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Income from salary

Any income will be treated as income from salary only if one basic
condition is fulfilled.
Condition:- There should be employee- employer relationship.
If there is no employee employer relationship then such income
cannot be taxed as income from salaries.
*** Income to be charged under the salary the amount should be
received from present employer or former employer.
urrender of salary!- If an employee opts for to surrender his salary to
the central government under section " of the volunteer surrender of the
salary #the salary so surrendered would be excluded while commutating
his taxable income.
$olunteer payments: - alary# per%uisite or allowance may be given as a
gift to an employee# yet it would be taxable .
alary is taxable on due basis or receipt basis whichever is earlier.
alary becomes due during the previous year &whether paid during the
same year or not' taxable in the assessment year as income of the
previous year.
Arrears of salary received during the previous year although it pertains to
one of the earlier (the same was taxed earlier on due basis will not be
taxed in the current assessment year.
Arrears of salary
Taxed earlier )eceived after settlement not taxed ealier
%uestion is silent *f dispute

Ignore
In case salary becomes due in the next month or subse%uent month
then the settlement of income from salaries will be prepared from +arch
- ,eb.
Basic salary
-asic salary is the purest form of salary .It does not include other
amounts such as allowance# per%uisite etc.
.ross salary is fully taxable
/ence if net salary is given in %uestion we should convert it into gross
basic salary by adding bac0 the deduction
1xemption
ection 23&4' 5 $alue of leave travel concession &read with rule " -'
6eave travel concession extended by an employer to an employee for
anywhere in India with his family is exempt on the following basic.
+ode of travel

Air other mode
1conomic class airfare of national carrier
)ailway exists )ailway does not exist

2
st
class AC tic0et
Amount spent
7hichever is lower
)ecogni8ed transport not recogni8ed transport
2
st
or deluxe class 2
st
or deluxe class
Amount spent Amount spent
7hichever is lower whichever is lower
1xemption is available for 9ourney in India.
:ourney can be availed by employee # spouse# children
#dependent brothers ;sisters of an assessee
1xemption is available in respect of an amount spent on
9ourney by shortest route.
1xemption is available in respect of two 9ourneys in a bloc0 of
< calendar years.
The exemption shall not be available to more than two
children born after 2
st
*ctober 2==>. +ultiple births after one
child will be treated as single child.
Section 10(10 A) Computed pension
?ension tatus of employee Chargeable to tax
@ncomputed pension .overnment ABon-
government employee
Chargeable to tax
Computed ?ension .overnment 1xempt uAs 23 &23 A'
Computed ?ension Bon-government
employee
,ully Apartly exempt uAs
23 &23 A'
Computed pension is taxable as under
.overnment 1mployee .ratuity &may or may
not receive'
1ntire computed pension is
exempt.
@n computed is taxable
Bon-government .ratuity is received 2AC
rd
of the pension which is
normally entitled to receive
Bon-government .ratuity is not
received
2A"
nd
of the pension which is
normally entitled to receive.
Section 10(10) Gratuity

.overnment 1mployee **payment of .ratuity Act ***other
employee
,ully exempt 24A"D*last salary E *avg
salary
Frawn*no of years pm *no of
years
ervice service
+ax )s 23#33#333 +ax )s
23#33#333
7hichever is lower whichever is
lower
**last -asic salary pm Glast FA &terms'Glast FA &not in terms'
***Avg basic salary pm GAvg FA&terms'GAvg turnover &commission pm'
Section 10(10 AA) Leave salary
A employee gets different leave .An employee has to earn in the first
instance ; only when he has leave to his credit he can apply for leave. If
a leave is not ta0en within a year# as per service rule# it may lapse or it
may be enchased or it may be accumulated.
Bature of leave enchased tatus of employee Taxable or not
6eave encashment during
carry on of employment
.overnment ; non-
.overnment employee
Chargeable to tax. )elief
uAs >=
6eave encashment at the
time of retirementA leaving
9ob
.overnment employee ,ully exempt uAs 23&23
AA'
6eave encashment at the
time of retirementA leaving
9ob
Bon-.overnment
employee
exempt uAs 23&23 AA'
1xemption :-
2' ?eriod of earned leave to the credit of the employee at the time of
retirement.
"' 23 * Average monthly salary.
C' 6eave encashment actually received
<' +aximum )s. C33333
7hichever is lower
Section 10 (10 B) Retrenchment Compensation
Amount Calculated as per Industrial dispute Act
Actual Amt )eceived
+ax )s. 433333
7hichever is lower
ection 23 &23 c' read with )ule " - A
Voluntary Retirement Scheme Compensation
2. C months *last salary pm *completed year of service
". 2month *last salary drawn pm *bal month of service
C. Amt received
<. +ax ).433333
7hichever is lower
The scheme applies to
2. ?ublic sector company AAny other company
". Central Atate .overnment
C. 6ocal authority
<. @niversity
4. Cooperative ociety
D. IIT# II+ etc notified institution.

