This document discusses various aspects of salary income taxation in India. It defines salary and outlines what is included in salary such as wages, commission, allowances, perquisites, etc. It discusses the taxation treatment of various allowances as fully taxable, fully exempted or partially exempted. It also explains the valuation of perquisites provided by employers such as rent-free accommodation, use of cars, interest-free loans, medical reimbursements and more. The document provides detailed guidelines on calculating the taxable value of such perks.

1. Prof. Mohasin A. Tamboli
PIRENS Technical Campus
Email: mohasinat@gmail.com
1Prof. M.A. Tamboli

2. Any amount paid by employer to employee
for contribution of service after specific
interval is known as ‘Salary’
Relationship between two person must be
employer and employee.
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Prof. M.A. Tamboli

3.  Salary is inclusive term and it includes:
1. Wages & Salary
2. Leave Salary
3. Commission
4. Leave encashment in service
5. Advance Salary
6. Any Allowance
7. Perquisites
8. Monthly Pension
9. Gratuity
10. Annuity etc.
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Prof. M.A. Tamboli

4.  Salary is always charged on due or receipt which
is earlier.
1. Due Basis: Eg. Salary for the month March 2016
has become due in 2015-16 but paid in April 2016
will be included in total income of the PY 2015-16
2. Receipt Basis: Eg. Advanced Salary for the month
April 2016 is received in March 2016 will be
included in total income of the PY 2015-16
3. Salary once taxed on a particular basis cannot
again be taxed on another basis.
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Prof. M.A. Tamboli

5. 1. Wages: Payment for unskilled work ,
generally it is paid on daily basis.
2. Salary: Payment for skillful work,
generally it is paid on Monthly basis.
3. Remuneration: Any payment for expertise
knowledge, experience or personal skill,
generally it is paid once.
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Prof. M.A. Tamboli

6. Allowance means any additional payment
by employer to employee for specific
purpose.
Allowance may be classified as:
1. Fully taxable allowances
2. Fully exempted allowances
3. Partially exempted allowances
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Prof. M.A. Tamboli

7. 1) Dearness Allowance
2) Fixed medical allowance
3) Tiffin allowance
4) City compensatory allowance
5) Overtime allowance
6) Entertainment allowance
7) Non Practicing allowance
8) Other allowance: Project allowance,
Warden Allowance, Washing Allowance,
Servant Allowance etc.
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Prof. M.A. Tamboli

8. 1) Foreign Allowance
2) Allowance from U.N.O. paid to its
employee
3) Allowance to High Court Judges
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Prof. M.A. Tamboli

9. 1) House Rent Allowance :
a) BCDM Criteria
b) Other than BCDM Crireria
2) Specific /Specisl Allowance:
a) Travelling Allowance / Transfer Allowance
b) Daily Allowance
c) Helper allowance
d) Research Allowance
e) Uniform Allowance
f) Conveyance Allowance
g) Vehicle Allowance
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Prof. M.A. Tamboli

10. c) Special Allowance to meet the Personal
Expenses:
a) Tribal Area or Scheduled Area Allowance
b) Children Education Allowance
c) Hostel Expenditure Allowance
d) Transport Allowance
e) Underground Allowance
f) Special Compensatory Allowance
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Prof. M.A. Tamboli

11. ‘Perquisites’ is defined as any casual
emolument, fees or profits attached to an
office or position in addition to salary or
wages.
It may be in cash or kind.
It is included in salary income only if they
are received by an employee from his
employer.
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Prof. M.A. Tamboli

12. If gift given by employer to employee in
terms of cash or cash convertible then
such gift are 100% taxable.
If gift given in terms of things or goods
then exemption is aggregate Rs. 5000 per
year.
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Prof. M.A. Tamboli

13.  First less depreciation from asset and then add
remaining amount in salary in that year when property is
gifted.
N
o
.
Particulars Electronic
Items
(Computer,
Printer etc)
Vehicles Other
1 Rate of Depreciation 50% 20% 10%
2 Method of Depreciation WDV WDV SLM
3 Year Consider Completed
years only
Completed
years only
Completed
years only
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Prof. M.A. Tamboli

14. 1. By appointment of one doctor at factory premises and
provide monthly medical facility free of charge. It is 100%
exempted from tax.
2. Give authority to any doctor to provide medical facility to
employee and taken medical treatment from him is 100%
exempted from tax.
3. Any expenditure incurred by employer or reimbursement of
expenses by employer is exempted maximum upto Rs.
15,000
4. Medical facility provided outside India is exempted according
to limit fixed by RBI. If no limit fixed by RBI then no
exemption.
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Prof. M.A. Tamboli

15.  Such facility means allow children to take
education in employer’s institute.
 In such case exemption is Rs. 1,000 per
month per child and there is no maximum
limit of children.
 For ascertaining taxable portion first find out
cost of same education in another institute. If
it exceeds Rs. 12,000, then exceed portion
should be treated as salary of employee.
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Prof. M.A. Tamboli

16. 1. If Employer is Manufacturer: in such a
case, the cost of manufacture treated as
salary.
2. Purchase from Other: Actual amount paid
to purchase the service is treated as
salary.
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Prof. M.A. Tamboli

17. Any bill of telephone including mobile is
paid by employer on behalf of employee is
totally exempted from income tax.
If telephone bill of office and private use is
given separate then office exp. Is exempt
and private exp. Is taxable.
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Prof. M.A. Tamboli

18. Any amount paid by employer for providing
health club facilityis added to value of
salary. If recovery from employee deducted
from expenditure incurred by employer.
Expenses incurred by employer XXX
Less: Amount recoverd from employee XX
Value of Perk (Add to Salary) xxx
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Prof. M.A. Tamboli

