Salaries.

Sec.15,16,and 17 of the income tax Act deal with the computation of income under the head salaries. Important concepts. Employer and employee relationship. Surrender of salary. Place of Accrual(sec.9(1). Tax free salary. Foregoing of salary. Salary paid by Foreign Govt/ Enterprise. Salary due or received in foreign currency. How to compute salary in the grade system.

Basis of charge(sec.15)
As per sec.15, the following income shall be chargeable to income tax under the head Salaries: Any salary due from an employer or a former employer to an assessee in the previous year, whether paid in the previous year or not. Any salary paid or allowed to him in the previous year by or on behalf of an employer or former employer though not due in that previous year or before it became due to him, Any arrears of salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer, if not charged to income tax in any earlier previous year. Arrear of salary. Basis of Accounting.

Meaning of Salary.
Sec.17(1) gives an inclusive definition of Salary. Salary includesWages, Any annuity or pension, Any gratuity, Any fee, commission, perquisites or profit in lieu of or in addition to any salary or wages, Any advance of salary, Any payment received by an employer in respect of any period of leave not availed by him, The annual accretion to the balance to RPF in excess of 12% of employees salary and interest in excess of 9.5% p.a.etc.

Allowances. Meaning and type of allowances.

Allowance is a fixed monetary amount paid by the employer to the employee for meeting some particular expenses, whether personal or for the performance of his duties. These allowances are generally taxable and are to be included in the gross salary unless a specific exemption has been provided in respect of any such allowance.

Allowances which are fully taxable.

Dearness allowance (DA) City compensatory allowance (CCA) Medical allowance, Lunch allowance/ tiffin allowance, Overtime allowance Servant allowance, Warden allowance, Non-practising allowance Family allowance,

Prescribed allowances which are exempt to a certain extent sec.10(14).

Special allowance for performance of official duties. (sec.10(14)(i). Allowances to meet personal expenses.(sec.10(14)(ii).

Special allowances which are exempt to the extent of actual amount received.
Travelling allowance, Daily allowance, Conveyance allowance, Helper allowance, Academic allowance, Uniform allowance,

 Children education allowance, Hostel expenditure allowance, Transport allowance,

Allowances to meet personal exp.which are exempt to the extent of amount received or limit specified,

Allowances to meet personal exp.where exemption is allowed upto certain % of amount received. Allowance allowed to transport employee,(70% of expenditure or Rs 6000 whichever is less).

How to compute salary income.

Basic salary --------DA CCA HRA Bonus ,commission, etc. Add-value of perquisites Employers contribution in excess of 12% of salary. Interest credited to RPF in excess of 9.5% Gross salary. Less-deductionsEntertainment allowance(sec.16(ii) Employment tax(sec.16(iii) Net income chargeable to tax under the head salary

Perquisites.
Perquisites are the benefits or amenities in cash or kind, or in money or moneys worth and also amenities which are not convertible into money, provided by the employer to the employee whether free of cost or at a concessional rate. Their value , to the extent go to reduce the expenditure that the employee normally would have otherwise incurred in obtaining these benefits and amenities, is regarded as part of the taxable salary.

Perquisites which are taxable in the hands of all categories of employees.

Rent free accommodation, may be furnished or unfurnished. Any concession in the matter of rent in respect of the accommodation. Any sum paid by the employer in discharging the monetary obligation of the employee. The value of any other fringe benefits.

Perquisites which are taxable only in the case of specified employees.

Services of sweeper, gardener, watchman or personal attendant etc. Free or concessional gas, electric energy etc. Free or concessional educational facilities, Use of motor car, Personal or private journey provided free of cost,

Who is a specified employee (sec.17(2)(iii))

If he is a director of a company or, He ,the employee, has a substantial interest in the company (sec.2(32))carrying not less than 20% of the voting rights. His income under the head Salaries exclusive of all the benefits,exceeds Rs 50000.