards the end of the financial year.

– It should have a one rupee revenue stamp affixed with the signature of the person who has received the rent, along with other details such as the rented residence address, rent paid, name of the person who rents it etc.

– PAN No of house owner in case rent paid by employee is more than ₹ 100,000. [Circlular No. 08/2013 F.No. 275/192/2013-IT(B) dated 10.10.2013]

Can I simultaneously avail tax benefits on my home loan and HRA and also show rental income in my tax return?
No restriction in case you have proper justification for the same.

Special attention:-

Practical cases seen:-
There are cases where employees pay their rent in cash and landlord refuses to provide any rent receipts.

What employees do-
Employees prepare rent receipts themselves and do forge signatures. Also there might be cases where employees actually do not pay any rent but still prepares rent receipts.

Legal consequences:-
These all are covered under forgery cases and offences under giving false evidence and fabricating false evidence of IPC (Section 191 & 192).

What employer should do if such cases are identified in his company:-
Sack the employee.

Sep 152014
 

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:-

Factors

Description

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:-

Basis of difference Diversion of income Application of income, i.e., expenses – Application of income may be grouped under two broad heads:-

  1. For computing taxable income such expenses are allowed to be deducted – Allowable Expenses
  2. Other Expenses – Disallowed expenses
Tax Treatment In case income is diverted by over riding title such income shall be computed in the hands of person to whom it is diverted In case of application of income, income is taxable in the hands of person earning such income and only allowable expenses are allowed to be deducted from such income.

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:-

  1. Interest of your saving account, NSC etc
  2. Interest of your fixed deposits
  3. Dividends
  4. Notional income in case of more than one house property
  5. Interest payable on single house property that you possesses
  6. Gifts you received in the previous year
  7. Other
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:-

Source of Income Forms
Salary Interest House property Business & Profession Partnership Business Capital gains and other sources

Yes

Yes

One

ITR 1

Yes

Yes

Yes

Yes

ITR 2

Yes

Yes

Yes

Yes

Yes

ITR 3

Yes

Yes

Yes

Yes

Yes

ITR 4

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
  • Proof of income being earned
  • Required while applying for visa etc
  • The strong proof of measuring your financial strength
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.

 

Sep 152014
 

Impact on employees of Enhancement of wage ceiling from Rs. 6500/- to Rs. 15000/-

Vide notification dated 22.08.2014 Ministry of Labour and employment has enhanced the ceiling of wage from Rs. 6500/- to Rs. 15000/- for the computation of contribution to Provident fund for both employer and employee contribution.

Extract of the Notification

608(E)- In exercise of powers conferred by section 6A read with sub section (1) of section 7 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952), the central government hereby makes the following, further to amend the Employees’ Provident Funds Scheme, 1952, namely:-

  1. (1) This Scheme may be called the Employees’ Provident Funds (Amendment) Scheme, 2014.
    (2) It shall come into force on and from the 1st day of September, 2014.
  2. In the Employees’ Provident Funds Scheme, 1952,-

(a)    In paragraph 2, in clause (f), in sub-clause (ii), for the words “six thousand and five hundred rupees”, the words “fifteen     thousand rupees” shall be substituted;
(b)   In paragraph 26, in sub-paragraph (6), for the word “six thousand and five hundred rupees” the words “fifteen thousand rupees” shall be substituted;
(c)    In paragraph 26A, in sub-paragraph (2), in the proviso, for the words “six thousand and five hundred rupees” wherever they occur, the words “fifteen thousand rupees” shall be substituted.

[F No.- S-35012/1/2012-SSII]

609(E)- In exercise of powers conferred by section 6A read with sub section (1) of section 7 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952), the central government hereby makes the following, further to amend the Employees’ Pension Scheme, 1995, namely:-

  1. (1) This Scheme may be called the Employees’ Pension (Amendment) Scheme, 2014.
    (2)    It shall come into force on and from the 1st day of September, 2014.
  2. In the Employees’ Pension Scheme, 1995 (hereinafter referred to as the principal Scheme), in paragraph 3, in sub- paragraph 2, in the proviso, for the words “rupees six thousand and five hundred”, whenever occur, the words “fifteen thousand rupees” shall be substituted.
  3. In the principal scheme , in paragraph 6, in clause (a), after the words, figures and letter “or 27A of the Employees’ Provident Fund Scheme, 1952”, the words “and whose pay on such date is less than or equal to fifteen thousand rupees” shall be inserted.

Download Circular

Impact on Employees

On Take Home

As a result of the above notification every employee whose salary is less than Rs. 15000 is comes under the mandatory requirement of contribution to the Provident fund.

Earlier the limit was Rs. 6500/- PM and employee was required to pay Rs. 780/- as contribution through his employer, and employees whose salary was in excess of Rs. 6500/- was not required to contribute to the fund.  The same provision is continued in the above notification.

Through this notification, the department has widened the scope Provident Fund by enhancing the salary limit. As a result of the notification employees getting salary more than Rs. 6500/- and up to Rs. 15000/- also comes the umbrella of Provident fund. The above enhancement will reduce their take home ranging from Rs. 781/- to Rs. 1800/- depending upon the salary bracket in which falls.

However, this step will encourage saving and investment in the economy. Therefore, this will positively impact employee in terms of enhances capital receipt at the time of retirement.

Impact on Computation of Taxable Income

The above contribution will be eligible for deduction u/s 80C under the income tax Act 1961.

Impact on Employers Cost:

As a result of the above amendment in the provisions of Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, employer cost will increase from 780 to 1800 depending upon the slab of the employees.

Download Example in Excel Format

Sep 012014
 

Due dates for the Month of September 2014

05-09-2014
Service Tax
- Service Tax payments by Companies for August
06-09-2014
Central Excise
- Payment of Excise Duty for all Assessees (other than SSI Units)
07-09-2014
Income Tax
- TDS Payment for August
10-09-2014
Central Excise
- Filing ER-1 Return (Other than SSI Units)
– Filing Quarterly ER-2 Return by 100% EOUs
– Filing monthly ER-6 Return by specified class of Assessees regarding principal inputs.
15-09-2014
Income Tax
- Advance Income Tax – All Assesses
Providend Fund
- PF Payment for August
20-09-2014
MVAT
– TDS Payment for August
21-09-2014
ESIC
- ESIC Payment for August
MVAT *
– MVAT Monthly Return for August (TAX>1000000/-)

– Monthly Payment of August
30-09-2014
Income Tax
- Return of Income & Wealth for others covered under Audit & Companies but other than covered under Transfer Pricing Regulations

Profession Tax
- Payment of August
*If payment of MVAT made as per time prescribed, additional 10 days are given for uploading e-return
Sensys Technologies Pvt. Ltd.
HO: 524, Master Mind1, Royal Palms, Goregaon East, Mumbai – 400 065.
Tel.: 022-66278600 | Call: 09769468105 / 09867307971
Email: sales@sensysindia.com | Website: http://www.sensysindia.com
Branches: Delhi & NCR | Pune | Bangalore | Hyderabad | Ahmedabad | Chennai | Kolkatta
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