JAMIA MILLIA ISLAMIA

Faculty of law

Project

Salary, Perquisites and Allowances

Tax Law

Submitted to: Dr. Ekramuddin Sir

Submitted by: Arifa Diwan

BA.LLB (Self-finance) 6th Semester

Batch: 2017 - 2022

1
 INDEX

SERIAL Topic PAGE

NUMBER NUMBER
1. Acknowledgement 3

2. Salaries 4

3. Profits in lieu of salary 8

4. Forms or applications related to salary 10

5. Perquisites 12

6. Allowances 15

7. Recent amendment for salaried class 22

2
ACKNOWLEDGEMENT

I would like to express my special thanks of gratitude to my teacher Dr. Ekrammuddin who gave me the
golden opportunity to do this wonderful project on the topic “Salary, Perquisites and Allowances”, which also
helped me in doing a lot of research and I came to know about so many new things. I am really thankful to her.

Secondly, I would also like to thank my parents and friends who helped me a lot in finalizing this assignment
within the limited time frame.

-Arifa Diwan

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SALARIES (SECTION 15-17)

Salary is defined as the remuneration that a person receives periodically for rendering services based on an
implied or express contract.

Chargeability (Section 15)

According to Section 15 of the Act, “The following incomes” shall be chargeable to income-tax under the head
“Salaries” : -

1. Any salary due from an employer or a former employer to an assesses it the previous year, whether paid
or not.
2. Any salary paid or allowed to him in the previous year by or on behalf of an employer or a former
employer, though not due or before it became due to him
3. Any arrears of salary paid or allowed to him in the previous year by for on behalf of an employer or a
former employer, if not charged to income tax for any earlier previous year.

CASE: C.LT. v. Lady Navaljhi Tata1

JUDGEMENT: It was held that a director of a company, though holding an office, is not an employee unless
there is a contract to that effect. An agent is usually not an employee.

Perquisites or profits or any remuneration received from persons other “than the employer, would be taxable
under the head ‘Income from other sources’ even if they accrue to the employee by reason of his employment.
For example: remuneration received by a lecturer of a college for acting as an examiner in a university.

A lump sum payment made gratuitously, by way of compensation or otherwise to the widow or other legal heir
of all employee who dies. While still in active service, is not taxable as income (Circular No. 573 dated 21-8-
1990). It may be noted here that circular issued by CBDT expressing its views on a statutory provision is not
binding on court or tribunal in interpreting the statutory provision itself.2Compulsory deductions from salary

1
(1947) 15 ITR 8
2
Keshavji v. Ranji & Co. v. C.LT. (1990) 183 ITR 1
4
and the voluntary foregoing of salary due to him are mere applications of the income and the salary is
nonetheless taxable.3 But where the salary is given up or diverted before accrued it will not be taxable income.4
Money embezzled by an employee would constitute his income and therefore liable to be taxed.5

In C.LT. v. Navnitlal Sakanlal6 agreements between the company and its Managing Directors entitled them to
remuneration and also empowered. the Board of Directors to resolve in respect of any year not to pay any
remuneration to them. For the previous year relevant to AY 1973-74, the Board of Directors resolved. that “the
amount of commission payable to each of the Managing Directors” should be expended to purchase single
premium deferred annuity policies on their lives. Board’s resolution neither referred to the provision in
agreement for non-payment of remuneration nor said that the Managing Directors should not be paid any
remuneration or part thereof. In such circumstances, it was held that the amount of commission did accrue the
Managing Directors and could not be said to have been diverted. Therefore, it constituted part of their
remuneration and was includible in their hands as salaries.

