02-04-2010, 09:49 PM
I will be really glade, if some one could help to elaborate the compositiion of average rate of tax formula used to withhold tax out of employees salary.
02-04-2010, 09:49 PM
02-05-2010, 04:17 AM
Dear,
In each month of a specific tax year, Yearly income should be reassessed as to include the effect of adjustments or by considering any change in earnings / benefits / perquisites and accordingly new yearly income should be determined, which should include income earned in prior months of a tax year and expected income in the following months of a tax year.
Let us have an illustration in this regard, suppose If an employee earns Rs. 20,000 a month for 6 months and accordingly tax is deducted at the rate of 0.5% on yearly income of 240,000 (20,000*12),(in this case monthly tax will be Rs. 100, i.e. 240,000*0.5% =1,200/12 =100 and accumulated tax for first 6 months would be 600 i.e. 100*6) in the seventh month, monthly salary increases to Rs. 25,000 per month, then in the seventh month, Yearly income will be reassessed as,
Rs. 120,000 for first 6 months (20,000*6) + 150,000 for subsequent 6 months (25,000*6) = 270,000.
On Taxable income of Rs. 270,000, rate will be 0.75% and yearly tax will be 2,025 (270,000*0.75%), now from the seventh month, monthly tax will be 237.5 i.e. {(2,025-600)/6}.
Summarily, Tax will be deducted in the remaining months of a tax year as to reconcile "yearly tax on taxable income" with "yearly tax deducted on taxable income".
I hope you have been replied for your query, let me know in case of any ambiguity.
Best Regards,
Faisal
In each month of a specific tax year, Yearly income should be reassessed as to include the effect of adjustments or by considering any change in earnings / benefits / perquisites and accordingly new yearly income should be determined, which should include income earned in prior months of a tax year and expected income in the following months of a tax year.
Let us have an illustration in this regard, suppose If an employee earns Rs. 20,000 a month for 6 months and accordingly tax is deducted at the rate of 0.5% on yearly income of 240,000 (20,000*12),(in this case monthly tax will be Rs. 100, i.e. 240,000*0.5% =1,200/12 =100 and accumulated tax for first 6 months would be 600 i.e. 100*6) in the seventh month, monthly salary increases to Rs. 25,000 per month, then in the seventh month, Yearly income will be reassessed as,
Rs. 120,000 for first 6 months (20,000*6) + 150,000 for subsequent 6 months (25,000*6) = 270,000.
On Taxable income of Rs. 270,000, rate will be 0.75% and yearly tax will be 2,025 (270,000*0.75%), now from the seventh month, monthly tax will be 237.5 i.e. {(2,025-600)/6}.
Summarily, Tax will be deducted in the remaining months of a tax year as to reconcile "yearly tax on taxable income" with "yearly tax deducted on taxable income".
I hope you have been replied for your query, let me know in case of any ambiguity.
Best Regards,
Faisal
02-08-2010, 03:31 PM
Fasisal. Thank alot mate for such a comprehensive reply & my most of the queries has been answered with the answer put down by you. apart from one additional query if possible, please answer that as well. what does adjustment means against the tax withheld against the salary income. like Adjustment against the tax withheld from employee on the purchase of New Car, Car registeration, Telephone Bill.
02-08-2010, 07:34 PM
Download-LinkTax calculator 2009-2010.xls http//www.megafileupload.com/en/file/134523/Tax-calculator-2009-2010-xls.html