What is Income from Salaries in Income Tax ?

Let us understand what is Income from Salaries?

 ll kinds of taxable income of an assessee fall under any of the following five heads of income. Those incomes which does not find place under any of the first four heads and are taxable , fall under the fifth head of income. In order to calculate the taxable income under each head, certain deductions have made from gross income of that head. These deductions are different for each head. There are separate sections in the Income tax Act for computing the taxable income under each head, which are as under :    

1.    Salaries- Sections 15 to 17,

2.    Income from House Property- Sections 22 to 27,

3.    Profits and Gains of business or Profession- Sections 28 to 44,

4.    Capital Gains- Sections 45 to 55, and

5.    Income from other Sources- Sections 56 to 59.

     No deduction of expenses incurred in relation to exempted incomes in Income from salaries

     In computing total income in Income from Salaries, no deduction shall be allowed in respect of expenditure incurred by the Assessee in relation to income which does not form part of total income.

     The Assessing Officer may determine the expenses incurred to earn income which does not form part of total income, in accordance with such method as may be prescribed.

     What are salaries here in Income from salaries?

     Any remuneration paid by an employer in consideration of his services is called salary. It includes monetary value of those benefits and facilities provided by the employer which are taxable.

     Under section 15, the following incomes are taxable under the head ‘Salaries’:

a.     The salary due from an employer or former employer to an assessee in the previous year, whether paid or not;

b.    The salary paid or allowed to him in the previous year by or on behalf of an employer though not due or before it becomes due to him;

c.     Any arrears of salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer, if not charged to income tax for any earlier previous year.

    What do you mean by salary?

     According to Income from Salaries in Income tax in Section 17(1) gives an inclusive definition of salary. Accordingly, “Salary” includes-

1.    Wages

2.    Any annuity or pension,

3.    Any gratuity

4.    Any fees, commissions, perquisites or in addition to any salary or wages;

5.    Any advance of salary.

6.    Any payment received by an employee in respect of any period of leave not availed by him;

7.    Annual accretion to the balance at credit of an employee participating in a recognised fund to extent of following :

a.     Employer’s contribution in excess of 12% of salary;

b.    Interest credited on the balance in the PF account in excess of 9.5% P.A.

8.    The accumulated balance transferred from unrecognized provident fund account to a recognize provident fund account to the extent it is chargeable to tax;

9.    The contribution made by the Central Government in the previous year, to the account of an employee under a pension scheme referred to in section 80CCD.


Hope you would have understood what is Income from salaries.