Meaning of Salary Section 17(1)

According to Section 17(1) “Salary” includes -

1. Wages
2. Pension
3. Annuity
4. Gratuity
5. Advance Salary paid
6. Fees, Commission, Perquisites, Profits in lieu of or in addition to Salary or Wages
7. Annual accretion to the balance of Recognized Provident Fund
8. Leave Encashment
9. Transferred balance in Recognized Provident Fund
10. Contribution by Central Govt. or any other employer to Employees Pension A/c as referred in Sec. 80
CCD.
3
Ram Prasad v. C.L.T (1972) 86 ITR 112 (SC)
4
J.H. Desai v. C.I.T., (1995) 212 ITR 211
5
Wankaner Jain Social Welfare Society v. C.I.T., 260 ITR 241 (Mad)
6
AIR 2001 SC 235
5
The above amounts may be paid by the employer either voluntarily or under a contractual obligation. Thus the
salary for the notice period payable by the employer is also taxable. Salary and. wages signify payments for
services rendered to an employee. Bonus is taxable on receipt basis if bonus is received in arrears, the assesses
can claim relief under Section 89(1).Overtime payments are taxable. Annuity is a sum of grant paid every year.
Annuity paid by the employer is included in salary and if paid by other outside agencies is taxed under “Income
from other sources”.

Gratuity is paid to an employee for long and meritorious services. rendered by him to an employer. It is not paid
to an employee gratuitously or merely as a gift. Gratuity is as much taxable as a contractual salary subject to
Section 10. It is exempt up to a certain extent under Section 10. Gratuity received by an employee is taxable
under the head “salary” whereas gratuity received by the legal heir of the premium paid by the employer on an
accident policy taken the employee is not a perquisite. Any fees and commissions payable by the employer to
the employee is taxable as salary. Fees and commission are chargeable as salary irrespective of the fact that
they are paid in addition to or in Hen of salary. However, if fees or commission is paid to a person who is not
an employee-is not taxable under the head “salary”. Compensation awarded by the court for wrongful
termination of services is not ‘salary’.7 Rent-free accommodation provided to a foreign technician is not a
perquisite as he continued to be the employee 3 of a foreign company. 8
Advance salary is taxable or receipt basis irrespective of incidence of tax. Arrear salary is taxable on receipt
basis, if the same has not been subjected to tax on due basis. However relief can be claimed in this case under
Section 89.
Leave salary received by a central/state Government employee in respect of period of earned leave at his credit
at the time of retirement superannuation, is exempt from tax. But in the case of non-Government employee
(including an employee of a local authority or public sector undertaking) leave salary is exempt from tax fully
or partially in some cases. Salary in lieu of notice period is taxable under Section 15 on receipt basis.9

Salary paid to a partner is.an appropriation of profit and is not chargeable under the head “salaries” but is
chargeable under the head profits and gains of business profession”.

Retrenchment compensation received by a workman under the Industrial Disputes Act, ‘1947, or any other Acts
or contract of service, or award etc. is exempt from tax to a certain extent.

7
All India Reporter v. Ramchandra(1961) 41 ITR 446 (SC)
8
N.Sciandra C.I.T. ITR 675 (Cal.)
9
V.D. Talwar v. C.LT. (1963) 49 ITR 122 (SC)
6
Nevertheless, not all income is termed as salary. If a professional is being paid for his/her expertise in a
professional capacity, the term that is used is ‘Professional/Technical Fees’.

Likewise, a partner earning salary from his/her company will charged taxes under ‘Profits & Gains from
Profession or Business’.

Some other examples include the salary paid to a Member of Parliament or a Member of Legislative Assembly.

1. Salary is taxed on ‘due basis’ or ‘receipt basis’, whichever is earlier.

2. Income from salary taxable during the year consists of following:

i. Salary due from employer (including former employer) to taxpayer during the previous year,
whether paid or not;
ii. Salary paid by employer (including former employer) to taxpayer during the previous year before
it became due;

a) Arrear of salary paid by the employer (including former employer) to taxpayer during
the previous year, if not charged to tax in any earlier year.

PROFITS IN LIEU OF SALARY

“Profits in lieu of Salary” includes

1. The amount of any compensation due to or received by an assessee from his employer or former
employer at or in connection with the term inaction of his employment or the modification of the terms
and conditions relating thereto;

2. Any payment (other than any payment referred to-in clause (10), clause (10 A), clause (10B), clause
(11), clause (12), or clause (13) or clause (13A) of Section 10, due to or received by an assessee from an
employer or as former employer or from provident or other fund, to the extent to which it does not
consist of contributions by the assessee or interest on such contributions or any sum received under a
Keyman insurance policy including the sum allocated by way of bonus on such policy.