19. 1. Snacks provide anywhere = Totally Exempt.
2. Lunch Provide at remote place = Totally
Exempt.
3. Lunch provide in factory or office:
1. Expenditure incurred for lunch XXX
2. Less: Rs. 50 Per Lunch XX
XXX
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Prof. M.A. Tamboli

20. Any loan given by employer to employee
at concessional rate then value of perk is;
SBI standard Rate-Actual Rate charged by
the employer.
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Prof. M.A. Tamboli

21. Any salary paid by employer to cook,
gardener, watchman or servant added to
salary of employee.
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Prof. M.A. Tamboli

22. Any fund for providing lump sum amount
on retirement is known as Provident Fund.
Provident
Fund
Statutory
Provident
Fund
Recognized
Provident
Fund
Unrecognized
Provident
Fund
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Prof. M.A. Tamboli

23. Particulars Statutory
Provident Fund
(S.P.F.)
Recognized
Provident Fund
(R.P.F.)
Unrecognized
Provident Fund
(U.R. P.F.)
1. Employer’s
Contribution
Fully Exempt Exempt upto 12 %
of Salary
For the time being
exempt
2. Employee’s
Contribution
Deduction U/S 80
(Investment)
Deduction U/S 80
(Investment)
Deduction U/S 80
not applicable
3. Interest on
Provident Fund
Fully Exempt Exempt upto 9.5
%
For the time being
exempt
4. Maturity Value Fully Exempt Fully Exempt Half (50%)
Exempt
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Prof. M.A. Tamboli

24. 1. If car own by employee and maintenance
cost also by employee: No value should be
added to salary of employee.
2. If car own by employee and maintenance by
employer:
1. Fully use for office = No Value
2. Fully use for Personal purpose = Actual maintenance
expenditure incurred by employer added to salary.
3. How much portion is used for office is not known:
Car below 1600 cc = Rs. 1,800 per month
Car above 1,600 cc = Rs. 2,400 per month
If driver is provide = Rs. 900 per month
Actual Expenses by Employer- Value as per rule
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Prof. M.A. Tamboli

25. 3. If car own by employer and maintenance
cost also by employer:
1. Use for office Purpose = No Value
2. Use for personal purpose = 10% of Value of Car +
Actual maintenance expenses.
3. How much portion for office is not given:
Car below 1600 cc = Rs. 1,800 per month
Car above 1,600 cc = Rs. 2,400 per month
If driver is provide = Rs. 900 per month
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Prof. M.A. Tamboli

26. 4. If car own by employer and maintenance
by employee:
1. Use for office = No Value
2. Use for Personal Purpose = 10% of cost of car
3. How much portion use for office is not known
Below 1600 cc = Rs. 600 Per Month
Above 1600 cc = Rs. 900 Per Month
If driver provide = Rs. 900 Per Month
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Prof. M.A. Tamboli

27. When employees owns any automotive
conveyance (other than car) and running
and maintenance charges are met or
reimbursed by employer then :
1. Use for office = No Value
2. How much use for office not known =
Actual expenditure incurred by the
employer – Rs. 900 per month
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Prof. M.A. Tamboli

28. Valuation = Value at which such benefit is
offered to public – amount recovered from
employee
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Prof. M.A. Tamboli

29.  Perquisites means allow employee to use the
property free of cost or at concessional rate.
Normally perk are of four types:
1. Rent free accommodation
2. Furnished rent free accommodation
3. Concessional furnished accommodation
4. Residential accommodation at hotel
Here,
Salary = Basic+DA(forming
part)+Commission+Bonus+Fees+Taxable
Allowance+Any money chargeable under the Act
Prof. M.A. Tamboli
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30. 1. If the house which provided owned by the
employer: Value of perk consider in
salary on the basis of population of that
place, where house is provided.
Prof. M.A. Tamboli
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Population Value of Perk
1. Population Exceeds 25 Lakhs 15 % of Salary
2. Population is below 25 Lakhs but Exceeds 10 Lakhs 10% of Salary
3. Population is less than 10 Lakhs 7.5 % of Salary

31. 2. If employer provide house which is not
owned by himself but taken on rented
basis :
In this category no population base is
applicable and value of perk is 15% of
salary or
Actual rent paid by employer which is less
Prof. M.A. Tamboli
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32.  Accommodation with furniture is known as
furnished accommodation.
 For this calculation first find out value of
house and then add the value of furniture
 If furniture owned by the employer = 10% of
original cost of furniture
 If furniture taken on rented basis then, actual
rent paid by the employer
Prof. M.A. Tamboli
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33.  At concession means not free but minimum
charges are recovered from employee.
 To find the value of this, following steps are
important:
Step 1 : Find out value of house
Step 2 : Find out value of furniture
Step 3: Step 1 + Step 2
Step 4: Concessional Rate. Total recovered amount
Step 5: Step 3 – Step 4
The answer amount add into salary
Prof. M.A. Tamboli
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34. If company allow employee to reside at
hotel, here maximum 15 days allow to
reside at hotel.
1. 24% of salary or
2. Actual amount paid to hotel which is less
Prof. M.A. Tamboli
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35.  In case of salary three different deduction are
allowed:
1. Standard Deduction : Not Applicable
2. Entertainment Allowance: This exemption is allowed
to govt. employee only. The deduction is least of
following three:
1. 20% of basic salary
2. Rs. 5,000
3. Actual Entertainment allowance received
First this allowance add into salary, then take deduction
3. Professional Tax: Tax for profession or Service is
Professional Tax. Exemption is full amount paid as
professional tax
1. If paid by Employer = First add it in to Salary then take deduction
2. If paid by employee = take only deduction
Prof. M.A. Tamboli
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