Most firms with a workforce of 10 or more employees come under the Act. According to the Payment of Gratuity Act, 1972, gratuity is calculated as 4.81% of the basic pay. The gratuity amount is paid in gratitude for the services rendered by the individual during the period of employment.
This is only payable to those who have completed 5 or more years with the company. Gratuity is a lump sum benefit paid by employers to those employees who are retiring from the organization. The maximum amount that is payable in a year is Rs.
Different states have varying methods of calculating professional tax. Professional tax is a tax levied on the income earned by salaried employees and professionals, including chartered accountants, doctors and lawyers, etc.
It is tax exempt to the extent of actual expenditure incurred towards purchase of books and periodicals. Books and Periodicals Allowance –īooks and periodicals allowance is a type of allowance provided to employees for helping them meet the expenses associated with purchase of books, periodicals and newspapers. 40,000 has been introduced in lieu of transport (Rs 19,200) and medical (Rs 15,000) allowances. Note – In Union Budget 2018, a standard deduction of Rs. Medical allowance is a fixed allowance paid to the employees of an organization to meet their medical expenditure. Leave travel allowance only covers domestic travel and the mode of travel needs to be air, railway or public transport. The amount paid as leave travel allowance is exempt from tax under Section 10(5) of Income Tax Act, 1961. It is offered by employers to their employees to cover the latter’s travel expense when he or she is on leave from work. Leave travel allowance is eligible for tax exemption. 40,000 has been introduced instead of transport (Rs 19,200) and medical (Rs 15,000) allowances. Conveyance Allowance –Ĭonveyance allowance, also known as transport allowance, is a kind of allowance offered by employers to their employees to compensate for their travel expense to and from their residence and workplace. Similarly, self-employed individuals are not considered for HRA exemption under this section but can claim tax benefits under section 80GG of the Income Tax Act. They account HRA for salaried people for under section 10 (13A) of the Income Tax Act under rule 2A of Income Tax rules. HRA is applicable to both salaried as well as self-employed individuals. HRA forms an integral component of a person’s salary. HRA or House Rent Allowance is a salary component paid by employer to employees for meeting the accommodation expense of renting a place for residential purposes. DA component of the salary applies to both employees in India and Bangladesh. Allowances Dearness Allowanceĭearness Allowance is cost-of-living change allowance which the government pays to the employees of the public sector as well as pensioners of the same. As the name suggests, basic salary is the core of the salary of an employee. Base salary, therefore, does not include bonuses, benefits or any other compensation from employers.