02-05-2010, 04:17 AM
Dear,
In each month of a specific tax year, Yearly income should be reassessed as to include the effect of adjustments or by considering any change in earnings / benefits / perquisites and accordingly new yearly income should be determined, which should include income earned in prior months of a tax year and expected income in the following months of a tax year.
Let us have an illustration in this regard, suppose If an employee earns Rs. 20,000 a month for 6 months and accordingly tax is deducted at the rate of 0.5% on yearly income of 240,000 (20,000*12),(in this case monthly tax will be Rs. 100, i.e. 240,000*0.5% =1,200/12 =100 and accumulated tax for first 6 months would be 600 i.e. 100*6) in the seventh month, monthly salary increases to Rs. 25,000 per month, then in the seventh month, Yearly income will be reassessed as,
Rs. 120,000 for first 6 months (20,000*6) + 150,000 for subsequent 6 months (25,000*6) = 270,000.
On Taxable income of Rs. 270,000, rate will be 0.75% and yearly tax will be 2,025 (270,000*0.75%), now from the seventh month, monthly tax will be 237.5 i.e. {(2,025-600)/6}.
Summarily, Tax will be deducted in the remaining months of a tax year as to reconcile "yearly tax on taxable income" with "yearly tax deducted on taxable income".
I hope you have been replied for your query, let me know in case of any ambiguity.
Best Regards,
Faisal
In each month of a specific tax year, Yearly income should be reassessed as to include the effect of adjustments or by considering any change in earnings / benefits / perquisites and accordingly new yearly income should be determined, which should include income earned in prior months of a tax year and expected income in the following months of a tax year.
Let us have an illustration in this regard, suppose If an employee earns Rs. 20,000 a month for 6 months and accordingly tax is deducted at the rate of 0.5% on yearly income of 240,000 (20,000*12),(in this case monthly tax will be Rs. 100, i.e. 240,000*0.5% =1,200/12 =100 and accumulated tax for first 6 months would be 600 i.e. 100*6) in the seventh month, monthly salary increases to Rs. 25,000 per month, then in the seventh month, Yearly income will be reassessed as,
Rs. 120,000 for first 6 months (20,000*6) + 150,000 for subsequent 6 months (25,000*6) = 270,000.
On Taxable income of Rs. 270,000, rate will be 0.75% and yearly tax will be 2,025 (270,000*0.75%), now from the seventh month, monthly tax will be 237.5 i.e. {(2,025-600)/6}.
Summarily, Tax will be deducted in the remaining months of a tax year as to reconcile "yearly tax on taxable income" with "yearly tax deducted on taxable income".
I hope you have been replied for your query, let me know in case of any ambiguity.
Best Regards,
Faisal
