ON AUGUST 29, 2005
by
[FCA, FCMA, LLB, LCC(AA)]
SENIOR MANAGER
A.F. FERGUSON & CO.

AREAS TO BE COVERED
A Scope of Salary income
B Valuation of perquisites
C Employee share scheme
D Exemptions & concessions (including tax credit, etc)
E Provisions relating to staff retirement benefits
2

1 CHARGEABILITY S.12(1)
1.1
Definition of the “Receipt of income” S.69
1.2 Exception S.110
2 DEFINITION OF SALARY
2.1 General definition
2.2 Specific inclusion
2.3 Directorship
2.4 An issue in respect of Directors
S.12(2)
S.2(20) to (22)
3

3.
RECEIPT OF CAPITAL NATURE S. 12(2)
4.
TAX BORNE BY EMPLOYER IS TAXABLE S.12(3)
5.
NO DEDUCTION IS ALLOWABLE S.12(4)
6.
RECEIPTS FROM EMPLOYMENT INCLUDE
PAYMENTS RECEIVED FROM CERTAIN PERSON
OTHER THAN AN EMPLOYER
7.
SALARY RECEIVED IN ARREARS
S.12(5)
S.12(7)&(8)
8.
AVERAGE RATE OF TAX TO BE CHARGED ON
RECEIPTS ON ACCOUNT OF
(a) Termination of Employment S.12(6)&(8)
(b) Other payments on cessation of employment (an issue)
4

B VALUATION OF PERQUISITES & CERTAIN
EXEMPTIONS S.13 & SII PI
1. Service of a house keeper, driver, gardner or other domestic assistant S 13(5)
2 Utilities provided by employer S.13(6) & SII PI CI.38
3. Loan given by employer on or after July 1, 2002 S.13(7)
4. Use of Loan for taxable income S.13(8)
5. Waiver of obligation of employee to pay or repay amount owing to employer S.13(9)
6. Obligation of employee to repay amount owing by employee to another person, paid by employer
S.13(10)
5

B VALUATION OF PERQUISITES & CERTAIN
EXEMPTIONS S.13 & SII PI
7. Property transferred by employer to employee or services provided by employer to employee S.13(11)
8. Motor vehicle provided by employer S.13(3)
9. Accommodation or housing provided by employer S.13(12)
10. Medical SII PI CL39
11. Certain perquisites by virtue of employment S.13(13)
12. Perquisites not covered by the section 13 SII P I CL53A
6

1.
DETERMINATION OF LEVELS SALARY INCOME R.3 to 9
1.1 BASIC SALARY
1.2 SALARY
R.3(4)(b)
R.3(4)(c)
2.
BASIS OF VALUATION OF PERQUISITES, ALLOWANCES AND
BENEFITS
(a) House rent allowance in cash R.5
(b) Accommodation and housing provided by employer
(i) Rent free unfurnished accommodation R.5A(b)&9(4)(a)
(ii) Rent free furnished accommodation R.5B(b)&9(4)(b)
7

(c) Conveyance / Motor vehicle (Taxable Salary not exceeding Rs 600,000)
(i) Motor Vehicle partly for business and partly for personal R.6C
(ii) Motor Vehicle wholly for business R.6D
(d) Motor Vehicle provided by employer
(Taxable Salary exceeding Rs 600,000) R.9(5)
(e) Free or concessional passage for travel
(Taxable salary not exceeding Rs 600,000) R.7
(f) Minor perquisites
8

1. DEFINITION
2.
RIGHT OR OPTION TO ACQUIRE SHARES
3.
DISPOSAL OF THE RIGHT/OPTION
4.
CHARGEABLE TAX ON ISSUE OF THE SHARES
(a)
(b)
(c)
The benefit
Restriction on transfer
Amount chargeable to tax
S.14(6)
S.14(1)
S.14(5)
S.14(2)
S.14(3)(a)
S.14(3)(b)
5.
COST OF SHARES
6.
GAIN ON DISPOSAL OF SHARES ACQUIRED
UNDER THE SCHEME
S.12(4)
S.37
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1.
CHARITABLE DONATIONS
2.
INVESTMENT IN SHARES
3 CONTRIBUTION TO APPROVED PENSION
FUND (APF)
4 PROFIT ON DEBT
5 MISCELLANEOUS PROVISIONS RELATING
TO TAX CREDITS
S.61
S.62
S.63
S.64
S.65
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1.
FOREIGN SOURCE INCOME RETURNING
EXPATRIATES
2.
FOREIGN SOURCE INCOME OF RESIDENT
INDIVIDUAL
S.52(1)
S.52(2)
3.
FOREIGN-SOURCE SALARY OF RESIDENT
INDIVIDUAL S.102
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1.
PERSONS NOT REQUIRED TO FURNISH A
RETURN OF INCOME
(a) Employer’s Certificate in lieu of return
(b) Statements
2.
WEALTH STATEMENT
3.
DUE DATES FOR FURNISHING RETURN
AND OTHER DOCUMENTS
4.
WITHHOLDING TAX
S.115
S.116
S118
S.149
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5. TAX RATES
Where salary income exceeds 50% of total income [TY 2006]
(a) Taxable income does not exceed
Rs 100,000 NIL
(b) Taxable income exceeds from
Rs 100,000 to Rs 700,000 3.5% to 25%
(c) Above Rs 700,000 30%
S I
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II
I
1.
PENSIONS
2.
COMMUTATION OF PENSION
CL8
CL.12
3.
GRATUITY OR COMMUTATION OF PENSION
4.
APPROVED SUPERANNUATION FUND, ETC.
5.
ANNUITIES
6.
PROVIDENT FUND
CL.13
CL.25
CL.20 & 21
CL.22 & 23
14