Fiche de révision : Tax Planning and Salary Computation Strategies

📋 Course Outline

1. Deductions and tax regime choice
2. Salary computation under optional regime
3. Salary computation under default regime
4. House property income computation

📖 1. Deductions and tax regime choice

🔑 Key Concepts & Definitions

• Deduction under section 80C : A Chapter VI-A deduction for eligible investments with a specified maximum limit.
• Deduction under section 80D : A Chapter VI-A deduction for medical insurance premium payments subject to an overall cap.
• Deduction under section 80G : A Chapter VI-A deduction for certain donations measured as a defined percentage of the donation amount.
• Section 115BAC default tax regime : A tax regime where certain Chapter VI-A deductions are not available, so taxable income is computed differently.

📝 Essential Points

• In the shown computation, 80C deposit in PPF capped at ₹1,50,000 was treated as eligible under the non-115BAC column but not eligible under the 115BAC column.
• In the shown computation, 80D medical insurance premium of ₹20,000 plus spouse ₹10,000 was limited by a ₹25,000 cap and was treated as eligible under the non-115BAC column but not eligible under the 115BAC column.
• In the shown computation, 80G deduction was 50% of ₹10,000, giving ₹5,000, and it was treated as eligible under the non-115BAC column but not eligible under the 115BAC column.
• The total taxable income became ₹6,95,000 under the non-115BAC column and ₹8,50,000 under the 115BAC column because Chapter VI-A deductions were disallowed under 115BAC.
• The text concludes that if the 115BAC (default) regime yields a lower tax liability, it is advisable to opt for section 115BAC.

💡 Memory Hook

115BAC “cuts” Chapter VI-A deductions: higher taxable income but sometimes lower total tax.

📖 2. Salary computation under optional regime

🔑 Key Concepts & Definitions

• Optional tax regime (noted as 115BAC) : A salary taxation approach where specific deductions like Chapter VI-A are not applied in determining taxable income for the provided case.
• Standard deduction u/s 16 : A flat deduction from gross salary (subject to limits) used to arrive at taxable salary.
• Perquisite value of rent-free accommodation : The taxable value assigned to accommodation provided without rent, computed for the period of occupation.
• Taxability of perquisite items : Some perquisites are taxable using specified valuation methods while others are treated as not taxable as per the given statements.

📝 Essential Points

• Mr. Prabhu’s optional-regime taxable salary used gross salary ₹13,87,000 and deducted standard deduction u/s 16 of ₹50,000 (lower of actual salary or ₹50,000).
• Rent-free accommodation perquisite was computed as 10% of salary for 4 months only because occupation was from 01.12.2025.
• The mobile phone facility given for personal use was stated as not taxable perquisite (and telephone expense comparison resulted in nil taxable perquisite).
• Perquisite value on sale of car was determined using original cost ₹10,00,000, depreciation at 20% for two periods, value as on 01.08.2025 at ₹6,40,000, and subtracting amount received ₹2,50,000 to get ₹3,90,000.
• Laptop for official and personal use was stated as not taxable perquisite, while video camera perquisite was ₹50,000 × 10% = ₹5,000.

💡 Memory Hook

Optional salary path here: add taxable perquisites → subtract standard deduction u/s 16 = taxable salary.

📖 3. Salary computation under default regime

🔑 Key Concepts & Definitions

• Salary income computation : The process of determining income chargeable under the head Salary by adding salary components and applying applicable inclusions/exclusions.
• Dearness allowance inclusion : Dearness allowance may form part of salary based on whether it is treated as retirement-benefit component.
• Bonus as one month’s basic salary : A bonus received that equals one month’s basic salary is treated as a salary component for the assessment year.
• Employer contribution to recognised provident fund : Employer’s contribution to a recognised provident fund is treated as a salary component in the given question.

📝 Essential Points

• For Mr. Suresh (A.Y. 2026-27), basic salary was ₹70,000 per month from 01/04/2025 to 31/12/2025 and ₹85,000 per month from 01/01/2026 to 31/03/2026.
• Dearness allowance was given as 50% of the basic salary and was stated to not form part of retirement benefits.
• Bonus was stated to equal one month’s basic salary and was paid in November 2025, so it is a salary component for A.Y. 2026-27.
• Employer’s contribution to recognised provident fund was stated as 19% of basic salary with Mr. Suresh also contributing the same amount.
• Profession tax paid was ₹10,000 total, with ₹5,000 stated as paid by the employer on behalf of Mr. Suresh, making it a salary-related item in the computation.
• The provided answer shows total income chargeable under Salary as ₹14,69,450 when he did not opt out of the default tax regime under section 115BAC.

