INCOME FROM SALARY
Basis of Charge
[Section 15 ] SECY
• As per Section 15, Salary consists of the following :
a) any salary due from an employer or former
employer to an assessee in the previous year,
whether actually paid or not; ( Normal salary )
b)any salary paid to him in the previous year by an
employer or a former employer though not due or
before it became due to him. ( Advance Salary )
c)any arrears of salary paid to him by employer
or former employer, if not charged to income
tax for any earlier previous year. ( Arrears of
Salary )
• KEY POINTS
• Relationship between Payer and Payee.
• Salary and wages, conceptually not different.
• Salary from more than one Source.
• Salary from former, present or prospective
employer.
• Surrender of Salary[ under Voluntary
Surrender of Salaries (Exemption from
Taxation) Act,1961. ]
• Tax free Salary
• Once salary is taxed on receipt/due basis, it will
not be charged again on falling due or receipt
basis, as the case may be.
• The assessee can claim relief u/s 89(1) for
arrears or advance salary.
• Loan from employer is not salary & not taxable,
as it is advance against salary & not advance
salary.
• Partner is not an employee of Firm, hence any
salary, bonus commission or remuneration
received by him, is not taxable as Salary, but
taxable as Business Income.
As per Sec 17(1), Salary includes the
following :
a) Wages,
b) Any Annuity or Pension,
c) Any Gratuity,
d) Any Fees, commission, perquisites or
profits in lieu of or in addition to
salary/wages,
e) Any Advance Salary,
f) Leave Salary,
g) Annual accretion to the Provident Fund
to the extent it is taxable,
h) Contribution made by the Central Govt
or any other employer to the account
of employee under a pension scheme
Computation of Income
From Salary
Particulars Amount Amount
(₹) ( ₹)
Basic Salary ..........
Allowances ..........
Profit in lieu of Salary ..........
Perquisites ..........
Gross Salary ..........
Less : Deduction u/s 16
a. Entertainment Allowance ........
[ u/s 16(ii) ]
b. Professional Tax [ u/s 16 (i) ] ......... ........
INCOME FROM SALARY ..........
1)Entertainment Allowance [Sec 16 (ii) ] :
Only Govt employees can claim following
deduction :-
a)Actual Entertainment Allowance.
b)1/5TH of Salary........[ Here, Salary = Basic Pay ]
c) Rs.5000/-
Whichever is lower.
2)Professional Tax [Sec 16 (iii) ] :
Deduction is available in the year in which professional
tax is actually paid.
If employee have paid professional tax of more than
one year then entire P.Tax so paid is allowed as
deduction.
If P.Tax is reimbursed by the employer then it will first
added as perquisite ( in case of all employees,
whether specified or not & then allowed as
