SALARY

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• BASIC SALARY
• Dearness Allowance (D.A.)
• Commission
• Bonus
• Gratuity
• Leave Salary Encashment
• Pension
• Retrenchment Compensation
• VRS
• Other Receipts in lieu of Salary

SALARY
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Income from Salary

• Gross SalaryAs per defination u/s17(1)
• Basic Salary
• Taxable portion of gratuity,pension,LTC,etc
• Taxable portion of allowances
• Taxable portion of perquisites
• Profit in lieu of Salary
• Taxable portion of contribution to RPF made by
  employer
• GROSS SALARY
• LessDeduction u/s 16
• 16(ii) Entertaintment Allowance
• 16(iii) Professional Tax
• INCOME FROM SALARY

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Deductions u/s 16

• Entertainment allowance
• This allowance is applicable to central state
  government employees
• Deduction Lease of following
• 1.5000
• 2. 20 of Basic Salary
• 3.Amount Actually received
• .Professional TaxSec 16(ii)
• Deduction is amount actually paid during the
  previous year

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• Special Allowance( Rule 2BB)
• Sec 10(14)(i) Official The amount given to meet
  expenses related to employment. The exemption is-
  Amt of actual expenditure or amount of allowance,
  whichever is less.
• These allowances are Traveling allowance, Daily
  allowance, Helper allowance, Uniform allowance

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Sec10(14)(ii) Personal The allowance given to
meet personal retirement of the employee. The
exemption is amt of allowance or limits
specified whichever is less
Particular Exemption
Children Education Allowance Rs.100 p.m per child (max 2 children)
Children Hostel Allowance Rs.300 p.m per child (max 2 children)
Allowance for transport sector employees 70 of amount received or Rs.6000pm whichever is less
Transport/Conveyance allowance( for journey between place of duty residence Rs.800 pm for general or Rs.1600p.m for handicapped
Mining allowance 800p.m
Tribal Area Allowance 200p.m
Compensatory field re allowance 2600p.m
Compensatory Modified Field Area allowance 1000p.m
Counter insurgency allowance 3900p.m
Underground Allowance 800p.m
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House Rent Allowance
Minimum Of Following Shall Be Exempted u/s
10(13A) 1) Actual Received 2) 50 or 40 of
Salary 3) Rent Paid- 10 of Salary
NOTE 1) 50 When house is situated in a metro
city, else 40. 2) Salary BasicD.A.(if terms
so provide) turnover based commission
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Sec10(7) Foreign Allowance

• Any allowance or perquisites paid or allowed
  outside India by the government to a citizen of
  India, for rendering services outside India, is
  fully exempt from tax
• Allowances to high court judges u/s 22A(2) of the
  high court judges Act,1954
• Sumptuary allowance given to High court Supreme
  court judges
• Allowance received by an employer of UNO from hid
  employer

