Frequently Asked Questions - Income from Salary

What is income from salary?

Any emoluments received by an employee from an employer in cash, kind or as a facility [perquisite] is considered as Salary. In theoretical terms, it includes

What are allowances? Are all allowances taxable?

Allowance is generally defined as a fixed quantity of money or other substance given regularly in addition to salary for the purpose of meeting some particular requirements connected with the service rendered by the employee or as compensation for unusual conditions of that service.

Are the daily allowance given during tour by the employer , which is not spent, will be treated as income?

Yes, this being a part of salary will be taxable.

What should be the tax treatment of reimbursement of expenses on grocery and children’s education. Would this be considered as income?

Yes. These are in the nature of perquisite.

In the FY 2007-08, I had worked with two different employers , who have not deducted any tax from salary paid to me. However the total salary from both the employers is exceeding the exemption limit. Do I have to pay taxes on my own?

Yes. You will have to pay self-assessment tax and file the return.

Is it necessary to issue a form 16, even if the employer has not deducted the taxes on salary?

Form-16 is a certificate of TDS and is not required to be issued when the taxes are not deducted from salary. However your employer must issue a salary statement.

Is pension income a part of salary?

Yes it is. Uncommuted pension is taxable as salary while commuted pension is exempt in case of Govt.employees. However pension received from the United Nation is exempt.

Is Family pension a part of salary income?

No. It is taxable under Income from other sources.

If I am receiving my pension through a bank who will issue Form-16 or pension statement to me - the bank or my former employer?

The bank will issue the Form-16 in such cases.

Are retirement benefits such as PF and Gratuity taxable?

No. They are exempt subject to conditions and limits laid down in the Income Tax Act.

Are arrears of salary taxable?

Yes, arrears of salary 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.

Can my employer consider relief u/s 89(1) for the purposes of calculating my tax liability?

Yes.

My income from let out house property is negative. Can I ask my employer to consider this loss against my salary income while computing my tax liability?

Yes, loss from house property can be adjusted against your salary income.

Is leave encashment taxable as salary?

It is taxable if received while in service. Received as retirement benefit, however it is exempt subject to certain conditions.

Life insurance amount received on maturity along with bonus - is it taxable?

No, it is not taxable.