Explanation. For the purposes of this sub-clause, the expression: “Keyman insurance policy” shall have the
same meaning assigned to it in clause (10D) of Section 10.

3. Any amount due to or received whether in lump sum or otherwise, by any assessee from any person
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 i. Before his joining any employment with that person

ii. After cessation of his employment with that person

Thus the “profit in lieu of salary” includes the following

(1) Compensation on termination of employment: The amount of any compensation due to or received by
an assessee from his employer at in connection with the termination of his employment or the
modification of the terms and conditions relating there will be profits in lieu of salary.10 The termination
may be due to retirement, premature, termination, resignation or otherwise.

(2) Payment from an unrecognized provident fund or an unrecognized superannuation fund: Any payment
due to or received by an assessee from an unrecognized provident fund or an unrecognized
superannuation fund to ‘the extent to which-such payment does not consists of contributions by the
employee or interest on such employer’s contribution, will be regarded as profits in lieu of salary.11
Thus, the employer’s contribution and interest thereon is taxed as profit in lieu of salary.

(3) Payment under Keyman Insurance Policy: Any payment due to or received by an employee under a
Keyman Insurance Policy including the sum allocated by way of bonus-on such policy will be regarded
profits in lieu of salary.12

(4) Any amount due or received before joining or after cessation of employment: Any amount due to or
received whether in lump sum or otherwise by an assessee from any person before joining any
employment with that person; (b) after cessation of his employment with that person13

Compensation for loss of employment though capital receipt is taxable as profits in lieu of salary. Any other
payment received from the present or past employee is also taxable as profits in lieu of salary:

The following payments made under clauses 10, 10A, 10B, 11, 12 and
13 A- of Section 10 will not be included in “Profits in lieu of salary” :

1. Death cum-retirement gratuity to the extent.14

10
Section 17(3)(1)
11
Section 17
12
Section 17(3)(ii)
13
Section 17 (2)(iii)
14
Section 10 (10)
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 2. Certain amounts received in commutation of pension.15
3. Compensation received on retrenchment, closure or transfer of an undertaking to the extent.16
4. Any payment from a provident fund established under the Provident Fund Act, 1925.17
5. The payment of accumulated balance due and becoming payable to an employee participating in a
recognized provident fund, to the extent provided in rule 8 of Part A of the Fourth Schedule.18
6. Cash house rent allowance, wholly or in part in certain circumstances as provided.19

APPLICATIONS OR FORMS RELATED TO SALARIES

1. Form 12 BB

Investment declaration has to be done in the beginning of a financial year. Your employer asks you to declare
your tax-saving investments for the year to be able to deduct tax accordingly from your monthly salary.
Investment declaration is important for you because it can lead to higher in-hand salary.

Form 12 BB has to be submitted only when the employers ask for a declaration at the start of the financial year
to estimate TDS calculations for the whole year. Form 12BB has to be later submitted towards the end of the
financial year. Form 12BB does not have to be submitted to the tax department. It has to be submitted to your
employer.

2. FORM 12B

Form 12b is an income tax form that needs to be furnished according to Rule 26A by an individual joining a
new organisation or company in the middle of the year. The main purpose of the form is to furnish details of the
income earned by the individual from the previous employer. Every new employee has to submit Form 12B to
their new employer. Furnishing Form 12B is not compulsory.

15
Section 10 (10A)
16
Section 10 (10B)
17
Section 10 (11)
18
Section 10(12).
19
Section 10(13 A).
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 3.  FORM 16

Form 16 is a certificate, in which employer certifies the details about the salary and the tax deducted at
source from the salary during the year. Form 16 is issued once in a financial year, on or before 31st May of the
next year immediately following the financial year in which tax is deducted. Form 16 has two parts:

Part A- It contains the information of the employer & employee, like name & address, PAN and TAN details, a
period of employment, details of TDS deducted & deposited with the government.

Part B- It contains the details of salary paid, other incomes, deductions allowed, tax payable etc.

Form-16 is a certificate of TDS and in case if the taxes have already been deducted from salary then Form – 16
will not apply. However the employer must issue a salary statement.

