#06INCOME
Meaning of Salary
What is CTC?
Calculation of Income from salary
Allowances
Fully Taxable allowances:
Partly Taxable allowances:
Non Taxable allowances:
Perquisites
Perquisites that are taxable for all the employees:
Perquisites that are taxable only to specified employees:
Perquisites that are exempt from tax:
FORM 16
FORM 26AS
Meaning of Salary
The salary for the purpose of calculation of income from salary includes:
Wages;
Pension;
Annuity;
Gratuity;
Advance Salary paid;
Fees, Commission, Perquisites, Profits in lieu of or in addition to Salary or Wages;
Annual accretion to the balance of Recognized Provident Fund;
Leave Encashment;
Transferred balance in Recognized Provident Fund;
Contribution by Central Govt. or any other employer to Employees Pension A/c as referred in Sec. 80CCD.
What is CTC?
CTC is one of the generic term when a person talks about salary. CTC stands for Cost To Company. It is the amount that the company in spending on hiring and sustaining an employee.
CTC includes the salary as well as the other benefits provided to an employee which can be meal coupons, office space rent, Provident Fund, Medical Insurance, House Rent Allowance(HRA) and any other element that cost to the company.
It may be noted that CTC varies from the actual income from salary that a person receives as CTC also includes variables over and above the actual salary that a person is receiving.
Calculation of Income from salary
Basic Salary —
Add: —
1. Fees, Commission and Bonus —
2. Allowances —
3. Perquisites —
4. Retirement Benefits —
5. Fees, Commission and Bonus —
Gross Salary —
Less: Deductions from Salary —
1. Entertainment Allowance u/s 16 —
2. Professional Tax u/s 16 —
Net Salary —
Allowances
Fully Taxable allowances:
Dearness Allowance: The allowance is paid to the employees to cope with inflation.
Entertainment Allowance: This is an allowance that is provided to the employees to reimburse the expenses which are incurred on the hospitality.
Overtime Allowance: Overtime allowance is the allowance which is paid to the employees for working above the regular work hours.
City Compensatory Allowance: This allowance is paid to those employees who move to urban cities.
Project Allowance: When an employer provides an allowance to the employees to meet the project expenses.
Tiffin/Meals Allowance: Employees may be provided with meal allowances in some cases.
Cash Allowance: Employer may also provide cash allowance in some cases like for marriage or holiday purposes.
Partly Taxable allowances:
House Rent Allowance: It is the allowance that an employer pays to his employee for accommodation.
Entertainment allowance
Special allowances like allowance for travel, uniform, research allowance etc.
Special allowance to meet personal expenses like children’s education allowance, children hostel allowance etc.
Non Taxable allowances:
Allowances that is paid to the Govt. servants abroad: When the government employee of India are paid allowances when they are serving abroad.
Sumptuary allowances: Sumptuary allow
Compensatory allowance paid to judges: When a judge receives a compensatory allowance, it is also not taxable.
It may be noted that a person can save tax on income from salary by getting the Tax Saving Allowances.
Perquisites
Perquisites are those payments which are received by an employee from the employer over and above the salary.
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