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Meaning of Salary

Introduction

What is taxable under the head Salary?
  • Salary
  • Perquisites
  • Profit in lieu of Salary
What is Salary?
Section 17(1) defines 'salary' to include:
(i)wages;
(ii)any annuity or pension;
(iii)any gratuity;
(iv)any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages;
(v)any advance of salary;
(va)leave encashment;
(vi)the annual accretion to recognised provident fund to the extent of the following:
 a)   Employer's contribution in excess of 12% of salary;
 b)   Interest on the balance in the provident fund account credited in excess of 9.5%
(vii)the accumulated transferred balance from unrecognised provident fund account to a recognised provident fund account to the extent it is chargeable.
(viii)the contribution made by the Central Government [or any other employer] in the previous year, to the account of an employee under a pension scheme referred to in section 80CCD
What is Perquisite?

Perquisites are emoluments or benefits received from an employer, in addition to salary, bonus, allowances, gratuity, etc. They include rent-free accommodation, free electricity, gas or water supply, free domestic servant, value of any benefit or amenity provided, obligation of employee, specified security or sweat equity shares, etc. provided / paid for by the employer. These perquisites are added to the Salary Income for arriving at the tax liability as per the applicable slabs.

 

 

Meaning of Salary