Income from Salaries Allowances

1. Income from Salaries

2. Income from Salary
• Section 15 to 17
• Any remuneration paid by an
employer to his employee in
consideration of his service.
• Monetary value of those
benefits and facilities provided
by the employer which are
taxable.

3. Salary – Section 17 (1)
• Includes:
– Wages
– Any annuity / pension
– Any gratuity
– Any fee, commission
– Perquisites/ profits in lieu of salary
– Any advance salary
– Any payment received in respect of any period
of leave not availed (Encashment of earned
leave)
– Annual accretion to Recognized Provident Fund
– Taxable portion of transferred balance
– Contribution made by the Central government /
other employer under the pension scheme

4. Important points
• Foreign Salary and Pension
• Relationship of employer and employee
• Professional income- business/ profession
• Receipts from persons other than
employer
• Pension
• Salary of MP- Other Sources
• Salary of a partner- Business/ Profession
• Family pension

5. Salary
Basic Salary Allowances Perquisites
Profits in lieu
of Salary
Less
Entertainment
Allowance
Employment
Tax

7. Income from Salaries

8. Meaning
• Payments in cash made by the
employer to his employee
monthly, other than salary.
• Fixed sum of money paid
regularly in addition to salary
for the purpose of meeting some
particular requirement
connected with the service
rendered by an employee.

9. Allowances
Taxable
Allowances
Allowances
exempt upto
Specified limit
Fully
Exempted
Allowances

10. Taxable Allowances
Dearness Allowances
Fixed Medical allowances
Tiffin Allowances
Servant Allowances
Non- Practicing Allowances
Hill Allowances
Warden and proctor
Allowances
Deputation Allowances
Overtime Allowances
Other Allowances

11. • Dearness Allowances
– Common allowance on account
of high prices
– Additional DA- sometimes
– Included- Salary
– Taxable in full
– Given as terms of employment-
included in salary for
determining exemption limit of
HRA, RPF, etc
– Dearness Pay - becomes part of
basic salary

12. • Fixed Medical Allowances
– fully taxable.
• Tiffin Allowance
– Lunch and Refreshment to the
employees
– Meal allowance / Refreshment
Allowance
• Servant Allowance
– Taxable for all categories of
employees
• Non- practicing allowance-
– Medical Doctors - government
service

13. • Hill Allowance
– Given to employees working in hill
areas on account of high cost of living in
hilly areas as compared to plains
– Fully taxable - place < 1000 metre
height from sea level
• Warden and Proctor Allowance
– Educational Institutions for working as
warden of the hostel
• Deputation Allowance
– An employee is sent from his permanent
place of service to other place or
institution or organization on deputation
for a temporary period
• Overtime Allowance
– Employee works for extra hours over
and above his normal hours of duty
– Extra wages - fully taxable

14. • Other Allowances
– Family allowance to armed
personnel while on field without
family
– Project allowance
– Marriage allowance
– Rural allowance
– City Compensatory Allowances
– Telephone Allowance
– Education Allowance
– Dinner Allowance
– Health allowance
– Holiday allowance
– Special qualification allowance, etc

15. Other
Allowances
Project
Marriage
Rural
CCA
Telephone
Education
Dinner
Health
Holiday
Special
Qualificati
on

17. Allowances
Exempt Upto Specified Limit

18. Allowances
Exempt Upto
Specified Limit
HRA
Entertainm
ent
Special
Allowances
Sec 10 (14)
(i)
Special
Allowances
Sec 10 (14)
(ii)

19. House Rent Allowances
• Allowance granted to an assessee by his
employer to meet expenditure incurred on
payment of rent in respect of residential
accommodation occupied by him
• Exempt upto a certain extent
• Rule 2A - least of the following amount
shall exempt
1. HRA actually received
2. Excess of rent paid over 10% of salary
3. a) If the accommodation - Mumbai,
Kolkata, Delhi or Chennai- 50 % of salary
b) At any other places - 2/5th (40%) of salary
House Rent Allowances

20. • Employee is living his own house -
getting HRA
• Living in a house for which he is not
paying any rent
• Fully taxable
• Salary
– Basic Pay
– Dearness Allowance- if terms of employment
– Commission based on fixed percentage of
turnover
HRA

21. Entertainment Allowance
• Included in the Salary u/s 15
• Deduction - u/s 16 (ii)

23. • Special allowances exclusively to be incurred
in the performance of the duties of his office
• Sec 10 (14) (i)
• Travelling Allowance
• Cost of travel on tour or on transfer
• Travel on transfer - any sum paid in
connection with transfer packing, and
transportation of personal effects on such
transfer.

