What is Profit in lieu of Salary

Posted by Unknown on 12:42 in Income from Salaries | Comments : 0

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