💡 Memory Hook

Default-regime salary here uses: Basic + (50% DA) + Bonus + Employer RPF + employer-paid profession tax; then reach ₹14,69,450.

📖 4. House property income computation

🔑 Key Concepts & Definitions

• Income from house property : Income chargeable under the head House Property is computed using property rental parameters and municipal taxes and then adjusted for interest on loan when applicable.
• Municipal value and fair rent : Municipal value and fair rent are rental-based starting measures used to determine the value of the property for tax purposes.
• Standard rent under Rent Control Act : Standard rent is a legally specified benchmark that limits the rent that can be taken for computing annual value.
• Interest on loan for self-occupied vs let-out : Interest paid on housing loan for the property can be used in computing chargeable house property income under the conditions described.

📝 Essential Points

• For Mrs. Sejal’s house property (P.Y. 2025-26), municipal value was ₹1,80,000, fair rent was ₹2,36,000, and standard rent was ₹2,20,000.
• Rent received was ₹22,500 per month, and municipal taxes were stated as 10% of municipal value paid during the year.
• Construction started in August 2018 and was completed on 31st August 2021, and the loan of ₹5,00,000 was taken on 1st September 2018 for construction of the property.
• Loan interest was paid at 15% per annum every month, and the entire loan was outstanding as on 31st March 2026.
• The provided answer indicates income from house property chargeable for A.Y. 2026-27 as ₹62,650 and asks the analysis under the default regime option under section 115BAC.

💡 Memory Hook

House property annual value starts from municipal/fair/standard rent, then adjust for actual rent and taxes, and add applicable interest effect.

📅 Key Dates

📊 Synthesis Tables

Tax liability: default vs other column in shown example

⚠️ Common Pitfalls & Confusions

1. Mixing up which column uses Chapter VI-A deductions: under section 115BAC in the shown example, 80C, 80D, and 80G deductions were treated as not eligible.
2. Assuming rent-free accommodation perquisite covers the full year: the computation explicitly restricted it to 4 months because occupation started on 01.12.2025.
3. Treating the mobile phone facility as taxable perquisite: the statement given made it nil taxable perquisite.
4. Valuing the car perquisite without subtracting the amount received from the employee as shown in the car sale calculation.
5. Using standard deduction u/s 16 incorrectly: taxable salary used the lower of actual salary and ₹50,000.
6. For house property, taking fair rent without checking the standard rent limit: both fair rent and standard rent are provided so annual value cannot be based on fair rent alone.

✅ Exam Checklist

1. State why Chapter VI-A deductions under 80C, 80D, and 80G can affect taxable income differently under the section 115BAC column in the given computation.
2. Compute taxable income from salary by subtracting standard deduction u/s 16 from income from salary before standard deduction.
3. For Mr. Prabhu, compute rent-free accommodation perquisite for only the occupied months starting from 01.12.2025.
4. Apply the given rule that mobile phone facility and the telephone expense comparison result in nil taxable perquisite for Mr. Prabhu.
5. Compute car sale perquisite using original cost, depreciation for the stated periods, value as on 01.08.2025, and subtracting amount received.
6. Use standard deduction u/s 16 correctly as the lower of actual salary or ₹50,000 in Mr. Prabhu’s taxable salary.
7. For Mr. Suresh, compute total basic salary using ₹70,000 p.m. and ₹85,000 p.m. over the exact given date ranges.
8. Compute dear allowance as 50% of basic salary and apply the note that it does not form part of retirement benefits.
9. Include bonus equal to one month’s basic salary paid in November 2025 when forming salary chargeable for A.Y. 2026-27.
10. Compute income from house property inputs using municipal value, fair rent, standard rent, rent received per month, and municipal taxes at 10% of municipal value.
11. When answering the house property question, incorporate the construction/loan dates and interest at 15% p.a. with the loan outstanding as on 31st March, 2026 to reach the given chargeable amount.