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GRATUITY sec 10(10)
During Continuation Of Service
On Termination Of Service
If Non Government Employee
Covered Under PGA
Fully Taxable
YES
YES
NO
NO
Minimum Of Following Exempted 1) Actual Gratuity
Received 2) Rs. 3,50,000/- 3)1/2 month Avg
Salary X Completed Year of Service
Minimum Of Following Exempted 1) Actual Gratuity
Received 2) Rs. 3,50,000/- 3) P.M. Salary X
Completed Year of Service X 15/26
Fully Exempt
Note PGA PAYMENT OF GRATUITY ACT SALARY
BASICD.A. COMPLETED YEAR includes every
completed year period in excess of 6 months
shall be treated as a year
Note AVG. SALARY (10 MONTHS BASIC
SALARYD.A.TURNOVER BASED COMMISSION) /
10 COMPLETED YEAR ignores ANY FRACTION
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LEAVE SALARY ENCASHMENT sec10(10AA)
During Continuation Of Service
On Termination Of Service
Fully Taxable
If Non Government Employee
YES
Minimum Of Following Exempted 1) Actual leave
encashment Received 2) Rs. 3,00,000/- 3) 10
Months Average Salary 4) 30 Days Average Salary
For Every Completed Year Of Service, Subject To
Leaved Availed During The Tenure Of Service.
NO
Fully Exempt
Note AVG. SALARY (10 MONTHS BASIC
SALARYD.A.TURNOVER BASED COMMISSION) / 10
LAST 10 MONTHS EXACT FROM THE DATE OF
RETIREMENT. COMPLETED YEAR ignores ANY FRACTION
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PENSION sec10(10A)
UNCOMMUTED PENSION
COMMUTED PENSION
FULLY TAXABLE
IF NON GOVERNMENT EMPLOYEE
ASSESSEE RECEIVED GRATUITY
YES
YES
NO
NO
FULLY EXEMPT
ONE HALF OF TOTAL PENSION COMMUTED SHALL BE
EXEMPTED
ONE THIRD OF TOTAL PENSION COMMUTED SHALL BE
EXEMPTED
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RETRENCHMENT COMPENSATION sec10(10B)
If Compensation Paid Under Any Scheme Approved
By The Central Government.
In any other Case
MINIMUM OF FOLLOWING SHALL BE EXEMPTED a) ACTUAL
AMOUNT RECEIVED b) Rs.5,00,000/- c) ANY AMOUNT
CALCULATED UNDER INDUSTRIAL DISPUTE ACT,1947 i.e
Average of last 3 months8 a5/26 No of
completed years of service and part there in
excess of 6 months
Nothing Shall Be Taxable.
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VOLUNTARY RETIREMENT
In any other Case
RECEIVED FROM SPECIFIED EMPLOYERS
MINIMUM OF FOLLOWING SHALL BE EXEMPTED a) ACTUAL
AMOUNT RECEIVED AS PER V.R.S. GUIDELINES or
b)Rs.5,00,000/-
FULLY TAXABLE
GUIDELINES- a)COMPLETED AGE OF 40 YEARS OR
COMPLETED 10 YEARS OF SERVICE (IT IS NOT
APPLICABLE ON PUBLIC SECTOR COMPANY) b)THIS IS
FRAMED TO REDUCE THE STRENGHT OF EMPLOYEES. c)THE
VACANCY CAUSED BY VRS IS NOT TO BE FILLED UP
d)THE RETIRING EMPLOYEE IS NOT EMPLOYED IN
ANOTHER COMPANY BELONGING TO THE SAME
MANAGEMENT e) THE AMOUNT OF COMPENSATION DOES
NOT EXCEED 3 MONTHS SALARY FOR EACH COMPLETED
YEAR OF SERVICE or SALARY AT THE TIME OF
RETIREMENT x BALANCE MONTHS OF SERVICE LEFT
SPECIFIED EMPLOYERS - a)COMPANY b)LOCAL
AUTHORITY c)CO-OPERATIVE SOCIETY d)ANY AUTHORITY
ESTABLISHED UNDER CENTRAL/STATE/PROVINCIAL
ACT e)SPECIFIED UNIVERSITY f)INDIAN INSTITUTE OF
TECHNOLOGY(IIT) g)STATE GOVERNMENT h)CENTRAL
GOVERNMENT i)NOTIFIED INSTITUTION j)NOTIFIED
INSTITUTION OF MANAGEMENT (IIM)
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Sec10(11,12,13) Any sum received from PF,RPF,SAF
Type of fund Employer Contribution principal) Employers contribution interest) Employee's Contribution principal) Employees Contribution interest) Amount withdrawn on retirement
SPF Exempt Exempt Deduction u/s 80 c Exempt Exempt u/s 10(11)
RPF Exempt up to 12 of salary Exempt up to 9.5 Deduction us 80 c Exempt up to 9.5 Exempt subject to condition. If not then RPF treated as URPF
URPF Exempt Exempt No Deduction us 80 c Exempt Employees contribution exempt. Interest on employee taxable under IOS. Employer contri taxable as salary
PPF NA NA Deduction us 80 c Exempt Exempt u/s 10(11)
Approved Super annuation fund Exempt Exempt Deduction us 80 c Exempt Exempt u/s 10(3)
Approved gratuity fund Exempt Exempt NA NA Exempt u/s 10(10)