Friday, 29 August 2014

What is Profit in lieu of Salary

Profits in Lieu of Salary :

Receipts which are included under the head ‘Salary’ but Exempted u/s 10.
1.   Leave Travel Concession (LTC) - Exempt upto rules.
2.   Any Foreign Allowance or perks - If given by Govt. to its employees posted abroad are fully exempted.
3.   Gratuity :  A Govt. Employee or semi-Govt. employee where Govt. rules are applicable -- Fully Exempted.
      A.  For employees covered under Payment of Gratuity Act.--
           Exempt up to least of  following :
           (a)  Notified limit = Rs. 10,00,000
           (b)  15 days Average Salary for every one completed year of
service (period exceeding 6 months =1 year)
           1/2 month’s salary = (Average monthly salary or wages x 15/26
           (c)  Actual amount received.
B.  Other Employees -- Exempted up to least of following provided service is more than 5 years or employee has not left service of his own :
      (a)  Notified limit = Rs. 10,00,000
(b)  1/2 month’s average salary for every one year of completed service (months to be ignored.)
      (c)  Actual amount received
Average Salary = Salary for 10 months preceding the month of retirement divided by  10.
4. Commutation of Pension :
In case commuted value of pension is received --
(a) If Govt. employee -- is Fully Exempted.
(b) If other employee who receive gratuity also -Lump sum amount is exempted upto commuted value of 1/3rd of Pension.
If other employee who does not get gratuity -- Lump sum amount is exempted upto commuted value of 1/2 of pension.
5. Leave Encashment u/s 10(10AA)
    (a)  If received at the time of retirement by a Govt. employee---Fully Exempted
    (b) If received during service---Fully taxable for all employees
    (c) If received by a private sector employee at the time of retirement exempted upto :
    (i)  Notified limit Rs. 3,00,000
    (ii)  Average salary x 10 months
    (iii) Actual amount received.
    (iv) Average Salary x No. of months leave due.
6. Any Tax on perks paid by employer. It is fully Exempted.
7. Any payment received out of SPF . Any payment received out of SPF is Fully Exempted.
8. Any payment received out of RPF . Any payment received out of RPF is Fully Exempted, If service exceeds 5 years.
9. Any payment received out of an approved superannuation fund . is Fully Exempted

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