4.  FORM 26AS

Form 26AS is required to be issued Under Section 203AA of the Income-tax Act. It is a consolidated tax credit
statement issued to a taxpayer and shows the Income tax that has been deposited with the government with
respect to the taxpayer and Form 26AS.

Form 26AS Contains all the details of the taxes paid and deposited with the Income Tax Department.

5. Form 10C

Form 10C is the primary form to be submitted for claiming the benefits under the employee pension scheme.

The contributions made by your employer towards your PF account is segmented into EPF funds and EPS
funds.

The part of the contribution from your employer that goes into the EPS scheme can be withdrawn by using
Form 10C.

All members of the EPS scheme satisfying the below mentioned criteria can apply for Form 10C:

 A person who has left employment before completion of 10 years and who has attained 58 years of age
before completion of 10 years of service.
 A person who has completed 10 years in service and not attained 50 years of age, or a member who is
between 50 to 58 years of age and is unwilling to settle with reduced pension.
 Family/nominee of a member who died before completing 10 years of service and was more than 58
years at the time of death.

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ALLOWANCES

Allowances are fixed amounts, apart from salary, which are paid by an employer for the purpose of meeting
some particular requirements of the employee. There are generally three types of allowances for the purpose of
income tax- taxable, fully exempted and partially exempted.

1. Fully Taxable Allowances

i. Dearness Allowance

 The allowance is paid to the employees to cope with inflation.

ii. Entertainment Allowance

This is an allowance that is provided to the employees to reimburse the expenses which are incurred on
the hospitality. It is taxable as salary income. In case of Government  

Employees it is first added to salary and thereafter  least of following is deductible from salary in
respect of entertainment allowance.

           a)  Rs.5,000/-  or

           b) 20% of Salary or  

          c) Amount of entertainment allowance

 Salary for this purpose excludes any allowance, benefit or other perquisites.

iii. Overtime Allowance

 Overtime allowance is the allowance which is paid to the employees for working above the regular
work hours.

iv. City Compensatory Allowance

This allowance is paid to those employees who move to urban cities. Employers generally provide cab
facility to and from the office and residence of the employees. Such a facility is not taxed as a perquisite
for the employee. The facility would be an expense for the employer. 
As per the Indian Income Tax Act, use of any vehicle provided by a company or an employer for a
journey by the employee from his residence to his office or another place of work, shall not be regarded
as a taxable perquisite, even if provided to him free of cost or at a concessional rate.
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 v. Project Allowance

 When an employer provides an allowance to the employees to meet the project expenses.

vi. Tiffin/Meals Allowance

Employees may be provided with meal allowances in some cases. our employer may provide you with
meal coupons such as Sodexo. Such food coupons are taxable as perquisite in the hands of the
employee. However, such meal coupons are tax exempt up to Rs 50 per meal. A calculation based on 22
working days and 2 meals a day results in a monthly benefit of Rs 2,200 (22*100). Consequently, the
yearly exemption works up to Rs 26,400.

vii. Cash Allowance

Employer may also provide cash allowance in some cases like for marriage or holiday purposes.

2. Partly Taxable allowances:

i. House Rent Allowance

It is the allowance that an employer pays to his employee for accommodation. HRA is given by
employer for meeting the cost of living of the employee. HRA is exempt to the extent of least of
following amount

a) Actual HRA received,

b) Rent paid - 10% of basic salary & DA,

c) 50% of basic salary & DA for Mumbai, Delhi, Kolkata and Chennai or 40% for other cities

ii. Special allowances

Like allowance for travel, uniform, research allowance etc. Under this allowances are divided in
following two categories.

a) When exemption depends upon actual expenditure incurred by the employee (Official
Allowances):- In this category allowances are exempt u/s 10 to the extent of amount of

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 allowance is used for the purpose for which the amount is received. In simple the amount of
exemption under this category is least of following

 Amount of allowance; or
 Amount used for the purpose for which allowance is given

On the above basis exemption is available in case of the following allowances :-

 Travelling Allowance / Transfer Allowance

 Conveyance Allowance
 Daily Allowance
 Helper Allowance
 Research Allowance
 Uniform Allowance

b) When exemption does not depend upon actual expenditure incurred by the employee (Special
Allowances) :- In this category the amount of exemption does not depend upon actual
expenditure incurred by the employee but depends upon amount specified in the income tax
rule in respect of concerned allowance specified under this category. Allowances received
under this category exempt to the extent of lower of following

 The amount of allowance; or

 The amount specified in the income tax return

iii. Special allowance to meet personal expenses 

Like children’s education allowance, children hostel allowance etc.

