Income From Salary
Income From Salary
Income from salary is the income or remuneration received by an individual for services he is
rendering or a contract undertaken by him. This clause essentially assimilates the remuneration
received by a person for the services provided by him under the contract of employment.
This amount of remuneration will be considered as income for the purposes of Income Tax Act
only if there is an Employer and employee relationship between the person who is making the
payment and the person who is receiving the payment.
Employer and Employee Relationship – Any payment that is received by a person will be
treated as Income under Income Tax Act if there exist an Employer and employee relationship
between the payer and payee. For the purpose of qualifying income as income from salary, their
relationship should be that of a master and servant.Where a master is a person who directs his
employee that what is to be done and how it is to be done and servant is the person who is
liable to conduct that work in the manner told by his employer.
Contents [hide]
1 Meaning of Salary
2 What is CTC?
3 Calculation of Income from salary
4 Allowances
o 4.1 Fully Taxable allowances:
o 4.2 Partly Taxable allowances:
o 4.3 Non Taxable allowances:
5 Perquisites
o 5.1 Perquisites that are taxable for all the employees:
o 5.2 Perquisites that are taxable only to specified employees:
o 5.3 Perquisites that are exempt from tax:
6 FORM 16
7 FORM 26AS
Meaning of Salary
The salary for the purpose of calculation of income from salary includes:
Wages;
Pension;
Annuity;
Gratuity;
Advance Salary paid;
Fees, Commission, Perquisites, Profits in lieu of or in addition to Salary or Wages;
Annual accretion to the balance of Recognized Provident Fund;
Leave Encashment;
Transferred balance in Recognized Provident Fund;
Contribution by Central Govt. or any other employer to Employees Pension A/c as
referred in Sec. 80CCD.
What is CTC?
CTC is one of the generic term when a person talks about salary. CTC stands for Cost To
Company. It is the amount that the company in spending on hiring and sustaining an employee.
CTC includes the salary as well as the other benefits provided to an employee which can be
meal coupons, office space rent, Provident Fund, Medical Insurance, House Rent
Allowance(HRA) and any other element that cost to the company.
It may be noted that CTC varies from the actual income from salary that a person receives as
CTC also includes variables over and above the actual salary that a person is receiving.
Basic Salary —
Add: —
2. Allowances —
3. Perquisites —
4. Retirement Benefits —
Gross Salary —
Net Salary —
Allowances
Fully Taxable allowances:
Dearness Allowance: The allowance is paid to the employees to cope with inflation.
City Compensatory Allowance: This allowance is paid to those employees who move
to urban cities.
Cash Allowance: Employer may also provide cash allowance in some cases like for
marriage or holiday purposes.
Entertainment allowance
Special allowances like allowance for travel, uniform, research allowance etc.
Allowance paid by UNO: Allowances which is received by the employees of UNO are
fully exempt from tax.
It may be noted that a person can save tax on income from salary by getting the Tax Saving
Allowances.
Perquisites
Perquisites are those payments which are received by an employee from the employer over
and above the salary.
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 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.
All the details uploaded on the form help an individual to check your tax liabilities and rectify any
error before it is too late.
For any help on ITR Filing feel free to consult the tax experts at LegalRaasta. You can file ITR
yourself via our ITR software or get CA’s help on filing income tax return. You can also use the
option of Business Return, Bulk Return or Revised Return Filing.
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