Define Salary Income &Important point for computation

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Define Salary Income

As per sec 1A(i),Salary Income includes:

Table of Contents


ii.Annuities or pension




vi.Prequisities etc.

vii.Any advance salary

viii.Payment received by any employee in respect of any period of leave not availed by him or leave salary.

ix.Contribution by the employers towards recognised provident fund to the extent it is chargeable to tax

x.Interest allowed for the employee provident fund to the extent it is chargeable to the tax.

xi.Contribution made by the central Govt in the previous year to a notified pension scheme opened in the name of the employee.

Important point for computation of salary income.

The following important points must be understood for computation of salary income:

i. An income will be taxable under the head of salary, if the relationship between employer is like payer and payee.

ii.If the salary is surrendered by the employee to the central Govt unjder the voluntary surrender of salary act 1961, it will not be included in his taxable income. The employee may be a private sector, public sector or Govt employee.

iii.Salary will be deemed to a accured or arise at a place where services are rendered. If the services are rendered in india, it will accur in india even if it is received outside india and it will be taxable in india. If a person after rendering services in india, retries and settled abroad receives any pension for such service, such pension will be deemed to accur in india and taxable in india.

However, there is an exception to the above rule is available. If any indian citizen who is a Govt emplyoee and renders service outside india, salary received by him would be treated as indian income and taxable in india even if he is providing service outside india. But the allowances and prequities he receives outside india will be exempted.

iv. When the employee receives tax free salary from his employer, it means that the employer pays the tax due on such salary on behalf of the employee. The amount of tax so paid by the employer will be added to his salary.

v. Once the salary has been earned by kthe employee , it becomes taxable in his hand even if he waives the right to receives the same from the employer.

vi.If the salary is earned in foreign currency, it will be conveted into indian rupee.

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