10 December 2018

Gratuity meaning, applicability, calculation

Payroll & Statutory Compliance ,
Gratuity meaning, applicability, calculation

Meaning

The word 'Gratuity' was derived from Latin word 'Gratuitous', Which means free gift. Once under British rule, employers used to offer such gift on retirement or resignation of an employee after giving a long and meritorious service. In later stage, the concept becomes the Gratuity act 1972.
Now a day gratuity is benefit provided to employee for working more than 5 years and did not participate any activity, which caused employment injury or any offence involving moral turpitude in the course of employment.

Applicability

1. Gratuity act 1972 is applicable in all factories having:
  • 10 or more worker strength during any day in the preceding year, if the manufacturing process is running with aid of power.
  • 20 or more worker strength during any day in the preceding year, if the manufacturing process is running without aid of power.
2. Gratuity act 1972 is applicable in shops or other establishment having:
  • 10 or more employee strength during any day in the preceding year.
3. Gratuity act 1972 is applicable in the following cases irrespective to the employee/worker strength.
  • Mine
  • Oilfield
  • Railway company
  • Major Port
  • Plantation of Tobacco, Coffee or Sugar

Calculation

To calculate gratuity in India, always remember the following formula:

Part-1                                  Part-2                                 Part-3
  • Part-1: Here Salary Includes Basic & DA.
  • Part-2: This part represent 15 working days out of 26 in a month.
  • Part-3: Here the number of years should be rounded up only if the decimal value is 6 months or more.
Although employer may give a higher amount of gratuity if he/she wish to do so, but the tax free gratuity will be, least of the followings:
  1. Calculated value as per the formula stated above
  2. Maximum threshold limit (ie: Rs. 20 Lakh Currently)
  3. Actual Gratuity Amount Received.
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09 December 2018

TDS on Salary

Payroll & Statutory Compliance , Taxation
TDS on Salary

Applicability

TDS should be deducted form employees' salary by the employer, if the employee fallen under any tax bracket irrespective they are government or non-government employees'. It is the liability of employer that he/she should deduct the amount of TDS from employees' salary and pay the same to the government. The employer is also authorized to do to.

Employer's Primary Formalities

First of all, the employer should apply for TAN(Tax Deduction/Collection Account Number). No employers are authorized to deduct TDS, without obtaining a valid TAN. [Click here to Apply for TAN]. Once employer obtain the TAN, he is liable to deduct TDS from employees' salary, basis of their estimated total annual income. After deducting TDS, employer should issue from 16 to the employee. Employer should pay the deducted tax through challan (ITNS 281) to the appropriate government and he is also liable to file quarterly return in Form 24Q.

Computation

The employer should estimate the taxable income of the employee, and calculate the annual income tax on that income, on the basis of current year tax slab. After that the total annual tax should be divided by the number of working month(s).

Lets say Mr. X is an employee, who earn income from salary only, and his monthly salary is Rs. 20,000. That means his annual salary is Rs. 2,40,000 [20,000 * 12] right? Now in the current assessment year (ie: 2018-19), Income upto 2,50,000 , is exempted. Hence, no TDS will be deducted from Mr. X.

In another example, lets assume Mr. Y is another employee, and his monthly salary is  Rs. 50,000.
That means his annual salary is Rs. 6,00,000 [50,000 * 12] right? So, lets find out his income tax below:
  • For the 1st 2.5 Lakh , Tax will be 0
  • For the amount more than 2.5 Lakh but under 5 lakh, Tax will be 12,500 [2.5 Lakh * 5%]
  • For the amount more than 5 Lakh but under 10 Lakh), Tax will be 20,000 [1 Lakh * 20%]
Hence, the total estimated annual income tax of Mr. Y is, Rs. 32,500 [0 + 12,500 + 20,000]
Now the amount of monthly TDS will be Rs. 2708 [32,500/12]

From the Employees' Point of View:

If TDS is deducted from salary, then always ask Form 16 from your employer. Because Form 16 is the certificate of TDS deduction. Don't worry, when you will file the income tax return, the Income tax department will consider every penny of the TDS, you paid already. If the assessment shows that you do not have any tax liability , then you can claim refund in full of the TDS amount, or you can adjust with your tax liability.

