Income Tax on Salary Income- Basis of Charge, Allowance, HRA, Taxability of Perks, Gratuity, Pension, Leave Encashment, Providend Funds & Deductions from Salary
INCOME FROM SALARIES Important Points to be considered An income is chargeable to tax under the head “salary” if & only if there exits an employer-employee relationship between the payer and the payee. Basis of Charge Salary is chargeable to tax on DUE BASIS (accured) or on RECEIPT basis (advance) whichever is earlier. Taxability of Allowance Fully Taxable Allowances Sr. No. Allowance Type Particulars 1 Dearness Allowance (DA) Extra amount given to an employee to meet the burden of inflation or increase cost of living. 2 City Compensatory Allowance Compensation for the high cost of living in metropolitan & Large cities. 3 Fixed Medical Allowance Fixed allowance paid to the employees on a monthly basis irrespective of whether they submit the bills to substantiate the expenditure or not. 4 ...