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Salary Income Taxes

Whatever is received by an employee from an employer in cash, kind or as a facility (perquisite) is considered as Salary. This article helps you getting the right information regarding the payment of income tax from your salary.

Salary Income Taxes
 

 

Employer-Employee Relationship

If a person has the right/power to hire and fire another, then he is an employer of the latter.
 
Allowances and Taxable allowances
Allowances are fixed amounts, apart from salary, which are paid by an employer for the purpose of meeting some particular requirements of the employee. There are generally three types of allowances for the purpose of income tax- taxable, fully exempted and partially exempted.
 
Pension income as salary
Pension income is considered as salary in India. However pension received from the United Nation is exempt.
 
Family pension as salary
Family pension is not considered as salary. It is taxable under other sources.
 
PF and Gratuity
Retirement Benefits such as PF and Gratuity are not taxable. They are exempted subject to conditions and limits laid down in the Income Tax Act.
 
Arrears of salary 
Arrears of salary are taxable. However certain benefit of spread over of income to the years to which it relates can be availed for lower incidence of tax. This is called relief u/s 89(1) of Income-tax Act.
 
Computing Tax Liability
If your income from let out house property is negative, you can ask employer to consider this loss against your salary income while computing your tax liability. Also your employer can consider relief u/s 89(1) for the purposes of calculating your tax liability
 
Leave Encashment
Leave Encashment is taxable if received while in service. Received as retirement benefit, however it is exempt subject to certain conditions.
 
Life insurance
Life insurance amount received on maturity along with bonus is not taxable.

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