Conditions:
2. The employee must have completed at least <3 years of age or 23
years of service.
". $acated post should be proved as redundant ; should not be filled
by any other employee.
C. The retiring employee should not occupy any other post under the
same management.
Section 10(!) "#emption in case o$ a $orei%n &ational
I. The remuneration received by him as an official of an embassy
#high commission #consulate etc or as a member of staff of any
such official .
II. The remuneration received by him as an employee of a foreign
enterprise for services rendered during his stay in India if the
following conditions are satisfied :
2. ,oreign enterprise is not engaged in any trade or business in India.
". Total period of stay in India does not exceed =3 days in aggregate
in previous year
C. uch remuneration is not deductible from the income of the
employer chargeable in India.
III. Any remuneration received by him as an employer of a foreign
government during his stay in India in connection with his training
in any underta0ing owned by the government or government
company.
I$. )emuneration received in connection with his employment on a
foreign ship #where his total stay in India does not exceed =3 days
in the previous year .
Section 10 (') (ndian Citi)en employed A*road *y Government
o$ (ndia+
Any allowance or per%uisite paid or allowed outside India by the
government to a citi8en of India for rendering service outside
India is exempt
Section 10 (,-) "#emption o$ speci$ied employees and
per.uisites paid or retired chairman or any other mem*er or
retired mem*er o$ the /0SC
Allowances and per%uisites received by chairman or any other
member# including retired chairmanAmember# of the @nion ?ublic
ervice Commission &@?C' is exempt.
The following allowances and services has been
notified by -oard .
2. In case of serving chairman and members of public service
commission :-
a' The value of rent free official residence
b' $alue of conveyance facilities including transport allowance
c' umptuary allowance
d' $alue of leave travel commission
". In case of the retired chairman and retired members of the
union public service commission :-
a' A sum of maximum )s. 2<333 p.m. for defraying the service of
an attendant ; for meeting expenses incurred towards
secretarial assistance on contract basis .
b' The value of residential telephone free of cost ; the number of
free calls to the extent of )s. 24333

1reatment o$ provident $und .
In provident fund two people contribute. 1mployer and employee.
1mployer contributes from his business profits whereas employee
contributes from his gross basic salary.
alary means H-asic salary GFearness allowance &in terms'
Gturnover commission &sales'
Contributed
by
tatutory
provident fundAs
23 &22'
)ecogni8ed
provident ,und
@nrecogni8ed ?,
1mployeeIs Ignore Ignore Ignore
1mployerIs ,ully exempt 1xempt up to 2"J
p.a.* salary
,ully 1xempt
Interest
Credited
,ully 1xempt 1xempt up to =.4J
p.a.* salary
,ully 1xempt
6ump sum ,ully 1xempt ,ully 1xempt Taxable
6ump sum from unrecogni8ed ?,

1mployees 1mployer Interest on employees interest on
Contribution contribution Contribution employer

contribution
Ignore Taxable as I, Taxable as I,* Taxable as
I,

Section 10 (1,)
Allowance
1xempt allowance other
allowance
Amt spend HAmt 1xempt 1xempt up to It limits fully

1xempt
C@T/)F
C Conveyance allowance
@ @niform Allowance
T Travel ATransfer allowanceAtour
/ /elper Allowance
) )esearch Allowance
F Faily allowance
**Amount pent H Amount 1xempt
** ,or official purpose.

Amount 1xempt up to Income Act
Computation Allowance >33 pm
-lind or *rthopedically /andicapped +ax 2D33 pm
ChildrenIs 1ducation +ax 233 pm per child .+ax " child
ChildrenIs hostel expenses allowances +ax C33 pm per child .+ax " child
@nderground Allowance &1mployees wor0ing
in coal mine'
+ax )s. >33 pm
Tribal Area allowance +ax )s. "33 pm
Transport allowance&To employee of Transport
Co.
(3J * Amt received
+ax )s. 23333 pm
7hichever is lower
/igh Altitude Allowance
=333 to 24333 feet
+ore than 24333 ,eet
)s. 23D3 pm
)s. 2D33 pm
Island duty allowance +ax )s. C"43 pm
Counter In surgery Allowance +ax )s. C=33 pm
/ighly Active ,ield&area allowance' +ax )s. <"33 pm
+odified ,ield area allowance +ax )s. 2333 pm
,ield area allowance +ax )s. "D33 pm
"ntertainment Allo2ance u3s 1! (iii)
.overnment 1mployee
others
,ully taxable&ignore exp' Bo
deduction
Feduction uAs 2D &iii'
2A4 * -asic salary
Actual Amount )eceived
+ax )s 4333
7hichever is lower
Section 10( 14 A) Read 2ith rule 5 A
6ouse Rent Allo2ance
43J or <3J * salary
Actual /)A received
)ent paid 5 23J * salary
7hichever is lower
+etro Cities H43J
*ther cities H <3J
alary H-asic salary G FA &in terms' G Turnover Commission &ales'
)ule " A
2. The Assessee should stay in a rented house
". The rent should be actually paid.