If the employee has invested anything under Chapter VI-A, and he will be entitled to avail the benefit of deduction from his income. Then he can declare such investments in Form 12BB, so the employer can consider those benefits , while estimating your taxable income, and deduct lower TDS from the salary.
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25 November 2018

What is advanced tax and interest u/s 234A, 234B, 234C, 234D

Taxation ,
What is advanced tax and interest u/s 234A, 234B, 234C, 234D

Introduction

As the name suggest, advanced tax is paying tax in advance. We know that in the case of self-assessment tax, assessee need to pay tax after the end of financial year (ie: assessment year). In the case of advanced tax, the assessee have to estimate his/her annual income tax liability for the financial year and he/she have to pay the tax in a predefined instalment on the same financial year. Unlike self assessment tax you cannot pay advance tax after the financial year. In case you failed to pay or pay less advance tax, interest will be imposed on you (see below for interest details). If you pay more advanced tax then you can claim refund for the excess amount you paid, by filing income tax return. So, paying more advanced tax is good idea than paying less. Remember,  Advance tax is mandatory for assessee, whose income tax liability is exceeds Rs. 10,000.

Instalment of the advanced tax for the assessment year 2018-19:


Period Amount need to be cleared On or before
First-quarter Up to 15% of total tax 15th June
Second-quarter Up to 45% of total tax 15th September
Third-quarter Up to 75% of total tax 15th December
Fourth-quarter Up to 100% of total tax 15th March

Interest U/S 234A

When you failed to file income tax return within the due date, a simple interest @1%/month will be imposed on you under section 234A. Suppose you have an outstanding income tax liability and the last date for filing the income tax return in  is 31st July, 2018. Now let me assume that you paid the tax and filed the return on 1st August 2018. In that case you will be liable to pay interest u/s 234A on the outstanding tax liability.

Interest U/S 234B

If your income tax liability exceeds Rs. 10,000 and you are liable to pay advance tax, but you do not pay or pay but less then 90% of advance tax, in both situation a simple interest @1%/month will be imposed on you under section 234B.

Interest U/S 234C

Even if you paid 100% of the advance tax till the end of the financial year, you should not underestimate the instalment instructed by the income tax department. If you pay advance tax less than 12% on or before 15th June, or less than 36% on or before 15th September, or less than 75% on or before 15th December, or less than 100% on or before 15th March, a simple interest @1%/month will be imposed for all the cases, till the date of actual payment of the short fall.

Interest U/S 234D

As I said before, you can claim refund in case you has paid excess amount of advance tax by filing income tax return. Now let me assume you claimed refund but wrongly claimed more than what you were actually eligible for, in that case a simple interest @0.5%/month will be imposed on you.
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11 October 2018

Basic Tax System in India

Taxation ,
Basic Tax System in India


Taxes are the levies imposed on persons by Government to rise fund for various Government activity. In India Some taxes like Income tax, Custom Duty, are imposed by Central Government; Some taxes like Professional Tax, Entertainment tax, are imposed by State Government and others by local authorities. All these taxes can be segregated between two categories, ie: Direct Tax & Indirect Tax.

Direct tax: Tax burden can not be shifted to other person. Example: Income Tax, Corporate Tax etc.

Indirect Tax: Tax burden can be shifted to other person. Example: GST, Custom Duty etc.

Surcharge:

In addition to Direct & Indirect Taxes , Surcharge can be also applicable in some cases as tax on tax. Which means the rate of surcharge should be calculated on the tax amount instead of Taxable value.

Cess:

In applicability Cess is similar like Surcharge, but in purpose they both are very different. Where Surcharge are collected by Government to rise revenue for any Government expenditure, Cess are collected to met some specific purpose , like Educational cess for Educational expenditure only; Secondary & Higher Educational cess for Secondary & Higher expenditure only; Krishi Kalyan cess for Agricultural purpose only and so on.

In below hierarchy some of the main taxes (Not all taxes) are categorised. 

