Pay disbursing authority (Accounts Branch of HOs or Budget section in case of RO/CO) is responsible for calculation of income tax due on the...
Pay disbursing authority (Accounts Branch of HOs or Budget section in case of RO/CO) is responsible for calculation of income tax due on the salary and giving Form 16 to the employees. Form 16 shows the taxable income and details of income tax deducted. These details are to be entered in the returns and submission of returns to the Income Tax Deparetment is the responsibility of employees. However, we should also know the method of calculation of income tax so that the clerical error if any is detected well intime and correct tax is assessed by Accounts Section.
If HBA is sanctioned, the accrued interest on HBA is exempted from income under section 24(b) of income tax act.
If the loan is obtained from the bank or other institutions the interest will be deducted alongwith principal and the bank authorities will give the certificate to that effect which can be given to the accounts branch for calculation of taxable income.
If loan is obtained from the Department i.e if HBA is obtained, the interest will be recovered only after repayment of principal amount is over. However, the accrued interest can be exempted from income u/s 24(b) of Income Tax Act.
Exemption for Interest portion of HBA is admissible up to maximum of Rs. 1,50,000/- if HBA has been sanctioned on or after 01/04/1999. Exemption is admissible up to maximum of Rs. 30,000/- if HBA has been sanctioned on or before 31/03/1999.
Repayment of Principal sum of H.B.A. is exempt u/s 88 of Income Tax Act. This can be shown along with GPF Contribution/L.I.C. Premium/P.L.I. Premium etc. of which maximum rebate admissible is Rs. 1,00,000/-.
Example for calculation of HBA Accrued interest
1st instalment Rs 2,50,000 paid on 2.4.2008 2nd instalment of Rs 2,50,000 paid on 5.9.2008 Recovery of instalment @ Rs 2000 commenced from the month of October 2009
(Cumulative Total for the period 01/03/09 to 28/02/10 = Total of IBB of 03/2009 Rs. 5,00,000/- to IBB of 02/2010 Rs. 4,90,000/-)
Calculation of Notional Interest :
Cumulative I.B.B. from 01/03/09 to 28/02/2010 Rs. 59,70,000/-
59,70,000 x 11.5
---------------------- = Rs. 57,212.50/- Interest .
1200
Therefore in above case the accrued interest is Rs. 57,213/-
The recovery of Rs. 10,000/- can be shown as exemption u/s 88 whereas Accrued Interest on HBA Rs. 57,213/ can be shown as exempt u/s 24(b).
If HBA is sanctioned, the accrued interest on HBA is exempted from income under section 24(b) of income tax act.
If the loan is obtained from the bank or other institutions the interest will be deducted alongwith principal and the bank authorities will give the certificate to that effect which can be given to the accounts branch for calculation of taxable income.
If loan is obtained from the Department i.e if HBA is obtained, the interest will be recovered only after repayment of principal amount is over. However, the accrued interest can be exempted from income u/s 24(b) of Income Tax Act.
Exemption for Interest portion of HBA is admissible up to maximum of Rs. 1,50,000/- if HBA has been sanctioned on or after 01/04/1999. Exemption is admissible up to maximum of Rs. 30,000/- if HBA has been sanctioned on or before 31/03/1999.
Repayment of Principal sum of H.B.A. is exempt u/s 88 of Income Tax Act. This can be shown along with GPF Contribution/L.I.C. Premium/P.L.I. Premium etc. of which maximum rebate admissible is Rs. 1,00,000/-.
Example for calculation of HBA Accrued interest
1st instalment Rs 2,50,000 paid on 2.4.2008 2nd instalment of Rs 2,50,000 paid on 5.9.2008 Recovery of instalment @ Rs 2000 commenced from the month of October 2009
| Month and Year | Amount Paid(Rs.) | Amount Recovered (Rs.) | IBB (Rs.) | Cumulative Amount (Rs.) |
|---|---|---|---|---|
| 04/2008 | 2,50,000 | 2,50,000 | ||
| 05/2008 | 2,50,000 | |||
| 06/2008 | 2,50,000 | |||
| 07/2008 | 2,50,000 | |||
| 08/2008 | 2,50,000 | |||
| 09/2008 | 2,50,000 | 5,00,000 | ||
| 09/2008 | 5,00,000 | |||
| 10/2008 | 5,00,000 | |||
| 11/2008 | 5,00,000 | |||
| 12/2008 | 5,00,000 | |||
| 01/2009 | 5,00,000 | |||
| 02/2009 | 5,00,000 | 47,50,000 | ||
| 03/2009 | 5,00,000 | |||
| 04/2009 | 5,00,000 | |||
| 05/2009 | 5,00,000 | |||
| 06/2009 | 5,00,000 | |||
| 07/2009 | 5,00,000 | |||
| 08/2009 | 5,00,000 | |||
| 09/2009 | 5,00,000 | |||
| 10/2009 | 2000 | 4,98,000 | ||
| 11/2009 | 2000 | 4,96,000 | ||
| 12/2009 | 2000 | 4,94,000 | ||
| 01/2010 | 2000 | 4,92,000 | ||
| 02/2010 | 2000 | 4,90,000 | 59,70,000 |
(Cumulative Total for the period 01/03/09 to 28/02/10 = Total of IBB of 03/2009 Rs. 5,00,000/- to IBB of 02/2010 Rs. 4,90,000/-)
Calculation of Notional Interest :
Cumulative I.B.B. from 01/03/09 to 28/02/2010 Rs. 59,70,000/-
59,70,000 x 11.5
---------------------- = Rs. 57,212.50/- Interest .
1200
Therefore in above case the accrued interest is Rs. 57,213/-
The recovery of Rs. 10,000/- can be shown as exemption u/s 88 whereas Accrued Interest on HBA Rs. 57,213/ can be shown as exempt u/s 24(b).
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