Different levels of income and expenditure Essay

Different levels of income and expenditure - Essay Example e, fixed medical allowance, servant allowance, deputation allowance, other allowances like marriage allowance, telephone allowance, city compensatory allowance, family allowance etc. In addition to wages and salary, perquisites under section 17(2) are provided to employees by employer which includes certain benefits or amenities provided either voluntarily or under service contract. The perquisites for income tax purpose are tax free perquisites, taxable perquisites, perquisites taxable under specified cases. Example:       Amt in GBP Basic pay   Ã‚   40000 Dearness allowance   Ã‚   3000 Leave salary   Ã‚   5400 Professional tax paid by employer   Ã‚   5400 Perquisite for house:   Ã‚      15% of salary (40000+3000+5400)   7260    Furniture rent   1000    Less: rent recovered by employer   3000 5260 Less: professional tax   Ã‚   1000 Gross total income   Ã‚   53660 Less: tax deduction under section 80C   Ã‚      Contribution to statutory provident fun d    4000 Taxable income   Ã‚   49660 Income from house property The measure of charging income tax under this head is the annual value of property which is the inherent capacity of a building to yield income. Annual value has been defined as per Section 23(1) of Income tax act as (a) the sum for which the property is expected to be let from year to year, (b) where the property or part of property is let and annual rent received or receivable by the owner is in excess of sum as in clause (a), such amount received or receivable, (c) property or any part of property being let and was vacant for the whole or part of previous year, owing to such vacancy, the actual rent received or receivable by owner is less than sum as per clause (a), such amount received or receivable. Example: X owned two house properties, one for running business and other... The measure of charging income tax under this head is the annual value of property which is the inherent capacity of a building to yield income. Annual value has been defined as per Section 23(1) of Income tax act as (a) the sum for which the property is expected to be let from year to year, (b) where the property or part of property is let and annual rent received or receivable by the owner is in excess of sum as in clause (a), such amount received or receivable, (c) property or any part of property being let and was vacant for the whole or part of previous year, owing to such vacancy, the actual rent received or receivable by owner is less than sum as per clause (a), such amount received or receivable. Example: X owned two house properties, one for running business and other was let out at 3000 GBP per month. The second property was used as residence by X. Municipal taxes for two properties were 7200 GBP per annum. The business and let out premises were insured against loss by fire and insurance premium was 900 GBP.Sections 28 to 44D deal with computing income under this head. The term â€Å"business† defined in section 2(13) of Income Tax Act includes any trade, commerce or manufacture or any concern in nature of trade, commerce or manufacture. The term â€Å"profession† defined under section 2(36) of the Act includes any vocation. Income under this head includes profits and gains from business or profession carried out by an assessee during previous year, income derived by a trader or professional.