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08 October 2018

Composite supply under GST (Live demo in Tally ERP9)

Tally.ERP 9 , Taxation
Composite supply under GST (Live demo in Tally ERP9)

Composite supply is an additional product or service billed along with principle product or service.
For example of you purchase a computer and also purchase maintenance service their with, then the combined supply is called composite supply. In this case the computer is a principle product and the maintenance charge is composite service.
In GST regime the whole supply (principle + composite) is taxed at the rate applicable on the principle item, irrespective to the rate of GST applicable on the composite item. Watch the video above to learn about the account treatment of composite supply in tally.
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24 September 2018

How to pass manufacturing entry in Tally ERP9

Tally.ERP 9 ,
How to pass manufacturing entry in Tally ERP9
If you are belongs to any manufacturing entity, you should learn accounting treatments for a manufacturing process. In Tally ERP9 you can easily create a manufacturing voucher mode to keep these records. Here is the step by step instruction (with pictures) stated below:
Root to the stock item (Step 1)

STEP 1: To create the finish goods, Go from Gateway of Tally ➥ Inventory info. ➥  Stock Item ➥ Create
Stock item creation (Step 2)



STEP 2: Here you can type the name of your prospective product / finish goods.
Configuration (Step 3)
STEP 3: Press F12 ➥ Set "Yes" for "Enable component list details (Bill of Materials)" and save
Enable BOM (Step 4)

 STEP 4:  Set "Yes" for "Set Components (BOM)" and press enter.
Give a name of BOM (Step 5)

STEP 5: Enter a suitable name of the Component List, and Press enter.
Components list (Step 6)
STEP 6: In the "Unit of manufacture" field Put the number of quantities are manufactured with all those components you are going to list. ➥ Now Set the components list required along with their quantities to produce the final Item. ➥ Save all screens and back to the Gateway of Tally.
Root to the voucher type (Step 7)
STEP 7: From Gateway of Tally ➥ Accounts info. ➥ Voucher Types ➥ Create
Manufacturing Voucher Creation (Step 8)
STEP 8: Type the name "Manufacturing Entry" (or you can give another name) ➥ Setect the "type of voucher" as "Stock journal" ➥ Set "Yes" for "Use as a Manufacturing Journal" ➥ and save.
Visit the Manufacturing Voucher (Step 9)

STEP 9: Now ensure you already have all the raw materials available, otherwise purchase those. Once you have all components to manufacture the final product , From Gateway of Tally ➥ Accounting vouchers (or press "V") ➥ Press "ALT + F7" ➥ Select "Manufacturing entry" (or whatever name you given) and press enter.

Pass Manufacturing Entry (Step 10) 
STEP 10: Select the product you want to manufacture in the " Name of Product" field ➥ Enter how much unit you want to produce in the "Qty" field ➥ All components should automatically entered, As you already prepared BOM for the finish goods, so now just press enter to skip all those. ➥ If you also produces any Co product/ By Product/ Scrap along with the main item, then Select / Create the Item in the "Name of item" field (situated in right side). ➥ Enter the number of produced Co product/ By Product/ Scrap in the "Quantity" field (situated in right side) ➥ If any Additional cost incurs during the manufacturing process record it by selecting or creating the ledger in the "Type of Additional Cost" field (ledger should be under "Direct Expenses") & press enter ➥ Put the percentage of the additional cost AND YOU ARE DONE! ➥ Now you can save the Manufacturing Voucher.

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12 September 2018

P TAX RATE CHART FOR DIFFERENT STATES

Taxation ,
P TAX RATE CHART FOR DIFFERENT STATES

Professional tax is a state level tax, hence every states has their own rates of P.Tax. However no state can recover more than Rs. 2500 per annum as P.Tax from any type of person.

Rate Chart of Professional Tax for Different States are given below:

Andhra Pradesh and Telangana
Salary (per month)
P.TAX (Amount in Rs.)
Upto Rs.15000
Nil
Rs.15001 to  Rs.20000
150
Rs.20000 and above
200

Assam
Salary (per month)
P.TAX (Amount in Rs.)
Upto Rs. 10,000
Nil
Rs. 10,001 to Rs. 15,000
150
Rs. 15001 to Rs. 24,999
180
Rs. 25,000 and above
208

Bihar
Salary (per month)
P.TAX (Amount in Rs.)
Upto Rs. 25,000
Nil
Rs. 25,001 to Rs. 41,666
83.33
Rs. 41,667 to Rs. 83,333
166.67
Rs. 83,334 and above
208.33

Goa
Salary (per month)
P.TAX (Amount in Rs.)
Upto Rs.15,000
Nil
Rs.15,001 to Rs.25,000
150
Rs.25001 and above
200