3.  Non Taxable allowances:

i. Allowances that is paid to the Govt. servants abroad

When the government employee of India are paid allowances when they are serving abroad.

ii. Sumptuary allowances

Sumptuary allowances which are paid to the judges of HC and SC are not taxed.

iii. Allowance paid by UNO

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  Allowances which is received by the employees of UNO are fully exempt from tax.

iv. Compensatory allowance paid to judges

When a judge receives a compensatory allowance, it is also not taxable.

PERQUISITES

Perquisites are those payments which are received by an employee from the employer over and above the
salary. There are two types of taxability of perquisites:

1. Tax on perquisites

Perquisites added to the Head of Salaries while filing Income tax return are taxed by the government u/s 17(2)
of the Income Tax Act.

2. Tax-free perquisites

Some types of perquisites are tax-free in the hands of the employee. For effective tax planning and reduction of
tax liability, the employer and employee must be aware of such tax-free perquisites

FULLY AND PARTIALLY TAXABLE PERQUISITES

The following perquisites are fully taxable in the hands of all employees receiving such perquisites:

1. Rent free accommodation:

The rent free accommodation provided to employees by their employer is taxable. Since the employees are
provided rent free accommodation, the amount of income accruing to them cannot be determined by them.
Accordingly, there is prescribed manner for calculating income chargeable to tax as perquisite. The manner of
calculating income chargeable to tax as perquisite for rent free accommodation is as follows:

Income
Category of Employees Unfurnished Accommodation Furnished Accommodation

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 1) Provided to a Judge of
High Court, Supreme In case of Rent-Free Official
In case of Rent-free Official Residence: Nil
Court2) Provided to an Residence: Nil
Officer of Parliament

(a) Same as Unfurnished

Provided to Central/ State
Government employees
Accommodation(b) 10% p.a.
(a) License fees determined by the Central/
Of the cost of furniture
State Government
If such furniture is hired, then
hire charges payable.

Provided to any other employee

(i) 15% of salary in cities having population (a) Same as Unfurnished

1) Where the exceeding 25,00,000(ii) 10% of salary in Accommodation(b) 10% p.a.
accommodation is owned by cities having population between 10,00,000 Of the cost of furniture
the employer and 25,00,000(iii) 7.5% of salary in other If such furniture is hired, then
areas hire charges payable.

(a) Same as Unfurnished

2) Where the Accommodation(b) 10% p.a.
Lower of the following:(i) Rent Payable
accommodation is taken on Of the cost of furniture
or(ii) 15% of salary
rent by the employer If such furniture is hired, then
hire charges payable.

Lower of the following:(i)

Accommodation provided in Not Applicable since Hotel is presumed to 24% of salary or(ii) Rent
a hotel be furnished. (Room Fare/ Charges)
Payable

2. Concession in rent:

Some employers provide the employees with accommodation at rates lower than normal market rates. This
reduction in rates is known as concession in rent. The income chargeable to tax as perquisite as concession shall
be determined as:

(i) Amount of Income chargeable to tax as above

(ii) Less: Amount of rent payable/ paid to the employer. 

3. Payment by the employer in respect of an obligation of employee: 

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In this case, the amount is liable to be paid by the employee and the employer pays the same. Example: Self-
Assessment Tax of the employee is paid by the Employer.

4. Sweat Equity allotted or transferred to the assessed:

The Companies in appreciation of its employees or with an aim to achieve a particular objective grants an
option to the employees to subscribe equity shares at nil value or at concessional rates than the current market
prices to its workforce. If the employee exercises such option and subscribes to such shares at nil or
concessional rates, then it forms part of perquisites. 

