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Questions and Answers
What is the nature of Dearness Allowance (D.A.)?
How is Bonus taxed according to the text?
What is the calculation formula for Cost to Company (CTC)?
How is Advance salary treated in terms of taxation according to the text?
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Which component of salary is considered fully taxable?
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What happens to Leave Salary according to the text?
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When is an employee eligible to receive gratuity?
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Under what conditions is an employee entitled to receive gratuity?
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Which type of employees are eligible for gratuity benefits?
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What happens if an employer has less than 10 employees after the Gratuity Act becomes applicable to them?
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How is the amount of gratuity determined?
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Why is it important for an employee to complete five years with a single employer to receive gratuity?
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When can gratuity received from multiple employers in different years exceed Rs. 20 lakhs?
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How is salary per month calculated for POGA employees?
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What does pension refer to in relation to services rendered by an individual?
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How are pension funds typically accumulated for post-retirement years?
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In which scenario will a person receive a steady flow of income for life according to the text?
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For non-POGA employees, what does the average salary per month calculation include?
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Study Notes
Nature of Dearness Allowance (D.A.)
- Dearness Allowance is a cost-of-living adjustment paid to employees to offset inflation.
- It is typically a percentage of the basic salary and varies based on location and economic conditions.
Taxation of Bonus
- Bonus is considered part of the income and taxed according to income tax slabs.
Calculation of Cost to Company (CTC)
- CTC formula includes basic salary, allowances, benefits, bonuses, and contributions to retirement funds.
Treatment of Advance Salary in Taxation
- Advance salary is treated as income in the financial year it is received, affecting taxable income.
Fully Taxable Salary Component
- Basic salary is generally considered fully taxable under income tax laws.
Leave Salary
- Leave salary is applicable upon termination of employment; it is taxable as part of salary income.
Eligibility for Gratuity
- An employee is eligible for gratuity after completing a minimum of five years of continuous service with the same employer.
Conditions for Gratuity Entitlement
- Gratuity is payable on resignation, retirement, or death of the employee, provided the five-year condition is met.
Eligible Employees for Gratuity Benefits
- Employees of organizations with a minimum of 10 workers are entitled to gratuity benefits.
Employer Size and Gratuity Act
- If an employer has fewer than 10 employees, the Gratuity Act does not apply to them even after its enactment.
Determination of Gratuity Amount
- Gratuity amount is calculated based on the last drawn salary and years of service.
Importance of Completing Five Years for Gratuity
- Completing five years with a single employer ensures eligibility for gratuity, signaling commitment and continuity.
Gratuity from Multiple Employers
- Gratuity received from multiple employers can exceed Rs. 20 lakhs if it is proportionate to the service with each employer.
Salary Calculation for POGA Employees
- Salary per month for POGA (Payment of Gratuity Act) employees is calculated by averaging the last drawn salary over a specific period.
Pension and Services Rendered
- Pension refers to regular payments made to individuals after retirement as compensation for services rendered during employment.
Accumulation of Pension Funds
- Pension funds are typically accumulated through employer and employee contributions during the working years.
Steady Income for Life Scenario
- Annuities or pension plans can provide a steady flow of income for life post-retirement.
Average Salary Calculation for Non-POGA Employees
- For non-POGA employees, average monthly salary includes basic salary, allowances, and any other advantages provided by the employer.
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Description
Learn about the different components of a salary package such as basic salary, bonuses, allowances, perquisites, and retirement benefits. Explore how CTC (Cost to Company) is calculated and understand the difference between gross salary and net salary.
