Income from salary is the remuneration that is received by an individual who is rendering services under any contract which is taken by him. The contract should be under employment.
The amount received by an individual shall be considered as income from salary only if there is an employer employee relationship between those peoples who entered into the contract. One will be the person who pay the amount and one will be the person who receive the amount.
WHAT IS SALARY?
The salary for the purpose of income tax act includes the following part:
Wages;
Pension;
Annuity;
Gratuity;
Advance Salary paid;
Fees, Commission,
Perquisites,
Profits in lieu of or in addition to Salary or Wages;
Annual accumulation to the balance of Recognized Provident Fund;
Leave Encashment;
Transferred balance in Recognized Provident Fund;
Contribution which is made under Sec. 80CCD.
HOW TO CALCULATE INCOME FROM SALARY
ALLOWANCES
ALLOWANCES WHICH ARE FULLY TAXABLE
Dearness Allowances
Entertainment Allowances
Overtime Allowances
City Compensatory Allowances
Project Allowances
Tiffin Allowances
Cash Allowances
ALLOWANCES WHICH ARE PARTLY TAXABLE
House rent Allowances
Entertainment Allowances
Special allowances
Special Allowances (for meeting personal expenses)
ALLOWANCES WHICH ARE NON-TAXABLE
Allowances which are being paid to government
Sumptuary Allowances
ALLOWANCES WHICH ARE PAID BY UNO
Compensatory Allowances which are being paid to judges
The person can also save tax by getting the Tax Saving Allowances under Income from Salary.
PERQUISITES
Perquisites are the payments which are received by an employees by the employer above the salary.
PERQUISITES WHICH ARE TAXABLE TO ALL EMPLOYEES
Rent free accommodation
Payments for Club fee
Movable assets
Concession in accommodation rent
Interest-free loans
Expenses for Education
Insurance premium paid by employer on behalf of employees
PERQUISITES WHICH ARE TAXABLE TO SPECIFIC EMPLOYEES
Domestic purpose Free gas, electricity etc.
Concessional transport facility
Expenses for Concessional education
Payment which are made to gardener, sweeper and attendant.
PERQUISITES WHICH ARE EXEMPTED FROM TAX
Medical benefits
Health Insurance Premium
Leave travel concession
Staff Welfare Scheme
Car, laptop etc. (personal use).
FORM 16
Form 16 is a form where employer gives details about the salary which is being received by the employee and also the details of tax deducted at source throughout the year. Form 16 is issued once in a year, it is issued on or before 31st May of the next financial year.
Form 16 contains two parts which is as followed:
Part A: This part of the Form contains all the information about employer and employee.
Part B: This part of the Form contains the information about salary which is paid, tax payable etc.
FORM 26AS
Section 203AA of the Income Tax Act makes required to issue Form 26AS. This form contains all the information about tax which is paid or deposited to tax department. This form help an individual to know the tax liability.
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