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    Meaning of Salary

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    Salary includes basic pay plus allowances and perquisites for various purposes: - HRA, VRS, gratuity (not covered by act), leave salary, and provident fund are included for retirement benefits. - For RFA employees, salary includes basic pay, allowances, bonus, commission, DA for retirement benefits. - For purposes of gratuity covered by act, salary means basic pay and DA. - Entertainment allowance is either actual amount, 20% of basic, or Rs. 5,000 annually for government employees, and is fully taxable for others. - Standard deduction of Rs. 50,000 or salary, whichever is lower, can be claimed. Entertainment

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    Meaning of Salary

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    S
    48 views2 pages
    Salary includes basic pay plus allowances and perquisites for various purposes: - HRA, VRS, gratuity (not covered by act), leave salary, and provident fund are included for retirement benefits. - For RFA employees, salary includes basic pay, allowances, bonus, commission, DA for retirement benefits. - For purposes of gratuity covered by act, salary means basic pay and DA. - Entertainment allowance is either actual amount, 20% of basic, or Rs. 5,000 annually for government employees, and is fully taxable for others. - Standard deduction of Rs. 50,000 or salary, whichever is lower, can be claimed. Entertainment

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    Meaning of salary

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    Salary includes basic pay plus allowances and perquisites for various purposes: - HRA, VRS, gratuity (not covered by act), leave salary, and provident fund are included for retirement benefits. - For RFA employees, salary includes basic pay, allowances, bonus, commission, DA for retirement benefits. - For purposes of gratuity covered by act, salary means basic pay and DA. - Entertainment allowance is either actual amount, 20% of basic, or Rs. 5,000 annually for government employees, and is fully taxable for others. - Standard deduction of Rs. 50,000 or salary, whichever is lower, can be claimed. Entertainment

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    48 views2 pages

    Meaning of Salary

    Uploaded by

    S
    Salary includes basic pay plus allowances and perquisites for various purposes: - HRA, VRS, gratuity (not covered by act), leave salary, and provident fund are included for retirement benefits. - For RFA employees, salary includes basic pay, allowances, bonus, commission, DA for retirement benefits. - For purposes of gratuity covered by act, salary means basic pay and DA. - Entertainment allowance is either actual amount, 20% of basic, or Rs. 5,000 annually for government employees, and is fully taxable for others. - Standard deduction of Rs. 50,000 or salary, whichever is lower, can be claimed. Entertainment

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    of 2

    Meaning of salary

     HRA Salary =
     VRS Basic salary +
     Gratuity (not covered by gratuity act) DA (retirement benefits) +
     Leave salary Commission based on fixed percentage of sale
     Provident fund achieved by EE
    RFA Salary =
    Basic pay +
    Allowance +
    Bonus +
    Commission (all)+
    DA (retirement benefits) +
    Monetary payment
    Retrenchment Compensation Salary =
    Basic salary +
    Allowance +
    Perquisite +
    LTC +
    Commission
    Gratuity (covered by gratuity act) Salary = Basic + DA
    Entertainment Allowance Salary = Basic

    Deduction under section 16

    1. Standard deduction – 50,000 or salary w.e.l


    2. Entertainment allowance
     Deduction is allowed to govt EE
    w.e.l
    1. Actual amount received
    2. 20% of basic
    3. 5,000 p.a.
     Fully taxable for other EE
    3. Professional tax or tax on employment levied by state under article 276(2) is allowed as deduction
    Practice Question

    1. Mr. X retire on 08. 02. 2022 from a private sector company after completion of 30 years and 9
    months of service. He was entitled to 25 days leave for each completed years of service. Leave
    actually availed by him during service life is 510 days and leave enchased during employment is
    25 days leave in 2015 -16. His basic pay was 16,000 from 1.4.22 and D.A 50% of Basic pay. He
    received 3,55,000 from leave encashment

    2. Compute income from salary of Mr. Rahul


    Basic salary 6,00,000
    DA 3,20,000
    Commission 50,000
    Entertainment allowance 7,500
    Children education allowance Rs. 400 p.m. per child. He has two
    children.
    Conveyance allowance Rs. 1000 p.m. Mr. Sachin spent Rs. 800 p.m.
    on conveyance for official use
    Received Rs. 5,000 during the year as leave encashment
    Medical expense reimbursed by ER 21,000
    Professional tax (50% paid by ER) 7,000
    Health insurance premium paid by ER 9,000
    Gift voucher given by ER on his birthday 7,000
    Life insurance premium paid by ER 34,000
    Laptop provided for use at home 30,000
    ER owns TATA Nano Car, which was provided to the assesse for both
    official and personal use. Running expenses were paid by the ER.
    (engine cubic capacity of less than 1.6 litres)
    Annual credit card fee paid by the ER 2,000

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