Tip tax calculator: you want to know the tax payable on income from tips; apply this formula

Tip tax calculator: An employee working in an organization for five years or more is eligible for bonus income and when there is income there is also a tax liability. Thus, the individual who wins should be aware that the bonus money is income and therefore is taxable. You want to know how much tax will be on the bonus income received. We will do the math here:

Speaking on the income tax obligation involved in earning the bonus, Jitendra Solanki said, “The bonus is an important part of any employee’s salary structure and ultimately provides them with a big lump sum. In accordance with section 4 (1) of the Payment of Bonuses Act 1972, an employee only becomes eligible for the bonus after having completed 5 years of continuous service in the same establishment. Previously, bonus income up to Rs 10 lakhs was exempt from tax, but the exemption was increased to Rs 20 lakhs after the law was changed. “

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Calculation of the bonus amount for employees not covered by the Act
Tip = average salary for the last 10 months [(basic + DA) X number of years of employment] X 1/2;

For employees covered by the Tipping Act, income from tips up to Rs 20 lakhs is tax exempt. For those who are not covered, the exemption is allowed up to Rs 10 lakhs. You can calculate the tax payable on your tip income using the formula above.

Suppose you earned an average of 120,000 Rs (base + DA) in the last 10 months of your service in a particular company and you worked for 20 years.

Tip received = [120000 X 20] X 1/2 = Rs 12.00,000 (Rs 12 lakhs). Since income up to Rs 10 lakhs is exempt. Your taxable income is therefore Rs 2 lakh.

One can also go to the website of the income tax service (revenutaxindia.gov.in) and calculate the taxable bonus income by following the instructions.

Esther L. Steinbach

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