5. Amount of any Contribution to an approved superannuation fund:

Employer’s contribution to superannuation fund is a perquisite.

The tax treatment for approved superannuation fund is as follows:

i. Employer’s Contribution to Superannuation Fund: Up to Rs. 1,50,000/- exempt in the hands of the
employee.
ii. Employee’s Contribution to Superannuation Fund is allowed as deduction under Chapter VIA. (Subject
to the limits specified)
iii. Interest accumulated on such fund is exempt from tax.
iv. Payment of balance of fund:
v. To the employee on retirement
vi. To the employee on disablement
vii. To the legal heirs on death of the employee 

6. Transport Facility and Valuation of Free or Concessional Tickets:

i. The Value of any benefit or amenity resulting from the provision by an employer:

ii. who is engaged in the carriage of passengers or goods,

iii. to any employee or to any member of his household for personal or private journey free of cost or at
concessional fare,

iv. in any conveyance owned, leased or made available by any other arrangement by such employer for the
purpose of transport of passengers or goods

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 7. Valuation of benefit of provision of domestic servants

If the employee or any member of his household are provided with domestic servants such as sweeper,
gardener, watchman or personal assistant then the benefits so received by the employee are taxable as
perquisites in the hands of the employee. 

8. Utility such as gas, electricity or water supplied by employer

If the employer pays to the utility provider on behalf of the employee or if the employer himself provides such
utilities then the benefits so received by the employee are taxable as perquisites in the hands of the employee. 

9. Free or concessional educational facilities

If the employer provides free or concessional educational facilities from the educational institutions maintained
and owned by the employer or if free educational facilities are allowed in any other educational institution then
the benefits so received by the employee are taxable as perquisites in the hands of the employee.

10. Interest-free or concessional loan

The value of the benefit to the employee as a result of interest-free loan or concessional loan for any purpose
provided to the employee or any member of his household is a taxable perquisite. 

However, this perquisite will be not be chargeable to tax in any of the following cases:

i. If such loan is provided for the purpose of treatment of diseases such as cancer, tuberculosis, etc.
However, out of the amount of loan provided, if the employee receives reimbursement from any
medical insurance scheme, then such amount shall not be exempt.
ii. Amount of loans made to an employee does not exceed Rs. 20,000/-. 

11. Free or concessional food and non-alcoholic beverages

If the employer provides free or concessional food and/ or beverages such as tea, coffee etc., then the benefits
so received by the employee are taxable as perquisites in the hands of the employee. However, if the following
are provided by the employer then they are not taxable in the hands of employees as perquisites:

i. Free food and beverages such as tea, coffee etc. provided by the employer to an employee during
working hours at office or business premises less than Rs. 50/- per meal.
ii. Vouchers provided having value less than Rs. 50/- per meal
iii. Tea or Snacks provided during working hours

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 iv. Free food and beverages such as tea, coffee etc. provided during working hours provided in a remote
area or an offshore installation. 

12. Gifts or Vouchers

Gift or vouchers received by employees or by member of his household on ceremonies or occasions are taxable
perquisites in the hands of the employees. However, if the value of such gifts in totality do not exceed Rs.
5,000/- then such gifts are not taxable as perquisite in the hands of the employees. 

13. Reimbursement of credit card expenses

If the employer reimburses expenses incurred by the employee or any member of his household using a Credit
card then the benefits so received by the employee are taxable as perquisites in the hands of the employee.

14. Club expenditure

If the employer pays or reimburses for the periodic subscription of a club for the employee or any member of
his household then the benefits so received by the employee are taxable as perquisites in the hands of the
employee.

However, if the following are provided by the employer then they are not taxable in the hands of employees as
perquisites:

i. If the use of health club, sports and such facilities are provided uniformly to all employees by the
employer.
ii. Such expenditure is incurred wholly and exclusively for business purposes and if the expenditure is
properly documented by the employer. 

15. Use of movable assets

If movable assets such as laptops are provided by the employer to the employee then the benefits so received by
the employees are not taxable in the hands of the employee. However, other movable assets such as furniture,
car etc are provided by the employer to the employee than the benefits so received by the employee are taxable
as perquisites in the hands of the employee. 