Section 1'(5) 0er.uisites
+) .16I TC 6I./T C@T ; )emaining
Bon +onetary
pecified 1mployer
*ther
1xempt for Taxable for
1mployees all employees taxable not
taxable

7R G"L(S 1C

+ +edical ,acility
)
2
)ecreation
)
"
)efreshment
)
C
)ailway pass
)
<
)ent free accommodation
.
2
.oods
.
"
.ifts
1
2
1ducation ,acility
1
"
1*?
6 6unchAFinnerA+eals
I Interest -enefit
cholarship
T
2
TelephonesA+obiles bills
T
"
Tax on non monetary per%uisites
T
C
Transfer of +ovable Assets
T
<
TravelAtour Accommodation
C2 Credit Card ,acility
C" Club ,acility
@ @se of +ovable property
"GS
1 1lectricity
. .as #water
ervant
Section 1' (5)
+- +edical ,acility

India
outside India
Treatment in Treatment in
.)1 /ospital other /ospital
,ully 1xempt 1xempt up to )s. 24333
Cost of treatment G cost of stay Cost of travel
1xempt as per )-I 1xempt only if
.TI
up to )s. "
lacs
Cost of Treatment H1xempt for patient
Cost of travel H *ne attendant ; patient

. .overnment
) )ecogni8ed
1 1mployers /ospital
?atient
1mployee pouse children Fependent

-rother ister
?arents

)eimbursement of medical expenses
.)1 *thers
,ully exempt 1xempt up to )s. 24333
R
1
- Refresment
Refreshment like tea, coffee provided in the office during office hours is
exempt.
R
2
Recreation
.roup recreation facility provided uniformly to all employees will be
exempt.
R
4
Rail2ays or airlines+
)ailway pass provided to the railway employees ; Airlines tic0ets to
airlines employees will be exempt.
R
,
Rent $ree Accommodation
.overnment 1mployee *ther
1mployees
6icense fee as per
.overnment ,ees *wned by 1mployer /ired by
employer
?opulation ?opulation ?opulation more than /ire
charges by
@p to 23 la0hs up to "4 la0hs more than "4 la0hs employer
(.4J of 23Jof 24J of
salary alary alary
alary +eans:-
Includes Bot Included
- -asic salary F FA &not in terms'
F FA &in terms' 1 1xempt Amount
A All other Allowance 1 1mployers contribution to
?,
- -onus ? ?er%uisite
C Commission
+ +onetary ?ayment
(mportant 0oints
2' alary hould be calculated on due basis&arrears of salary#
advance salary should not be included'
"' alary should be calculated for the period during which the
accommodation is provided.
C' alary from all employers during such period will be considered.
)ent free ,urnished Accomodation
$alue of unfurnished
accommodation
Kxxx
&G' 23 J of original cost of furniture
owed ; provided by employer
&G'xxx
&G' Actual lease charges in case of
furniture ta0en on loans
&G'xxx
Taxable per%uisite value of rent Kxxx
free accommodation
,urniture includes television sets# radio# AC plant etc

Concessional )ent Accommodation &C)A'
),,@ Kxxx
&-' Amount paid to employer &xxx'
Total value of C)A Kxxx
G
1
Goods
If goods are manufactured by the employer and sold to employee at the
discount then the discount benefit will be fully exempt.
G
5
Gi$ts

@p to )s 4333 +ore than )s 4333 in Cash

1xempt Taxable ,ully
Taxable

"
1
"ducation 8acility
1mployee 1mployee children other family
,ully exempt
,ully
taxable

1mployee Institute other
Institute

up to +ore than
)s 2333 per child ) 2333 per child
,ully
taxable
1xempt ,ully Taxable

"
5
"S90( "mployees stoc: option scheme)
S2eat ".uity
?rovide Lnowhow Intellectual property otherwise
)ights
Taxable Bot
Taxable

