Income tax


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Income Tax, Income Tax Planning, Basic Pay In Salary, Gratuity Limit, Tax Slabs, Tax-Free Gratuity Limit

With the government raising the gratuity limit, it makes sense to negotiate for a higher basic salary to ensure a better payout.

The Union cabinet’s decision to raise the tax-free gratuity limit from Rs 3.5 lakh to Rs 10 lakh is likely to become a tool for companies to retain employees.

In 2008, when the government implemented the Sixth Pay Commission for central government employees, it was with effect from 2006. This helped employeesreap rich benefits. The decision to increase the limit forprivate sector employees brings them at par with government employees in terms of gratuity benefits.

However, employees wanting to take advantage of this decision need to be aware of a few things. One, salary negotiations will become critical as it makes sense to ask for a higher basic salary, especially if he is planning to stay with the company for long. Also, job-hoppers stand to lose money which is deducted from their salary under the gratuity head.

“To have a cost-optimum structure, the basic salary should be 40-50 per cent of the pay,” says Vikas Vasal, executive director, KPMG. This ensures that a person strikes a balance between the taxes he has to pay, his take-home salary, and exemptions and deductions available under the Income-Tax Act.

While negotiating for a new job, it is best if you ask for a higher basic pay. This will help you accumulate a good gratuity, or “accrued benefit,” as it is called. “After this announcement, employees should be more concerned with the basic salary than the cost to company, especially the middle class, for whom Rs 10 lakh is a significant sum,” said K Pandia Rajan, managing director, Ma Foi Randstad, citing the example of the US, where the basic salary is 70 per cent of the total.

In India, many employers keep the basic pay low, say tax experts. In such cases, employees should take a re-look at their basic salaries. If the basic salary as a percentage of the overall salary is low, the person should ask the employer to bring it to the 40-50 per cent level. “In small organisations, there is a scope for such negotiations,” said a tax expert. Knowing the method of gratuity calculation will clarify this point. The calculation is based on the current basic salary multiplied by the number of years, and further multiplied by 15/26.

If an employee with a basic monthly salary of Rs 20,000 has resigned after completing five years of service, he will get Rs 57,692 as gratuity. For someone who is retiring after 30 years and has a basic salary of Rs 60,000, the gratuity will be Rs 10,38,461. Of this, the person does not need to pay tax on Rs 10 lakh. The remaining Rs 38,461 will attract tax. The taxpayer needs to add the excess amount to his income to calculate his tax liability.

In future, an employee will be able to save tax on gratuity if he invests the amount in an annuity plan. “The draft of the Direct Tax Code has made a provision for such an investment,” said Vasal. In the Budget speech, the finance minister said the government was likely to implement the Direct Tax Code from April 1, 2011.

Any organisation with more than 10 employees needs to make provision for gratuity payouts according to the Payment of Gratuity Act, 1972. An employer makes this payment at the time of retirement, resignation, and death or disablement due to an accident or a disease.

In the private sector, only manufacturing companies have low employee churn. In other sectors, attrition rates are quite high.

Many feel that employees in the private sector do not give importance to gratuity as they rarely work in a company for long. “Young employees today look at cash-in-hand more than long-term benefits like gratuity,” said a human resource head of a large company.

To be eligible for gratuity, an employee needs to put in a substantial number of years in the job. While the Payment of Gratuity Act, 1972, pegs this at five years, many companies have set higher limits.

This clip comes from Aaron Russo’s film, America: Freedom to Fascism. You can watch the film online @ video.google.com Please learn the truth behind the income tax: it was created with the Federal Reserve Act in 1913 – its purpose being to fund the government to pay the interest incurred on government loans from the (private) Federal Reserve. In other words, the income tax is paid to central bankers, and have no gains to you whatsoever. Learn about how international bankers (such as the Rothschild’s and Rockefeller’s) have come to dominate the world through the control of financial systems, via their ownership of central banking institutions. But that’s only the beginning… We have become their slaves, and they desire to form a world-government that will control us all under their supreme authority. And knowing the truth is the only thing that can set us free. MARCH ON WASHINGTON! April 15th, 2008 PROTEST THE INCOME TAX AT YOUR LOCAL POST OFFICE! So long as there is a central bank, you will never be free or prosperous.

Follow the Magical Accounting Rules

To make sure that financial statements are easy to understand, there is a set of rules and practices that is established, which is known as the generally accepted accounting principles (GAAP). This has been developed to provide a basic guideline for the rules of accounting because I think it’s fair to say that it can get confusing at times. There are a lot of variations to the meaning so here is the best answer. It’s the generally accepted accounting rules and procedures that are necessary to define accounting practice.

