Meaning of salary, Basic Salary, Dearness Allowance, fFeatures of salary

1. Income from
sala
PREPARED BY –C A ANNIE
STEPHEN

2. THE FIVE HEADS OF
INCOME
 INCOME FROM SALARIES
 INCOME FROM HOUSE PROPERTY
 INCOME FROM
BUSINESS/PROFESSION
 CAPITAL GAINS
 INCOME FROM OTHER SOURCES

3. MEANING OF SALARIES
Income from salary is the income or
remuneration received by an individual
for services he is rendering or a contract
undertaken by him.
 In order to be salaries , the relationship
between the payer and the payee should
be that of a master and servant or that of
an employer and employee

4. The employer may be :
An individual
Firm
Association of persons
Company
Central or State govt
Public Body
Local Authority

5. Features
Conceptually there is no difference
between wages and salaries
Salary from more than one person
due to change in employment or due
to employment with more than one
employer is taxable as Salary
Salary from former, present or
prospective employer is treated as
Salaries

6. Features …..
Foregoing of salary-Once salary has
accrued to an employee, its subsequent
waiver does not make it exempt from tax
liability
Voluntary foregoing of salary or waiver
of salary due to him is merely an
application of income and is nonetheless
chargeable to tax

7. Salary under Section 17(1) means
 Wages
 Any annuity or pension
 Any gratuity
 Any fees, commission, perquisites or profits
in lieu of salary
 Any advance of salary
 Any leave salary encashment received by an
employee
 The portion of annual accretion in any
previous year to the balance at the credit of
the employee participating in a recognized
provident fund

8. • ALLOWANCE
S
• HRA
• EA
• CCA
• CHILDREN
EDUCATION
ALLOWANCE
• HILLY AREA
ALLOWANCE
• UNIFORM
ALLOWANCE
• RETIREMENT
BENEFITS
• GRATUITY
• PENSION
• EARNED
LEAVE
ENCASHMEN
T
• PERQUISITES
• RENT FREE
ACCOMODATION
• CAR FACILITY
• LAPTOP
• CLUB FACILITY
• GAS WATER
ELECTRICITY
ELEMENTS OF SALARY

9. BASIC SALARY
 Basic Pay is the essential component of salary.
 It is given by employer to employee for his
basic qualities like qualification, experience and
expertise in particular field
 It is generally given in the form of a pay scale
2,0000 – 1000 – 2,5000 – 2000 – 35000 – 3000 –
5,0000 – 4000 – 7,0000
 Basic pay is always fully taxable

10. Dearness Allowance
 Dearness Allowance is given to an employee to
compensate him for increase in prices or cost of
living
 It is generally based as certain percentage of
basic pay and it is linked to consumer price
index
 It is revised from time to time
 Dearness allowance of an employee is always
fully chargeable to tax.

11. BONUS
A bonus is extra money that an employee
receives over and above the normal wages
or salary.
The person may receive the extra payment
for good performance.
Bonus is fully taxable as salary

12. Fees/Commission
 Payment for extra work is called
commission or fees
 It is fully taxable as salary
 Fees is an additional payment for
services rendered beyond the normal
employment terms
Commission may be paid if the
employee performs over the targets

13. ILLUSTRATION
Mr. Aman is working with ABC Ltd. for
a Basic Salary of 25,000 pm
Dearness Allowance of 5,000 pm.
Calculate his Salary Income of the
Previous Year 2019-20?

14. ILLUSTRATION 2
Mr. Nitin is working with ABC Ltd. at a
Basic salary of 25,000 pm
 Dearness Allowance of 7,000 pm
 Commission 2,000 pm
Bonus of 30,000 on 30th Nov 2019.
Calculate his Salary Income of the AY
2020-21

15. Illustration 3
Mr. Syed joins Y Ltd. on 1st May 2018 at
a Basic Salary of 25,000 pm
 Dearness Allowance 10% of Basic
 He resigns on 31st Jan 2019.
Calculate his Salary Income of the PY
[2019-20]