24. Special Allowances
Sec 10 (14) (i)
Travelling
Daily
Conveyance
Helper
Academic
Uniform
Special Allowances
Sec 10 (14) (ii)
Special hill
compensatory
Children
Education
Children Hostel
Transport

25. Fully
Exempt
Foreign
Sumptuary
Employess
of UNO
Per-diem

27. Allowances
Exempt Upto Specified Limit

28. Allowances
Taxable
Allowances
Allowances
exempt upto
Specified limit
Fully
Exempted
Allowances

29. Allowances
Exempt Upto
Specified Limit
HRA
Entertainm
ent
Special
Allowances
Sec 10 (14)
(i)
Special
Allowances
Sec 10 (14)
(ii)

30. Special allowances
• Two types
• Those which are exclusively
incurred in the performance
of the duties of his office
• Those which are to meet the
personal expenses

31. Special
Allowances
Exempt u/s
10 (14) (i)
Exempt u/s
10 (14) (ii)

32. Special Allowance Sec 10 (14) (i)
• Exclusively to be incurred in the
performance of the duties of his office
• Special allowances granted to meet
expenses wholly, necessarily and
exclusively incurred in the performance
of the duties of an office.
• These are exempt to the extent actually
spent
• Such expenses are actually incurred for
that purpose and
• Notified by the Central Government.

33. Special Allowances
Exempt u/s
10 (14 ) (i)
Travelling Daily Conveyance Helper Academic Uniform

34. Special Allowance Sec 10 (14) (i)
• Travelling Allowances
– To meet cost of travel on tour or on transfer
– The cost of travel on transfer – any sum pad
in connection with transfer packing and
transportation of personal effects on such
transfer
• Daily allowance
– Allowance granted for the period of journey
on tour or on transfer
– To meet the ordinary daily charges incurred
by an employee
– On account of absence from his normal office
place of duty.

35. Special Allowance Sec 10 (14) (i)
• Conveyance Allowance
– To meet expenditure incurred on
conveyance in the performance of
duties of an office or employment
of profit.
• Helper Allowance
– Expenditure incurred on a helper
where such helper is engaged for
the performance of official duties.

36. Special Allowance Sec 10 (14) (i)
• Academic Allowance
– Allowance granted for
encouraging the academic,
research and other professional
pursuits.
• Uniform Allowances
– Expenditure incurred on the
purchase or maintenance of
uniforms for wear during the
performance of official duties

38. Special Allowance
Section 10 (14) (ii)

39. Special Allowances
• To meet personal expenses
• Any such allowance granted to the
assessee either
• To meet his personal expenses at the
place of his official duties or
• At the place where he ordinary resides or
• To compensate him for the increased cost
of living.
• Exempt from tax to the extent notified by
the Central Government

40. Special Allowances
1. Special Compensatory
Allowance
1. Special hill compensatory
allowance
2. High altitude allowance
3. Uncongenial climate allowance
4. Snow bound area allowance
5. Avalanche allowance

41. Special Allowances
2. Special Compensatory Allowance
– Border area allowance
– Remote locality allowance
– Difficult area allowance
– Disturbed area allowance
3. Special Compensatory – Tribal Areas/
Scheduled Areas/ Agency Areas)
Allowances
– Madhya Pradesh, Tamil Nadu, UP,
Karnataka, Tripura, Assam, West bengal,
Bihar and Orissa
– Rs 200 p.m

42. Special Allowances
4. Any allowances granted to an
employee working in any
Transport System
– To meet his personal expenses
– During his duty performed in the
course of running such transport
from one place to another place
– 70 % of such allowance or
– Rs 10,000 p.m whichever is less

43. Special Allowances
5. Children Education Allowance
– Rs 100 p.m per child
– Max – 2 children
6. Children Hostel Allowance
– Rs 300 p.m per child
– Max – 2 children

44. Special Allowances
7. Transport Allowance
– To compensate the cost incurred on
account of commuting between the
place of residence and the place of
duty
• Max Rs 1,600 p.m
– If the employee – blind or deaf and
dumb or orthopedically handicapped
with disability of extremities
• Exempt- Rs 3,200 p.m

45. Special Allowances
8. Underground Allowance
– Employee who is uncongenial
unnatural climate in underground
mines
– Max Rs 800 p.m.
9. Special allowances to members
of Armed forces

47. Fully Exempted Allowances

48. Fully
Exempt
ed
Foreign
Sumptua
ry
From
U.N.O
Per-diem

49. Fully Exempted Allowances
• Foreign Allowances
– Paid by government to Indian citizen
outside India
– For rendering services abroad
– It is not taxable at all
– Several types – overseas allowance,
children education allowance,
entertainment allowance, etc
– Not available to non- government
employees
– Those who are not Indian citizens

50. Fully Exempted Allowances
• Sumptuary allowances to High
court or Supreme court judges
– Allowances given to high court and
supreme court judges
– Fully exempt from tax
• Allowances from UNO
– Paid by U.N Organizations to its
employees

51. Fully Exempted Allowances
• Per-diem allowances
– Paid for the purpose of use of hotel,
boarding and lodging facilities to an
employee