Income from Salaries – Charging Section and Allowances

Earnings from Salaries– Charging Area and Allowances, Earnings from Incomes at a glimpse., Home Lease Allowance [Sec. 10 (13A)], Home Entertainment Allowance, Other exemptions. Now you can scroll down below and examine more details for “Income from Wages– Charging Area and Allowances”

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Income from Salaries– Charging Section and Allowances

What is Wage

The significance of the term ‘income’ for functions of income tax is much broader than what is usually understood. Every payment made by a company to his employee for service rendered would be chargeable to tax as income from incomes. The term ‘wage’ for the functions of Income-tax Act, 1961 will consist of both monetary payments (e.g. basic wage, bonus offer, commission, allowances etc.) as well as non-monetary centers (e.g. real estate accommodation, medical facility, interest totally free loans etc).

Should Check Out– Earnings of Other Individuals included in our Income

Basis of Charge (Sec.15)

  • Income from salary chargeable to tax on due basis or receipt basis whichever takes place previously. In other words income due in a financial year is taxable, even if it is not received and income got in a monetary year is taxable, even if it not due.

    What is included in Wage (Sec.17?)

    There are four elements of salary earnings:–LRB-

    1. Salary correct
    2. Allowances
    3. Perquisites
    4. Profit in lieu of income

    Should Read– Incometaxindiaefiling


    • Salaries
    • Any annuity or pension:
    • Any gratuity
    • Any costs, commissions, perquisites or revenue in lieu of wage.
    • Any advance income
    • Encashment of leave

    The following allowances are exempt to the degree they are spent for the specified function. If they are not spent for the defined purpose, then the unspent quantity will be taxable.

    Allowance Conditions for exemption
    Travelling allowance/Transferred allowance To satisfy the expense of travel on tour or on transfer of duty
    Daily allowance during travel To fulfill normal daily charges sustained on account of lack from his regular location of duty
    Conveyance allowance To meet the expenses of conveyance in performance of official duties
    Helper allowance Helper is engaged for main work
    Academic and research allowance For motivating academic research study pursuits
    Uniform allowance On the purchase and maintenance of uniform for official purpose

    Must Read– Leading Factors for Earnings Tax Refund Failure

    The following allowances are exempt to the level of the limitation specified i.e. exemption does not depend upon expense.

    Allowance Degree of exemption
    Children Education allowance Rs.200 p.m. exempt
    Transport allowance given to an employee to satisfy his expense for the function of travelling between the place of his house and the place of his responsibility It is exempt up to Rs.800 per month (Rs.1,600 per month in the case of a worker who is blind or orthopedically disabled
    Allowance for transport employees to satisfy individual expenditure during his responsibility, provided he is not in invoice of day-to-day allowance Lower of:-.

    ( a) 70% of such allowance or

    ( b) Rs.10,000 monthly

    Home Lease Allowance [Sec. 10 (13A)]

    Excused from tax to the level of the least of the following:

    1. 50% of income in Delhi, Mumbai, Kolkata, Chennai or 40% of salary in other cases.
    2. Home rent allowance; or
    3. The excess of lease paid over 10% of salary (lease paid less 10% of salary)

    Needs To Check Out– Income Tax– Sources, Basics & Important Principles

    Home Entertainment Allowance

    In case of Civil servant, least of the following is exempt from tax:

    • 5,000/-
    • 20% of Salary or
    • Entertainment allowance in fact received

    For entertainment allowance, wage indicates standard income; it omits all benefits and allowances.

    From AY 2002 -03, for non– government employees, home entertainment allowance reduction will not be available.

    Other exemptions

    Nature of helpful allowance perquisite Quantity of exemption
    ( i) Settlement on voluntary retirement Actual quantity or Rs.5,00,000 whichever is less
    ( ii) Travelling allowance, Daily allowance, Conveyance allowance, Helper allowance, Academic allowance and Uniform allowance These allowances will be exempt to the degree of minimum as following:.

    ( 1) Real allowance got.

    200 p.m.

    ( vi) Special countervailing uneven locations allowance or high elevation allowance, etc. Exemption varies from Rs.300 p.m. to Rs.7,000 p.m.
    ( vii) Border area, remote location, disturbed location allowance etc. Exemption numerous from Rs.200 p.m. to Rs.1,300 p.m.
    ( viii) Offsetting field location allowance Rs.2,600 p.m.
    ( ix) Compensatory customized field location allowance Rs.1,000 p.m.
    ( x) Counter insurgency allowance Rs.3,900 p.m.
    ( xi) Transportation allowance Rs

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