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Salary It means any remuneration paid by the employer to the employee in consideration of his services. It could be monetary or non-monetary.
Place of Accrual:
It is the place where the employee is working or rendering services. In case of Govt. employee if he get transferred to outside India and earn a salary there for the services rendered there, it is considered as Indian Income. Whereas if a non-govt. employee is transferred to a branch outside India, his salary which is received there, is considered as foreign income.
Salary Grade
Every person has a salary grade/pay scale which represents exclusively the initial basic salary, future increments in the same, during the entire service period and the maximum salary after which there is no increment.
Tax-free Salary
When the employer pays the tax on behalf of the employee, it is called tax-free salary. In such a case, the aggregate of the net salary received plus the amount of tax paid on his behalf by the employer, should be taken into account for income tax purpose. ( gross salary)
Allowances
Allowances refers to a fixed sum of money paid regularly, in addition to salary for the purpose of meeting some particular requirement connected with the services rendered by an employee. From Income Tax view, There are three types of such allowances: 1. Fully taxable allowances 2. Partly taxable and partly exempt allowances 3. Tax-free allowances (Fully exempt allowances)
C. Medical Allowance D. Servant Allowance E. Tiffin/ Dinner/ Refreshment Allowance F. Overtime Allowance G. Non-practicing Allowance H. Hill Allowance I. Deputation Allowance
J. Warden & Proctor Allowance K. Family Allowance L. Marriage Allowance M. Project Allowance N. Rural Allowance O. Telephone Allowance P. Education Allowance Q. Holiday Allowance R. Health Allowance S. Special Qualification Allowance T. High Cost of Living Allowance
B. Entertainment Allowance:
This allowance is paid by the employer to the employee to enable the employee to meet certain expenses incurred by him for entertaining the customers of the employer's business. The entertainment allowance fully included in the gross salary income of the employee. Thereafter a deduction is allowed in respect of this allowance u/s 16 (ii) to a govt. employee, from the gross salary income (subject to certain conditions).
C. Special Allowance:
Special Allowances for performing of the office duties:
1. Travelling/Transfer/ Packing Allowance 2. Daily Allowance 3. Conveyance Allowance 4. Helper Allowance 5. Academic Allowance 6. Uniform Allowance All the above allowances are exempt from tax to the extent to which they are actually spent by the employee for his official duty purposes. The unspent amount is taxable.
Special allowances for meeting the personal purpose: 1. Children Education Allowance- is exempt at Rs. 100 p.m. per child upto two children. 2. Children Hostel Allowance- is exempt at Rs. 300 p.m. per child upto two chidren. 3. Transport Allowance- is exempt at Rs. 800 p.m. incase of employee who is blind or orthopedically handicapped is exempt at Rs. 1600 p.m. 4. Underground Allowance- is exempt at Rs. 800 p.m. 5. Tribal Allowance- is exempt upto a maximum of Rs. 200 p.m.