Gujarat
Salary (per month)
P.TAX (Amount in Rs.)
Less than Rs.5999
Nil
Rs.6000 to Rs.8999
80
Rs.9000 to Rs.11999
150
Rs.12000 & above
200

Jharkhand
Salary (per month)
P.TAX (Amount in Rs.)
Upto Rs.25,000
Nil
Rs.25,000 to Rs.41,666
100
Rs.41,667 to Rs. 66,666
150
Rs.66,666 to Rs. 83,333
175
Rs. 83,333 and above
208

Karnataka
Salary (per month)
P.TAX (Amount in Rs.)
Less than Rs.15000
Nil
Rs.15000 and above
200

Kerala
Salary (per half year)
P.TAX (Amount in Rs.)
Up to Rs.11999
Nil
Rs.12000 to Rs. 17999
120
Rs.18000 to 29999
180
Rs.30000 and Rs. 44999
300
Rs.45000 to Rs.59,999
450
Rs.60,000 to Rs. 74,999
600
Rs.75000 to Rs.99999
750
Rs.100000 to Rs. 124999
1000
Rs. 125000 and above
1250

Madhya Pradesh
Salary (per month)
P.TAX (Amount in Rs.)
Less than Rs. 18750
Nil
Rs.18750 to Rs.25000
125
Rs.25000 to Rs. 33333
167
Rs. 33333 & above
208 & 212

Maharashtra
Salary (per month)
P.TAX (Amount in Rs.)
Less than Rs.7500
Nil
Rs.7501 to Rs.10000
175 for Men & Nil for Women
Rs.10001 and above
300 for February
200 for rest of the months

Manipur
Salary (per month)
P.TAX (Amount in Rs.)
Up to Rs. 4250
Nil
Rs. 4251 to Rs.6250
100
Rs.6251 to Rs.8333
167
Rs.8334 to Rs. 10416
200
Rs.10417 & above
208 & 212

Meghalaya
Salary (per month)
P.TAX (Amount in Rs.)
Up to Rs.4166
Nil
Rs.4167 to Rs.6250
16.50
Rs.6251 to Rs.8333
25
Rs.8333 to Rs.12500
41.50
Rs.12501 to Rs. 16666
62.50
Rs.16667 to Rs. 20833
83.33
Rs.20834 to Rs. 25000
104.16
Rs.25001 to Rs. 29166
125
Rs.29,167 to Rs. 33,333
150
Rs.33334 to Rs. 37500
175
Rs.37501 to Rs. 41666
200
Above 41667
208

Odisha
Salary (per month)
P.TAX (Amount in Rs.)
Up to Rs.13304
Nil
Rs.13305 to Rs.25000
125
Rs.25001 and above
300 for February
200 for rest of the months

Punjab
Salary (per annum)
P.TAX (Amount in Rs.)
more than 2.5 Lakhs
200

Puducherry
Salary (per month)
P.TAX (Amount in Rs.)
Up to Rs.3500
Nil
Rs.3501 to Rs. 5000
16.66
Rs.5001 to Rs.9000
40
Rs.9001 to Rs.10000
150
Rs.10001 to Rs. 12,500
126.67
12501 and above
182.50

Sikkim
Salary (per month)
P.TAX (Amount in Rs.)
Up to Rs.20000
Nil
Rs.20001 to Rs.30000
125
Rs.30001 to Rs.40000
150
Rs.40000 & above
200

Tamil Nadu
Salary (per half year)
P.TAX (Amount in Rs.)
Upto Rs. 21000
Nil
Rs 21001 to Rs.30000
135
Rs.30001 to Rs.45000
315
Rs.45001 to Rs.60000
690
Rs.60001 to Rs. 75000
1025
Rs. 75001 and above
1250

Tripura
Salary (per month)
P.TAX (Amount in Rs.)
Up to Rs.5000
Nil
Rs.5001 to Rs.7000
70
Rs.7001 to Rs.9000
120
Rs.9001 to Rs.12000
140
Rs.12001 to 15000
190
Rs. 15001 and above
208

West Bengal

Salary (per month)
P.TAX (Amount in Rs.)
Up to Rs.10000
Nil
Rs.10001 to Rs.15000
110
Rs.15001 to Rs.25000
130
Rs.25001 to Rs.40000
150
Rs.40000 & above
200

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