Income tax saving technique

[Ikhan]

AoA all,
I have question regarding Income tax saving, before asking that i would like to brief you what sort of medical benefit we are offering to our employees.

We have a contract with insurance company for coverage of all employees' hospitalization & they charge us annually Rs 5000-7000 per employee.

Plus we also offer our employee a reimbursement facility upto Rs 9000-15000/-(annually) for OPT coverage, mean the maximum medical benefit given to employee is around Rs 22000 (7000+15000).

As per clause 139(b) - All employees not entitled to free medical treatment or hospitalization or re-imbursement of medical or hospitalization charges under the terms of employment are entitled for medical exemption up 10% of their basic salary that decreases their taxable income for lower slab selection.

My question is, if the total of medical benefit given to an employee is less than the medical exemption(10% of basic), can we do below mentioned calculation for taxable income.

Employee Salary = 50,000
Basic Salary = 45,454
Medical allow= 4545
<b>Annual Medical exemption = (4545 x 12) - 22000( already given) = 32540
Taxable income = (50,000 x 12) - 32540 = 56,7460</b>

Please let me know is it correct or not.


Thanks in advance


-Imran

[Ikhan]

AoA
Can anyone answer this..??


-imran

[LapTop]

IKhan Bhai,

Insurance agar fully job k hawaly say hay, yani k agar kaam k doran koi hadsy ki surat may hay, to ye ap employee ki taxable income may add nahi karyn gay,,,,,
Agar ye saholat kaam k ilawa bhi hadsy ki surat may ho to phir aap ki company jo amount employee ki insurance k liye adda kary gi or amount employee ki taxable income may add ho ga,

Jo amount reimbursement ho ga employee ko medical treatment ka wo exempt hota hay.
Par aap reimburse amount ko medical allowance treat nahi kar sakty.

[faisal_desperado]

Dears,

Based on the query, Ikhan's calculation is slenderly wrong due to lack of clarification and Laptop's assumption/suggestion is wrong as well.

First of all, your query requires some clarifications, i.e. whether do you pay your employees Rs. 9,000 - 15,000 at the end of the tax year if the same has not been availed by them?, since you said that you offer reimbursement facility, however you forgot to inform whether the same is paid if not reimbursed due to no such necessity.

Apart from the aforesaid, if it is assumed that you pay your employee or adjust Rs. 22,000 in full at the end of the tax year, then calculation should be semblance to the following;

Total medical allowance Rs. 54,545, which is within the permissible range of 10%, now deduct the said amount from Rs. 600,000 if Rs. 22,000 have been added in the taxable income of an employee, and resultant Figure of Rs. 567,455 will be taxable income.

However, if you have not added Rs. 22,000 into the taxable income of the employee then difference should be deducted (i.e. Rs. 32,545) from the employee salary to arrive at the taxable income.

Please note that the answer is same as Ikhan ascertained, however this answer is based on the assumption shown above.

Let it be know, if confusion still exists.

Best Regards,

Faisal.

[LapTop]

<b>13. Value of perquisites.-</b>
(13) Where, in a tax year, an employer has provided an employee with a perquisite which is not covered by sub-sections (3) through (12), the amount chargeable to tax to the employee under the head “Salary” for that year shall include the fair market value of the perquisite, 3[except where the rules, if any, provide otherwise,] determined at the time it is provided, as reduced by any payment made by the employee for the perquisite.

Insurance k liye Sub-Section 13 of Section 13,

<b>THE SECOND SCHEDULE (139) (a) </b> The benefit represented by free provision to the employee of medical treatment or hospitalization or both by an employer or the reimbursement received by the employee of the medical charges or hospital charges or both paid by him, where such provision or reimbursement is in accordance with the terms of employment

Provided that National Tax Number of the hospital or clinic, as the case may be, is given and the employer also certifies and attests the medical or hospital bills to which this clause applies;

(b) any medical allowance received by an employee not exceeding ten per cent of the basic salary of the employee if free medical treatment or hospitalization or reimbursement of medical or hospitalization charges is not provided for in the terms of employment; or

Ab mera question ye hay k, Contract of employment 1 hi bany gay a 2 bany gay,
1 contract may likha jaye ga k employee ko medical charges reimbursement karyn gay or dosry may likha jaye ga k nahi karyn gay medical charges reimbursement or medical allowance dayngay.

