As per the information provided by the Income Tax Department, section 17 of the Income-Tax Act defines the term ‘salary’. Generally whatever is received by an employee from an employer in cash, kind or as a facility (perquisite) is considered as salary.
Every person who works either for an employer or manages his/her own business is awarded with a sum of money as a salary or monthly income.
If your salary fits into the income tax bracket then you also have to pay taxes as per the rules. Here is what the Income Tax Department has to say about your salary and taxes on it.
As per the information provided by the Income Tax Department, section 17 of the Income-Tax Act defines the term ‘salary’. However, not going into the technical definition, generally whatever is received by an employee from an employer in cash, kind or as a facility [perquisite] is considered as salary.
What are allowances?
Allowances are fixed periodic amounts, apart from salary, which are paid by an employer for the purpose of meeting some particular requirements of the employee. E.g., Tiffin allowance, transport allowance, uniform allowance, etc. There are generally three types of allowances for the purpose of Income-Tax Act – taxable allowances, fully exempted allowances and partially exempted allowances.
Perquisites are benefits received by a person as a result of his/her official position and are over and above the salary or wages. These perquisites can be taxable or non-taxable depending upon their nature. Uniform allowance is exempt to the extent of expenditure incurred for official purposes u/s 10(14).
Also, all the reimbursements of expenses on grocery and children’s education made by the employer to employee are considered as income as these are in the nature of perquisites and should be valued as per the rules prescribed in this behalf.
Are retirement benefits like PF and Gratuity taxable?
In the hands of a Government employee Gratuity and PF receipts on retirement are exempt from tax. In the hands of non-Government employee, gratuity is exempt subject to the limits prescribed in this regard and PF receipts are exempt from tax, if the same are received from a recognised PF after rendering continuous service of not less than 5 years.