$aluation of Taxable weat 1%uity ; others 1*?
,+$ on 1xercise date KKK
&-' Amount )ecovered from the 1mployee &KK'
Taxable $alue of ?er%uisite KKK
L Lunch
Inside *ffice outside *ffice
@?T* )s. 43 1xcess Trough Bon
otherwise
?er +eal Transferable paid
1xempt Taxable @?T* )s. 43 1xcess
?er +eal
1xempt
Taxable
An electronic meal card will also be treated as a non transferable paid
voucher.
Sec 1' (5 V() ( (nterest $ree or concessional Loan
(nterest Bene$it
6oan ta0en for Aggregate up to ) "3333 Aggregate more
)ule CA Fisease than )
"3333
,ully 1xempt ,ully 1xempt 6oan * &-I )ate-
Actual rate'
**The interest benefit is calculated on the maximum outstanding monthly
balance
S ; Scholarship
"#empt u3s 10(1!)
Stipened
,or meeting cost of )ecompense for wor0
1ducation
1xempt uAs 23&2D' Taxable as income from
As a scholarship alary
1
1
1elephone37o*ile *ills
TelephoneA+obiles provided or telephoneA mobiles bills paid or
reimbursed by the employer will be fully exempt.
1
5
1a# on non monetary 0er.uisites
Tax on Bon monetary per%uisites paid by the employer will be fully
exempt uAs 23&23CC'.
1
4
1rans$er o$ 7ova*le Assets
Computer ; 1lectronic gadgets +otor Car other Assets
43J of 7F$ "3J of 7F$ 23J of
6+
Cost Kxxx
&-' Feprecation &Kxxx'
Feprecated $alue Kxxxx
&-' ale ?rice &xxxx'
Total value of ?er%uisite Kxxx
Fepreciation should be calculated for completed years only.

1
,
;1ravel 3 1our Accommodation
/otel Accommodation
@p to 24 days +ore than 24 days
Bot taxable "<J of salary
/otel charges
Fouble accommodation
,irst =3 days +ore than =3 days
T$? of /2 or T$? of /" T$? of /2GT$? of /"
The following houses will not be taxable provided in )emote Areas such
as
+-+ining# *- *ff shore # ?-pro9ect# F-Fam# *-on shore oil exploration#
?-?ower .eneration.
/ouse provided to Fiplomats# 6eaders of opposition# /igh court or
upreme Court :udges will not be taxable.
C
1
Credit Card
The amount of expenses including membership fees ; annual fees
incurred by the employee or any member of his household which is
charged to a credit card provided by the employer or otherwise #paid for
a reimbursement by the employer shall be ta0en to be the value of
per%uisite chargeable to tax .
C
5
Clu*
- If the employer reimburses or ma0es payment of any expenditure
incurred in a club including the amount of annual or periodical fee for the
employee or any member of his household #the actual amount shall be
T$?.
- If the employer provides uniformly to all the employees the user of
health club # sports ; similar facilities there will be no taxable per%uisite .
/ /se o$ 7ova*le Assets
Telephone Computer Car *thers
1xempt Fiscussed eparately

*wned by 1mployer /ired by
1mployer

23J of cost /ire
charges
Car
,ully office use office to residence n ,ully ?rivate ?artly office
-ac0 @se partly pvt
use

&?*??'
,ully 1xempt Taxable

,ully ?rivate @se
1xpenses of 1mployer KKK
&-' )ecovered from 1mployee &KK'
&-' Fep M 23J A/ire charges &KK'
KKK
*wned by /ired by
1mployer 1mployer
0900 /se 92ned *y "mployee

1xpenses of 1xpenses of
1mployee 1mployer
Bot a per%uisite 1xp of 1mployer
KKK
&-')ecovery from 1mployee
&KK'
&-' 1xempt Amount
&KK'
Total $alue of ?er%uisite
KKK
* 1xempt Amount
@p to 2D33 CC +ore than 2D33CC

) s2>33 pm ) "<33 pm

0900 /se o2ned By "mployer
1xpenses of 1mployee 1xpenses of 1mployer
@p to 2D33 CC +ore than "<33 CC @p to 2D33 CC +ore
than "<33

)s D33pm )s =33 pm )s 2>33 pm )s
"<33 pm
** ) =33 additional for driver if provided
0er.uisite 1a#a*le only $or Speci$ied "mployees
?er%uisite in respect of gas# electric energy supply for household
consumption
1 1lectricity
. .as# 7ater
weeper# ervant
1.
pecified 1mployee Bon pecified 1mployee

Taxable 1xempt
pecified 1mployee
Firector 1mployee ubstantial Cash taxable
Interest holder salary more than
.TI up to )s. 43333 )s. 43333

Cash Taxable alary

.ross Taxable Tax
KKK
&-' 1xcludes non monetary per%uisite
&KKK'
&-' Feduction uAs 2D
&KKK'
Cash Taxable salary
KKK