Salary with car, computer, LTC and provident fund; total income and tax (as set, 1961 Act, AY 2017-18)

Assumptions

1. The terms of employment do not say that dearness allowance counts as salary for retirement benefits, so it is left out of salary for the provident fund (Fourth Schedule, Part A, rule 2(h)). The result if it counts is given at the end.
2. The question gives neither his residential status nor his age. He is taken to be a resident individual below 60, the likelier case for a manager with children of 7 and 3, though their ages do not prove his; the results at 60 to 79 and at 80 or more are given at the end.
3. Nothing is said of his own provident fund contribution, so the only deduction under section 80C is the PPF deposit. Section 80C(2)(v) allows it only to an account in the name of a person referred to in section 80C(4); clause (a) of that sub-section, which applies to clauses (i), (v), (x) and (xi) of section 80C(2), names, for an individual, the individual, his wife or husband, or any child of his. The deposit is taken to be to such an account; the result if it is not is given at the end.

Basic salary, dearness allowance and bonus

Recognised provident fund

The employer's contribution above 12% of salary is deemed received by the employee and is taxable (Fourth Schedule, Part A, rule 6(a); section 17(1)(vi)).

Perquisites and allowances

1. Professional tax paid by the employer (₹2,000): it discharges his own liability, so it is a perquisite under section 17(2)(iv). The whole ₹3,000 paid is then deductible under section 16(iii).
2. Laptop and computer: the rule that values the use of an employer's movable asset at 10% a year of its cost leaves out laptops and computers, so nothing is added for them and their cost (₹45,000 and ₹35,000) does not enter salary (Income-tax Rules, 1962, rule 3(7)(vii), as substituted by the Income-tax (13th Amendment) Rules, 2009).
3. Motor car (above 1.6 litres, self-driven, owned by the employer, used officially and privately, all expenses met by the employer): valued at ₹2,400 a month; the ₹45,000 of running costs is covered by that flat value. He is a specified employee (salary far above ₹50,000; section 17(2)(iii)(c)). For November 2016 to March 2017: ₹2,400 × 5 = ₹12,000 (Income-tax Rules, 1962, rule 3(2), Table II, Sl. No. (1)(c)(i), as substituted by the Income-tax (13th Amendment) Rules, 2009).
4. Leave travel concession: section 10(5) exempts travel assistance from the employer for the employee and his family on leave to a place in India, up to the expense actually incurred and subject to the prescribed conditions. The question does not say where the family travelled; the journey is taken to be to a place in India, since the question allows the exemption as far as the law permits (the result for a journey abroad is given at the end). Travel is by air, so the limit is the national carrier's air economy fare by the shortest route to the destination. The reimbursed fares (₹30,000 for the two adults and ₹45,000 for the three children) are economy fares; the answer takes them to be within that shortest-route fare, as the question allows the exemption "to the extent permissible in law" and gives no other fare (any excess would be taxable). Family includes the spouse and children (Explanation to section 10(5)). Rule 2B(4) denies the exemption for more than two surviving children of an individual after 1 October 1998, but its proviso excludes children born before that date and a multiple birth after one child, so the twins are covered with the daughter. Exempt ₹75,000; taxable nil. (Income-tax Rules, 1962, rule 2B(1)(i) and (4) with its proviso, as amended by CBDT Notification No. 10502 of 12 January 1998 (S.O. 34(E)).)

Computation of total income for assessment year 2017-18

Tax liability

Rates for a resident individual below 60, previous year 2016-17 (Finance Act, 2017, First Schedule, Part I, Paragraph A, item (I); Finance Act, 2017, section 2(11) and (12)):

If the facts are otherwise

• Dearness allowance counts as salary for the provident fund: 12% of ₹9,10,000 is ₹1,09,200, more than the ₹1,04,000 contributed, so nothing is taxable; total income ₹9,41,000 and tax liability ₹1,16,600 (same rates).
• He is 60 or more but under 80: the first ₹3,00,000 is free, so tax is ₹1,13,400 and tax liability ₹1,16,800 (Finance Act, 2017, First Schedule, Part I, Paragraph A, item (II)).
• He is 80 or more: item (III) of the same Paragraph makes the first ₹5,00,000 free, so tax is ₹93,400 and tax liability ₹96,200.
• The PPF account is not in the name of a person section 80C(4)(a) names: no deduction, so total income is ₹10,17,000 and tax liability ₹1,34,000 (same rates).
• The journey was to a place outside India: section 10(5) covers travel to a place in India only, so the ₹75,000 is taxable; total income ₹10,42,000 and tax liability ₹1,41,730 (same rates).