Basically it’s a set of theories that accountants come to accept, and there are always controversies with some methods between accountants like any other field of study. Accounting is a discipline that is always growing and changing so it’s a good idea to keep up to date with all of the trends that are going on. Since the management prepares the financial statements of a company it is possible that a financial statement can be altered to give a company a particular boost. So, that’s why the companies that sell their ownership to the public needs to get their financial statements audited by a public certified accountant. A certified public accountant (CPA) are licensed through the sate for the same exact reason lawyers and doctors are, so they and protect the public by providing the highest quality of professional service possible. The reason why CPAs are used is because they have no connection with the company and are independent. They have zero financing ties with the company.

Some firms that employ a lot of certified public accountants include Deloitte & Touch, KPMG, and PricewaterhouseCoopers. An accountant with no strings attached or is independent commonly performs an audit, which is evaluating a companies financial statements, product, accounting systems, and records. The main purpose of an audit is to make sure that the financial statements have been properly prepared according to the excepted accounting rules. Keep in mind; since accounting is not a precise science it has room for interpretation according to the GAPP. However, that doesn’t mean that the accountants report should contain substantial errors in the financial report, but more like that for the most report it is reliable for creditors to take a look at. An accountant can make a decision only when the financial statements conform to the guidelines of GAAP. In the past creditors, banks, and investors tend to favor an auditor when they are deciding to invest in a company or give loans, because of their independence. The individualistic audit is an extremely crucial factor in the growth of financial markets internationally.

Also, many organizations can directly or indirectly influence a GAAP. The Financial Accounting Standards Board (FASB) is the most critical body for the development and issuing of rules on accounting practice. The website I previously listed is extremely critical and you can attend seminars online for no cost, and also stay up to date with the rules. This independent body issues the Statements of Financial Accounting Standards. Next, the American Institute of Certified Public Accountants (AICPA) is the official professional association for certified accountants. It’s the largest CPA organization that exists in America and heavily influence accounting practices through its senior committees. The Securities and Exchange Commission is the agency of the federal government that legally has the power to set and execute accounting practices for companies that sell security to the public, and it has a large impact on accounting practice. Next, the governmental accounting standard (GASB) is critical for accounting because its main job is to issue the standards for accounting to the local and state governments in the United States. However, a lot of these organizations are focused on the rules in regulations in the United States.

There are a lot of businesses and accountants internationally so that’s why the International Accounting Standard Board (IASB) was formed. It was approved by more then 25 international agencies. The U.S laws that analyze the revenues for the cost of operating a business can also affect accounting practice. It’s no question that the major provider for income for the government comes from income tax. The income tax rules are heavily applies by the Internal Revenue Service (IRS). Sometimes these rules actually cause a conflict with the accepted rules of accounting. A lot of businesses use accounting practices because it’s a requirement by tax law. Also, companies can use the rules of tax law to their advantage financially. Accounting also has laws of conduct for profession, and one extremely important one is ethics. A nice website dealing with the issues of ethics is ethics.org.

It touches bases on questions that help determine if something is either right or wrong, and is based on moral decisions. Most people are faced with several ethical issues each day and, and some ethical activities could be on the range of illegal. If a business decides to use false or misleading advertising, or to bribe customers into giving them testimonials for a specific product, then they could be acting in an unethical manner. The ethics of a company could also be a result of the employees so that’s why it’s always a good idea to run a background check of who you are hiring, whether it’s online or offline.

Professional ethics is the guidelines that apply to the conduct of individuals of a certain profession. Similar to the ethical actions of a company, the ethical actions of an individual is a decision. As being a member of an organization, accountants have to take the responsibility not only to their customers and employers, but also to the general public to act in the greatest ethical way possible. Accountants are very good at following professional ethics because they are the second professional group as having the largest ethical standards, with clergy being the highest, no surprises about that one. It is important for individuals who decide to become an accountant to have the highest levels of professionalism as possible. To enforce that its prestigious members are following the rules, the AICPA along with each state have adopted some codes of professional conduct that certified public accountants have to follow.

Some simple rules are being responsible to the people that depend on the trust of accountants, such as creditors and investors. When working with people the accountant must act with integrity which means that they are honest, and the individuals gain from the visit with the accountant. The accountant must display objectivity which means that they are intellectually honest, and they must remain independent which means that they must avoid any relationship with the business or individual because it will damage the accountant’s principles.

