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Income Tax

Income Tax - Taxable Heads of Income

Income from Salary

Income from salary consists of all remuneration due or paid to a person for services rendered by him/her as an employee. For an income to be termed as ‘salary’, you should share an ‘employee-employer relationship’ with the payer. Salary is chargeable to tax on a due or receipt basis, whichever is earlier. Remuneration for work done in India is taxable irrespective of the place of receipt.

Salary from more than one source:

If an individual receives salary income from more than one employer during the year, the income from each source is taxable as ‘salary’ in the hands of the employee. Thus, the salary received from all the employers during the year is taxable in aggregate in the employee’s hands.

            Under Section 17(1) of the Income Tax Act, salary includes the following:

  1. Wages
  2. Annuity or pension
  3. Gratuity
  4. Any fee, commission, perquisite in lieu of or in addition to any salary or wages.
  5. Any advance of salary
  6. The amount contributed by an employer towards a Recognized Provident Fund (RPF) in excess of 12 per cent of the employee’s salary and the interest in excess of 12 per cent on the balance in the RPF.
  7. Any payment received in respect of any period of leave not availed.
  8. The value of any perquisites and benefits to the employee provided by the employer.
  9. Any profit in lieu of salary, that is, any amount or compensation due to or received by an employee from his/her employer, or former employer, at or in connection with the termination of his/her employment or modifications of the terms and conditions of the employment.
  10. Any taxable amount in the RPF transferred from one employer to the other.

           With effect from April 1, 2002, salary also includes the value of any other fringe benefit or amenity provided by the employer to his employee, as may be prescribed.

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