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| Home » Income Tax System in India » Heads of Taxable Income » Tax upon salaries and wages |
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Tax upon salaries and wages |
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A major potion of the tax collected by the government of India, does come from the imposed tax upon salaries and wages. There is obviously a certain criteria on the basis of which the government is collection tax upon salaries and wages. But before going into further details we have to get ourselves acquainted with the legal definition of salary. It includes the payment allowances, bonus or commission payed in a monthly basis or in the form of any other monetary payments. It may get various name from the employers but it will finally come under the head of Salary. The following things cannot be termed as salary:
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- Dearness allowance or dearness payment. Once it enters into the computation of retirement benefit or superannuation of the employee concerned then it will again come under the scope of Salary;
- Employer's contribution to the provident fund account of the employee;
- The value of perquisites specified in sub-section (2) of section 17 of the Income-tax Act;
- Allowances which are exempted from payment of tax;
On the other hand salary includes the following aspects:
- Wages;
- Any annuity or pension;
- Any gratuity;
- Any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages;
- The annual accredition to the balance at the credit of an employee participating in a recognized provident fund, to the extent to which it is chargeable to tax under Rule 6 of Part A of the Fourth Schedule;
- The aggregate of all sums that are comprised in the transferred balance as referred to in sub-rule (2) of rule 11 of part A of the Fourth Schedule of an employee participating in a recognized provident fund, to the extent to which it is chargeable to tax under sub-rule (4) thereof;
- Any advance of salary;
- Any payment received by an employee in respect of any period of leave not availed of by him;
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