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Accounting Standards: Follow the Magical Accounting Rules

To make sure that financial statements are easy to understand, there is a set of rules and practices that is established, which is known as the generally accepted accounting principles (GAAP). This has been developed to provide a basic guideline for the rules of accounting because I think it’s fair to say that it can get confusing at times. There are a lot of variations to the meaning so here is the best answer.  It’s the generally accepted accounting rules and procedures that are necessary to define accounting practice. Basically it’s a set of theories that accountants come to accept, and there are always controversies with some methods between accountants like any other field of study.

Accounting is a discipline that is always growing and changing so it’s a good idea to keep up to date with all of the trends that are going on. Since the management prepares the financial statements of a company it is possible that a financial statement can be altered to give a company a particular boost. So, that’s why the companies that sell their ownership to the public needs to get their financial statements audited by a public certified accountant. A certified public accountant (CPA) are licensed through the sate for the same exact reason lawyers and doctors are, so they and protect the public by providing the highest quality of professional service possible.  The reason why CPAs are used is because they have no connection with the company and are independent. They have zero financing ties with the company.

Some firms that employ a lot of certified public accountants include Deloitte & Touch, KPMG, and PricewaterhouseCoopers. An accountant with no strings attached or is independent commonly performs an audit, which is evaluating a companies financial statements, product, accounting systems, and records.  The main purpose of an audit is to make sure that the financial statements have been properly prepared according to the excepted accounting rules. Keep in mind; since accounting is not a precise science it has room for interpretation according to the GAPP. 

However, that doesn’t mean that the accountants report should contain substantial errors in the financial report, but more like that for the most report it is reliable for creditors to take a look at.  An accountant can make a decision only when the financial statements conform to the guidelines of GAAP.  In the past creditors, banks, and investors tend to favor an auditor when they are deciding to invest in a company or give loans, because of their independence.  The individualistic audit is an extremely crucial factor in the growth of financial markets internationally.

Also, many organizations can directly or indirectly influence a GAAP. The Financial Accounting Standards Board (FASB) is the most critical body for the development and issuing of rules on accounting practice. The website I previously listed is extremely critical and you can attend seminars online for no cost, and also stay up to date with the rules.  This independent body issues the Statements of Financial Accounting Standards. Next, the American Institute of Certified Public Accountants (AICPA) is the official professional association for certified accountants. It’s the largest CPA organization that exists in America and heavily influence accounting practices through its senior committees. 

The Securities and Exchange Commission is the agency of the federal government that legally has the power to set and execute accounting practices for companies that sell security to the public, and it has a large impact on accounting practice.  Next, the governmental accounting standard (GASB) is critical for accounting because its main job is to issue the standards for accounting to the local and state governments in the United States.  However, a lot of these organizations are focused on the rules in regulations in the United States.

There are a lot of businesses and accountants internationally so that’s why the International Accounting Standard Board (IASB) was formed.  It was approved by more then 25 international agencies.  The U.S laws that analyze the revenues for the cost of operating a business can also affect accounting practice. It’s no question that the major provider for income for the government comes from income tax. The income tax rules are heavily applies by the Internal Revenue Service (IRS). Sometimes these rules actually cause a conflict with the accepted rules of accounting. A lot of businesses use accounting practices because it’s a requirement by tax law.  Also, companies can use the rules of tax law to their advantage financially.  Accounting also has laws of conduct for profession, and one extremely important one is ethics.

It touches bases on questions that help determine if something is either right or wrong, and is based on moral decisions. Most people are faced with several ethical issues each day and, and some ethical activities could be on the range of illegal. If a business decides to use false or misleading advertising, or to bribe customers into giving them testimonials for a specific product, then they could be acting in an unethical manner.  The ethics of a company could also be a result of the employees so that’s why it’s always a good idea to run a background check of who you are hiring, whether it’s online or offline.  Professional ethics is the guidelines that apply to the conduct of individuals of a certain profession. 

Similar to the ethical actions of a company, the ethical actions of an individual is a decision.  As being a member of an organization, accountants have to take the responsibility not only to their customers and employers, but also to the general public to act in the greatest ethical way possible. Accountants are very good at following professional ethics because they are the second professional group as having the largest ethical standards, with clergy being the highest, no surprises about that one.  It is important for individuals who decide to become an accountant to have the highest levels of professionalism as possible.

To enforce that its prestigious members are following the rules, the AICPA along with each state have adopted some codes of professional conduct that certified public accountants have to follow.  Some simple rules are being responsible to the people that depend on the trust of accountants, such as creditors and investors. When working with people the accountant must act with integrity which means that they are honest, and the individuals gain from the visit with the accountant. The accountant must display objectivity which means that they are intellectually honest, and they must remain independent which means that they must avoid any relationship with the business or individual because it will damage the accountant’s principles.

Financial Accounting ACG2021 Spring 2008 SFCC Crosson Chapter 4 Videos