Tax on Salaried Employee in India

Income Tax on Salary in India

Income Tax in India is levied on the total income earned by an individual during a financial year (April 1 to March 31). Salary is one of the major sources of income for many individuals in India.

Key Points Regarding Income Tax on Salary

• Taxable Income:** The amount of income on which tax is calculated. It is determined by deducting various allowances and exemptions from your gross salary.
• Tax Slabs:** The government divides taxable income into different slabs, each with a specific tax rate.
• Tax Deductions:** You can claim various deductions under different sections of the Income Tax Act to reduce your taxable income.
• Tax Rebates:** The government may offer rebates on tax payable under certain conditions.
• Tax Payments:** You can pay income tax through various modes, including TDS (Tax Deducted at Source) by your employer, advance tax payments, and self-assessment tax payments.

Example of Income Tax Calculation on Salary in India

• Assumptions:
• Individual: A salaried employee under the age of 60 years.
• Gross Salary: ₹15,00,000 per annum.
• Deductions:
• Standard Deduction: ₹50,000
 
• HRA: ₹2,50,000
• 80C Investments: ₹1,50,000
• 80CCD(1B) (NPS): ₹50,000
 
• 80D (Health Insurance): ₹15,000
• 80TTA (Interest on Savings Account): ₹10,000
 
• Calculations:
• Gross Total Income:
• Gross Salary: ₹15,00,000
• Deductions:
• HRA + LTA: ₹2,50,000
• Standard Deduction: ₹50,000
• Net Salary: ₹12,50,000
• Income from Other Sources (assumed): ₹10,000
• Gross Taxable Income: ₹12,60,000
• 80C Deduction: ₹1,50,000  
• 80CCD(1B) Deduction: ₹50,000  
• 80D Deduction: ₹15,000
• 80TTA Deduction: ₹10,000
• Total Deductions: ₹2,25,000
• Total Taxable Income: ₹10,35,000
• Tax Calculation:
• Tax on income between ₹2,50,000 to ₹5,00,000 (5% of ₹2,50,000): ₹12,500
• Tax on income between ₹5,00,000 to ₹10,35,000 (20% of ₹5,35,000): ₹1,07,000
• Total Tax: ₹1,19,500
• Cess: 4% of ₹1,19,500 = ₹4,780
• Total Tax Payable: ₹1,19,500 + ₹4,780 = ₹1,24,280
• Note:
• This is a simplified example. Actual tax calculations may vary based on individual circumstances and applicable tax laws. It's crucial to consult with a qualified tax professional or use the official Income Tax Department's online calculator for accurate and personalized tax calculations.
• Tax laws and rates are subject to change.
• Disclaimer: This information is for general guidance only and does not constitute professional tax advice.

Tax Slabs for Individuals (FY 2023-24 / AY 2024-25)

Income Range	Tax Rate
Up to ₹2,50,000	Nil
₹2,50,000 - ₹5,00,000	5%
₹5,00,000 - ₹7,50,000	10%
₹7,50,000 - ₹10,00,000	15%
₹10,00,000 - ₹12,50,000	20%
₹12,50,000 - ₹15,00,000	25%
Above ₹15,00,000	30%

**Note:** This is a simplified overview. Tax laws and rates can change. Please refer to the official Income Tax Department website for the most accurate and up-to-date information.

NEW STARTUP IN INDIA FOR NRI

Set up of an Indian company Liaison Office Branch Office Project Office

Investment in India by Foreign Portfolio Investor (FPI)

Investment in Shares, Mutual Funds and other securities in India by NRI/ OCI

Investment in LLP/Proprietary concern/Firm in India by NRI or OCI

Set up of an Indian company by the foreign entity (FDI)

In order to strategically invest in India, NRIs can invest in Indian Company through Foreign Direct Investment (FDI). A erson resident outside India or an entity incorporated outside India (except for citizen of Pakistan and Bangladesh and entities in Pakistan and Bangladesh), can invest in India, subject to the FDI Policy of the Government of India.

Depending on the sector of the company, percentage limits upto which investment can be made in a particular sector have been stated in the FDI Policy. Further, FDI policy also states whether any approvals from RBI/FIPB/Other governmental authorities is required to be obtained or not i.e. FDI is allowed under automatic route (no permission) or government approval route.

FDI is prohibited in the following sectors:

(a) Lottery Business including Government/ private lottery, online lotteries, etc.

(b) Gambling and Betting including casinos etc.

(c) Chit funds

(d) Nidhi company

(e) Trading in Transferable Development Rights (TDRs)

(f) Real Estate Business or Construction of Farm Houses

(g) Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes

(h) Activities / sectors not open to private sector investment e.g. Atomic energy and Railway operations (other than permitted activities mentioned in the FDI Policy)

Note: Foreign technology collaboration in any form including licensing for franchise, trademark, brand name, management contract is also prohibited for Lottery Business and Gambling and Betting activities.

Types of Instrument: Indian companies can issue equity shares, fully and mandatorily convertible debentures, fully and mandatorily convertible preference shares and warrants subject to the pricing guidelines / valuation norms and reporting requirements amongst other requirements as prescribed under FEMA Regulations.

The Indian company is required to issue the equity shares within 60 days from the date of receipt of consideration. If the shares are not issued within 60 days, the consideration should be refunded to the investor within 15 days from the completion of 60 days

Compliances by Indian Company for FDI Investment:

Form Foreign Currency-Gross Provisional Return (FC-GPR): An Indian company issuing equity instruments to a person resident outside India and where such issue is reckoned as Foreign Direct Investment, defined under the rules, shall report such issue in Form FC-GPR, not later than thirty days from the date of issue of equity instruments.

Annual Return on Foreign Liabilities and Assets (FLA): An Indian Company which has received FDI, in the previous year including the current year, shall submit form FLA to the Reserve Bank on or before the 15th day of July of each year.

Transfer of shares by way of Sale/Gift: Transfer of shares should be in accordance with the prescribed guidelines under FEMA Regulations.

Further, one may have to evaluate if Form FC-TRS is required to be filed in case of transfer of shares as per the guidelines under FEMA Regulations. The onus of filing Form FC-TRS is of the resident transferor/transferee, as the case may be. Such Form is required to be filed within 60 days of transfer of equity instruments or receipt/remittance of funds, whichever is earlier.

Remittance of sale proceeds: AD Bank can allow the remittance of sale proceeds of equity instruments (net of applicable taxes) directly outside India to the seller of shares resident outside India or NRE/FCNR(B) account. The sale of security has been made in accordance with the prescribed guidelines under FEMA Regulations.