Tax Book 2023

Income From Salary Chapter- 07

Solution:

Hira (resident)

Computation of the income and tax liability thereon

For the tax year 202 3 Rs.

Basic Salary 1,800,000

Dearness allowance 10% of basic salary 180,000

Bonus 50,000

Conveyance allowance 50,000

Leave fare assistance 60,000

Interest fee loan 3,000,000 x 10% 300,000

Accommodation for house:

Higher of 45% of basic salary or fair market value

45% of basic salary 810,000 or Rs.850,000 850,000

Car 12,000,000 x 5% 600,000

Taxable Income 3,890,000

Tax Liability under normal case:

[405,000 + 25 % x (3,890,000 – 3 , 600 ,000)] 477 , 500

Note: There will be no treatment of salary of official driver @ Rs. 8,000 per month paid by the

Company as it was for the discharge of official performance.

(2) Treatment of House rent allowance:

Any amount provided as house rent allowance (other than accommodation provided by the

employer) in cash, the total amount shall be taxable and shall be included in the salary income

of the employee.

Example: Following are the details of income of Mr. Afzal for the financial year ended June 30,

2023 , who is employed with a company as Senior Manager.

Salary income

Pay Rs. 60,000 per month

House rent allowance Rs. 27,000 per month

Utilities Rs. 8,000 per month

He was provided conveyance allowance of Rs. 50,000 for a year. No car is provided by the

employer. Compute the taxable income and tax liability of Mr. Afzal for the Tax year 202 3.

Solution:

Salary 60,000 x 12 720,00 0

House Rent allowance 27,000 x 12 324,000

Utilities 8,000 x 12 96,000

Conveyance 50,000 50,000

Taxable Income 1,190,000

Tax Liability under normal rates:

Tax on Rs. 1,190,000 [2.5% x (1,190,000 - 6 00,000)] 14 , 750

7.7 Treatment of any other perquisite 13(13)]

Where any other perquisite not covered in section 12 is provided by an employer to an employee, the

value of such perquisite at fair value (excluding employee cost to acquire such benefit) shall be

included in the salary income of the employee.

7.8 Loan from employer to employee on or after 01- 07 - 2002 [u/s 13(7)]

Where a loan is made, by an employer to an employee either interest free or at concessional rate, the

amount to be included in the salary shall be computed according to the table given below: