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advice me

Mar-29th-2010

Please clarify what rates should apply in following suitations

1) An employee opts for VRS & will relived from service by 31.03.2010. We will pay terminal benefits in the month of April 10. what is taxable year (F.Y) for  the employee. One of the professional friend told that income is taxable in year in which actual payment made i.e 2010-10 (F.Y). Is it so or taxable in the year 2009-10(F.Y)?

2) As u r aware that Gratuity is proposed to increased to Rs 10 lakhs during latest budget. On same grounds most of the employees opted deferred the payment. What is tax liability if approved by retrospective or prospective effect?

Please clarify the same.

cmasunil

Dis is CMA Sunil. Working for CPUS (MMTC) as Dy Manager (F&A). We are international export house.

Replies

  1. Editor Said,

    Dear Sir
    Under Section 15 of Income Tax Act Salary is chageable to tax "either on the the due basis or receipt basis " whichever is earlier. In your query you mentioned that employee will relived from service by 31.03.2010 if as per your service rule all retirement benefits are due on 31.03.2010 then it will be taxble in finacial year 2009-10 and deferment of payment does't matter.

    Therefore, the subject matter in your query is "due date" of retirement benefits as per your service rule. Secondly if you are paying in advance then it will be taxable in the financial year in which such advance is paid.

    I hope it will serve your porpose. You can ask for further clarification without hesitation.

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  2. Editor Said,

    Dear Sir
    As dicussed above Salary is chageable to tax “either on the the due basis or receipt basis ” whichever is earlier. In your case all retirement benefits will be taxable in the financial year 2010-11(Assessment Year 2011-12) because as stated by you that it will be due in April 2010.

    Your Query regarding rate of TDS I want to explain that in the case of Salary there is no specified rate of TDS, You have to prepare the Computation giving the benefits of all deduction u/s 80C, 80D etc. as applicable and after that whatever tax liability will come you have to deduct the same. You can download the tax calculator for salaried person from our resources link given above.

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