Income from salary

Income can be charged under this head only if there is an employer-employee relationship between the payer and payee. Salary includes basic salary or wages, any annuity, gratuity, advance of salary, leave encashment, commission, perquisites in lieu of or in addition to salary and retirement benefits. The aggregate of the above incomes, after exemptions available, is known as Gross Salary and this is charged under the head income from salary. An allowance is a fixed monetary amount paid by the employer to the employee for expenses related to office work. Allowances are generally included in the salary and taxed unless there are exemptions available. Some allowances are fully taxable such as dearness allowance, city compensatory allowance, overtime allowance, servant allowance and lunch allowance. Whereas specific exemptions are available for some allowances. Here are some deductions/allowances which can be claimed. Standard Deduction: A standard deduction of up to Rs 50,000 in lieu of the earlier conveyance allowance and medical re-imbursement of Rs 19,200

This article was originally published on July 21, 2021.