16. Transfer of movable assets

18
If the employer transfers any movable assets such as computers and electronic items, motor cars etc. in the
name of the employee than the benefits so received by the employee are taxable as perquisites in the hands of
the employee. 

FULLY EXEMPT PERQUISITES

The following perquisites are fully exempt from tax subject to compliance of conditions specified: 

Perquisite Explanation

Telephone Telephone provided by the employer to his employee at his residence.

Transport Facility provided by an employer engaged in the business of carrying

Transport Facility of passengers or goods to his employees either free of charge or at concessional
rate

Privilege passes and

These are provided by Indian railways to its employees.
Privilege ticket

Perquisites allowed
Perquisites allowed outside India by the Government to a citizen of India for
outside India by the
rendering services outside India
Government

Employer’s Contribution
Employer takes a single insurance of all the staff and contributes towards the
to staff group insurance
insurance premium.
scheme

Recreational Facilities Subsidized lunch or dinner provided by the employer.

Amount spent on training This includes amount paid for refresher management course including expenses
of employees on boarding and lodging.

Sum payable by employer Funds include Recognised Provident Fund, Approved Superannuation Fund or
to an Approved Funds Deposit-linked insurance fund.

The following are exempt:(i) Value of medical treatment in a hospital

maintained by the employer to the employee or any of his family members(ii)
payment by the employer for treatment in a Government Hospital(iii) payment
Medical Facilities
by the employer for treatment of prescribed diseases in any approved
hospital(iv) Mediclaim insurance premium paid by the employer for the
employee(v) reimbursement up to Rs. 15,000/- of expenditure actually incurred

19
 by the employee for self or any of his family members.

This includes the following:(i) medical treatment of the employee or any

Amount paid towards
expenditure incurred
outside India on medical
treatment
member of the family of such employee outside India, (ii) travel and stay abroad
of the employee or any member of the family of such employee for medical
treatment(iii) travel and stay abroad of one attendant who accompanies the
patient in connection with such treatment. Conditions:(i) The amount of
exemption will be limited to the amount approved by RBI (ii) If the employee’s
taxable income before deductions is more than Rs. 2,00,000/- then the
expenditure on travelling of the patient and the attendant shall be fully taxable.

Conveyance Facility Conveyance facility provided to Supreme Court and High Court Judges.

Payment of premium on
personal accident  
insurance policies

 Family means the following:

1. Self, Spouse, Children (whether or not dependent and whether or not married)
2. Parents, Brothers and Sisters (wholly or mainly dependent on the individual)

RECENT AMENDMENT FOR SALARIED CLASS

As per an amendment in the Budget 2018, tax exemption on medical reimbursement amounting to Rs. 15,000
and transport allowance amounting to Rs. 19,200 in a financial year have been replaced with a standard
deduction of Rs. 40,000 (For FY 2018-19) and Rs. 50,000 (For FY 2019-20).

With this, I have reached to the end of this Article. I have tried to address some of not much talked areas in
Salary. Besides discussing about taxability of various allowances and perquisites (which is often formula based
in this Chapter), the main purpose was to make masses aware of something which is not much known. Hope the
content of the article helps.

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CONCLUSION

As already pointed out, no hard and fast parameters can be laid-down for the purpose of tax-planning in respect
of income from ‘Salaries’. Only broad guidelines may be provided in this regard and the same have been
discussed in the preceding paragraphs.

In the light of the aforesaid reasons, the Human Resource Department (HRD) of an organization will have to try
different permutations and combinations in respect of the pay-package of the employees of the organization, on
the basis of their peculiar needs and circumstances.

The aforesaid broad guidelines may be used as tax-planning measures in respect of the pay-package of the
employees of an organization.

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REFRENCES
Books
1. Singhania, Vinod K., Direct Taxes: Law And Practise, (New Delhi: Taxmann Publications Ltd.,
50th Edition, 2013)

Statutes
1. INCOME TAX ACT, 1961

Articles
1. https://www.iitk.ac.in/new/data/Finance_Officer_Office/Incometax_valuation_perquisites_2008.pdf
2. https://www.saralpaypack.com/blogs/perquisites-in-salary/

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