Income from salary includes the allowances, perquisites and retirement benefits.

1. Dr. Yagna Vyas

2. Salary includes the provisions contained in
Section 15, 16 & 17.

3. Basis of charge (Section:15)
1. Salary is charged on due basis or receipt basis (whichever is earlier)
2. Advance salary is assessed in the year of payment and not taxable in the
year which its due.
3. The arrears salary can be assessed in due basis can not be taxed again
when its paid.

4. Meaning of Salary, Perquisites & profit in
lieu of salary(Section 17)
Salary -
Sec 17(1)
Perquisites
-Sec 17(2)
Profit in
lieu of
salary- sec
17(3)
Meaning

5. Salary includes the following:
 Wages;
 Advance salary;
 Any fees commission, perquisites or profit in lieu of salary
or wages;
 any retirement benefits( pension, gratuity, PF, leave any retirement benefits( pension, gratuity, PF, leave
encashment);
 Contribution by employer in pension scheme of section
80CCD.

6. Allowances
Fully exempted
1. Allow. To high court
Judge
2. Allow. Paid to united
Nations organization
3. Compensatory allowance
Fully Taxable
1. Dearness Allow
2. City compensatory allow.
3. Lunch & Tiffin Allow
4. Medical Allow
5. Servant Allow
Partly Taxable
1. House Rent Allow
2. Special Allow *
3. Compensatory allowance
received by a judge
4. Sumptuary allowance
granted to high court or
supreme court judge
5. Allow. Granted to
government employee
outside India.
5. Servant Allow
6. Warden Allow
7. Interim Allow
8. Project Allow
9. Overtime Allow
10. Entertainment Allow**
11. Transport Allow*
11. Any other cash Allow

7. Special Allowances*
Amt. received & Amt.
Spent (whichever is less is
exempted)
1. Daily Allow.
2. Conveyance Allow.
3. Uniform Allow.
Amt. received & limit
specified(whichever is less
is exempted)
1. Children Education
Allow. (Rs. 100p.m./p.c.
maximum 2child)
2. Tribal Allow. (Rs. 200
* Transport Allowance to
other than handicapped
and blind employee is3. Uniform Allow.
4. Traveling Allow.
5. Helper Allow.
6. Research Allow.
2. Tribal Allow. (Rs. 200
p.m.)
3. Hostel Allow. ( Rs.
300p.m/p.c. maximum 2
child)
4. Transport Allow. (Rs.
3200p.m. only for the blind
& handicapped employee)
and blind employee is
fully taxable.
** Entertainment
Allowance to Non-
government employee is
fully taxable.

10. Illus- 1
Mr. X an employee of ABC ltd. Received the following monetary benefits
from the company during the previous year 2019-20.
B.S. Rs. 10,000 p.m.
DA Rs. 2500 p. m.
HRA 10% of salary
Compute his taxable income from salary for the AY 2020-21

11. Computation of Taxable Salary
Ordinary Resident PY: 2019-20
Individual AY: 2020-21
PAN:---------
Basic Salary(10,000*12) 1,20,000
Dearness Allowance(2500*12) 30,000
HRA (10% of 1,20,000) 12,000HRA (10% of 1,20,000) 12,000
Gross Salary 1,62,000
Specific deduction u/s 16:
* Professional tax ---
*Entertainment Allowances ---
Taxable Salary 1,62,000

12. Illus-2
Mr. X an employee of ABC ltd. Received the following emoluments
during the previous year 2019-20:
B.S:Rs. 12,500 up to 31st Dec, 2019
Which was incremented by Rs. 5000 from Jan, 2020.
DA: Rs. 12,500 p.m. (forming part of retirement benefits)
HRA received Rs. 7,500 p.m. (rent paid 12,000 p.m.)
Calculate his taxable income from salary for the AY:2020-21

13. Computation of Taxable Income from Salary
Ordinary Resident PY: 2019-20
Individual AY:2020-21
PAN:_______
Particulars Amt. Amt.
B.S. (12,500*9m) 1,12,500
(12,500+5,000=17,500*3m) 52,500 1,65,000
DA (12,500*12) 1,50,000DA (12,500*12) 1,50,000
HRA (7,500*12) 90,000
Less: exempted: (Note 1) 90,000 Nil
Gross Salary 3,15,000
Specific deduction u/s 16:
*professional tax --
* Ent. Allowance --
Taxable Income from Salary 3,15,000

14. Note:1
Minimum of 3 is exempted:
1. Actual HRA received: Rs. 90,000
2. Rent Paid- 10% of Salary:
(1,44,000 – 31,500)= Rs. 1,12,500
3. 40% of salary: Rs. 1,26,000
**Salary: B.S+ Spe. DA+ Sales Com**Salary: B.S+ Spe. DA+ Sales Com
= 1,65,000+ 1,50,000+0
=Rs. 3,15,000 *10%= 31,500
* 40%= 1,26,000

15. Mr.X an employee of XYZ ltd. earned the following income during the P.Y.
2019-20.
B.S. Rs. 35,000
D.A. 100% of B.S. (60% of which is forming part of salary)
Commission on sales @ 1% (turnover Rs. 1,00,000 p.m.)
HRA: 10% of B.S.
Rent paid by Mr. X was Rs. 10,000 p.m. in Delhi (up to 31st August he lives in
own house with his mother @ Noida)own house with his mother @ Noida)
Medical allowance Rs. 500p.m.
Compute his taxable income from salary for the AY 2020-21.

16. Computation of taxable income from salary
Ordinary Resident PY:2019-20
Individual AY:2020-21
PAN______
Particulars Amt. Amt.
B.S. (35,000*12m) 4,20,000
DA (100% of B.S.) 4,20,000
Medical Allow. (500*12) 6,000
Sales commission (100000*12m=12,00,000*1%) 12,000
HRA (10% of 4,20,000) 42,000
Less: exempted: (note-1) 24,500 17,500
Gross Salary 8,75,500
Less: specific deduction u/s 16
* Entertainment allow ****
* Professional tax ****
Taxable Income from Salary 8,75,500

17. Note -1
Minimum of the 3 is exempted: (1st Sept to 31st March)=7months
1. Actual HRA received (3500*7 m) = 24,500
2. Rent paid less 10% of salary =(70,000 – 39,900)= 30,100
3. 50% of salary = (50% of 3,99,000)= 1,99,500
Salary for HRA (7 months)Salary for HRA (7 months)
B.S = 35000* 7m= 2,45,000
Spe. DA= 35000*60%= 21000*7 m = 1,47,000
Sales commission (1,00,000*7m*1%)= 7,000
3,99,000* 10%= 39,900

18. Thank YouThank You