Salary

Salary Concept and Definition
 
Normally, the term Salary signifies the consideration for serve rendered by a person. The person who renders the services is called the employee while the person who receives the services and pays the consideration is called the employer. The expression meshing means mankind of relationship of master and servant between the employer and the employee. This relationship is governed by a contract of employment whether expressed or implied which is absolutely essential in order to tax the amount so received under the head Income from Salaries. Thus, a medical practitioner, an exhort or a chartered considerant not occupied by the employer but positive as a advisor or a retainer cannot be called an employee and the amount so received by such persons will not be taxable under the head Salaries. Further, where such persons argon appointed in a regular job under a contract, verbal or written or implied, then they micturate employees and their remuneration is taxable under the head Salaries.
 
 
Sec 17 of the Income Tax Act, 1961, gives an inclusive definition of salary. Broadly, it includes:
 
a)      Basic Salary;
b)      Fees, instruction and Bonus;
c)      Taxable portion of cash allowances;
d)      Taxable survey of Perquisites;
e)      Retirement Benefits etc.




 
Although all the components of salary income are included in salary, there are certain incomes in each of these categories which are either fully exempt or exempt upto a certain limit. The aggregate of all the above incomes, after the exemption(s) available, if any, is cognise as Gross Salary. From the Gross Salary, the side by side(p) deductions are allowed u/s 16 of the Act to total at the figure of Net Salary.
a)      Deduction for cheer allowance u/s 16(ii);
b)      Deduction on account of any sum paid towards tax on employment u/s 16(iii).
 
 
Tax Planning
 
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