Ham apni marzi say reimbursement ko medical allowance may convert nahi kar sakty han, ye hamari marzi nahi balky terms of employment par depend karta hay.

[Ikhan]

Dear faisal,

As for as clarification is concern, this is basically an assumption, the actual situation may varied from employee to employee but the calculation remain same if it is correct(that is basically my question)

for reimbursements related Question, lets take an example of an employee claimed his annual reimbursement limit (Rs 15000) in two installments(Sept & Jan), we may calculate his taxable income like

In Sept
-------
Monthly Salary = 50,000
Basic Salary - 45454
Annual Medical exemption = 4545 x 12 = 54540
Annual estimated income = (50,000 x 12) + 7500(OPT reimbursement)+ 7000(health insurance) = 614,500
<b>Taxable income = 614,500 - 54540 = 559,960</b>

In Jan
------
Annual estimated income = 614500 + 7500(OPT reimbursement) = 622000
<b>Taxable income = 622000 - 54540 = 567460</b>

Laptop bhai,
We have only one contact that clearly mentioned these two benefits like "we provide our employee a hospitalization facility through Health insurance company & also offer a medical reimbursement facility for OPT coverage upto Rs 15000.."

I have just added both amounts in employee's taxable income & deducted medical exemption.


-imran

[LapTop]

Mujhay yehi Objection hay,

ap nay contract may likh diya "we provide our employee a hospitalization facility through Health insurance company & also offer a medical reimbursement facility for OPT coverage upto Rs 15000.."hay "

ab employee ko jo exemption Clouse 139 (b) k tayhat hasil thi ab wo nahi rahay gi, us ka medical allowance taxable ho jaye ga, chahy wo 10% say kam ho ya zayada ho.

layhaza ap jo technique laga rahay han wo baykar ho jaye gi,

[Ikhan]

Laptop Bhai tu ap ka bhi objection dor kardete hain, koi masla nahi.

As you know employment contract is organization's internal matter, we can revise it at any time. if i will not mention this in contract & add these amounts in employee's taxable income than i think this condition can easily be implementable.

-Imran

[LapTop]

IKhan bhi,,,,
Bilkul ye problem to bilkul dor ho jaye gi,,,,
Par ab ik or problem khari ho gi aap k liye, k jo employees ki insurance or Medical re-imbursement expense ap nay book kiye hon gay na wo inadmissible ho jayen gay.

Is say zayada ab may aap ko clear nahi karon ga, oki,
Ab ap ko agar legal opinion chayea ho to as a client tashrif liyea ga mery office.
Thanks you.

[faisal_desperado]

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by Ikhan</i>
<br />Laptop Bhai tu ap ka bhi objection dor kardete hain, koi masla nahi.

As you know employment contract is organization's internal matter, we can revise it at any time. if i will not mention this in contract & add these amounts in employee's taxable income than i think this condition can easily be implementable.

-Imran
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

Dear,

Even if you had not provided the aforsaid details, my answer would have been the same as earlier, by the way, thanks for the clarification.

Your policies coincide with what i assumed while replied, you are not required to revise any of your policies as well.

Furthermore, there is no such requirement as to have 1 contract or 2 contracts, or the contract has to be revised etc. No need for any revision.

However, maximum benefits in the form of reimbursement/allowance should not exceed 10% of basic salary, if it is exceeded to the said limit, you will be required to clubbed that exceeded part with taxable income of the employee.

Laptop,
I may not rectify those problems, which have been arisen due to understanding incapability.


Best Regards,

Faisal.

[LapTop]

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