 BASIC SALARY

 Dearness Allowance (D.A.)

 Commission

 Bonus

 Gratuity

 Leave Salary Encashment

 Pension

 Retrenchment Compensation

 VRS

 Other Receipts in lieu of Salary

 Allowances

 Perquisites
 Income from Salary
• Gross Salary[As per defination u/s17(1)]
Basic Salary
+Taxable portion of gratuity,pension,LTC,etc
+Taxable portion of allowances
+Taxable portion of perquisites
+Profit in lieu of Salary
+Taxable portion of contribution to RPF made by employer
GROSS SALARY
Less:Deduction u/s 16
16(ii) Entertaintment Allowance
16(iii) Professional Tax
INCOME FROM SALARY
 Deductions u/s 16
• Entertainment allowance
This allowance is applicable to central & state government
employees
Deduction: Lease of following
1.5000
2. 20% of Basic Salary
3.Amount Actually received

.Professional Tax[Sec 16(ii)]

Deduction is amount actually paid during the previous year
• Special Allowance( Rule 2BB)

Sec 10(14)(i) Official: The amount given to

meet expenses related to employment. The
exemption is- Amt of actual expenditure or
amount of allowance, whichever is less.
These allowances are Traveling allowance,
Daily allowance, Helper allowance,
Uniform allowance
 Sec10(14)(ii) Personal: The allowance given to meet personal
retirement of the employee. The exemption is – amt of allowance
or limits specified whichever is less
Particular Exemption
Children Education Allowance Rs.100 p.m per child (max 2 children)
Children Hostel Allowance Rs.300 p.m per child (max 2 children)

Allowance for transport sector employees 70% of amount received or Rs.6000pm

whichever is less
Transport/Conveyance allowance( for Rs.800 pm for general or Rs.1600p.m for
journey between place of duty & residence handicapped
Mining allowance 800p.m
Tribal Area Allowance 200p.m
Compensatory field re allowance 2600p.m
Compensatory Modified Field Area 1000p.m
allowance
Counter insurgency allowance 3900p.m
Underground Allowance 800p.m
 House Rent Allowance

Minimum Of Following Shall Be Exempted u/s 10(13A):

1) Actual Received
2) 50% or 40% of Salary
3) Rent Paid- 10% of Salary

NOTE:
1) 50% When house is
situated in a metro city,
else 40%.
2) Salary = Basic+D.A.(if
terms so provide)+
turnover based
commission
 Sec10(7) Foreign Allowance
Any allowance or perquisites paid or allowed outside
India by the government to a citizen of India, for
rendering services outside India, is fully exempt from
tax
Allowances to high court judges u/s 22A(2) of the high
court judges Act,1954
Sumptuary allowance given to High court & Supreme
court judges
Allowance received by an employer of UNO from hid
employer
 GRATUITY sec 10(10)

During Continuation Of On Termination Of

Service Service

Fully Taxable
If Non
Covered
Governmen
YES Under PGA YES
t Employee

NO NO

Minimum Of Following Exempted Minimum Of Following Exempted

1) Actual Gratuity Received 1) Actual Gratuity Received
2) Rs. 3,50,000/- 2) Rs. 3,50,000/-
3) P.M. Salary X Completed Year of 3)1/2 month Avg Salary X
Service X 15/26 Completed Year of Service Fully Exempt

Note: Note:
* PGA= PAYMENT OF GRATUITY ACT *AVG. SALARY= (10 MONTHS BASIC
*SALARY= BASIC+D.A. SALARY+D.A.+TURNOVER BASED
*COMPLETED YEAR includes every COMMISSION) / 10
completed year & period in excess of 6 *COMPLETED YEAR ignores ANY
months shall be treated as a year FRACTION
 LEAVE SALARY ENCASHMENT sec10(10AA)

During Continuation Of On Termination Of

Service Service

Fully Taxable

If Non
YES
Government
Employee
Minimum Of Following Exempted
1) Actual leave encashment Received
2) Rs. 3,00,000/- NO
3) 10 Months Average Salary
4) 30 Days Average Salary For Every
Completed Year Of Service, Subject To
Leaved Availed During The Tenure Of
Service. Fully Exempt

Note:
*AVG. SALARY= (10 MONTHS BASIC SALARY+D.A.+TURNOVER BASED COMMISSION) / 10
[LAST 10 MONTHS EXACT FROM THE DATE OF RETIREMENT.]
*COMPLETED YEAR ignores ANY FRACTION
 PENSION sec10(10A)

UNCOMMUTED COMMUTED
PENSION PENSION

FULLY TAXABLE

ASSESSEE YES IF NON

YES
RECEIVED GOVERNMEN
GRATUITY T EMPLOYEE

NO NO

FULLY EXEMPT

ONE THIRD OF TOTAL PENSION ONE HALF OF TOTAL PENSION

COMMUTED SHALL BE EXEMPTED COMMUTED SHALL BE EXEMPTED
 RETRENCHMENT COMPENSATION sec10(10B)

If Compensation Paid Under Any Scheme

Approved By The Central Government. In any other Case

MINIMUM OF FOLLOWING SHALL

BE EXEMPTED
a) ACTUAL AMOUNT RECEIVED
Nothing Shall Be Taxable. b) Rs.5,00,000/-
c) ANY AMOUNT CALCULATED
UNDER INDUSTRIAL DISPUTE
ACT,1947 i.e Average of last 3
months8* a5/26 * No of completed
years of service and part there in
excess of 6 months
 VOLUNTARY RETIREMENT

RECEIVED FROM SPECIFIED EMPLOYERS In any other Case

MINIMUM OF FOLLOWING SHALL

BE EXEMPTED
a) ACTUAL AMOUNT RECEIVED FULLY TAXABLE
AS PER V.R.S. GUIDELINES* or
b)Rs.5,00,000/-

GUIDELINES:-
a)COMPLETED AGE OF 40 YEARS OR COMPLETED 10 YEARS OF SERVICE (IT IS NOT APPLICABLE ON PUBLIC
SECTOR COMPANY)
b)THIS IS FRAMED TO REDUCE THE STRENGHT OF EMPLOYEES.
c)THE VACANCY CAUSED BY VRS IS NOT TO BE FILLED UP
d)THE RETIRING EMPLOYEE IS NOT EMPLOYED IN ANOTHER COMPANY BELONGING TO THE SAME
MANAGEMENT
e)* THE AMOUNT OF COMPENSATION DOES NOT EXCEED = 3 MONTHS SALARY FOR EACH
COMPLETED YEAR OF SERVICE or SALARY AT THE TIME OF RETIREMENT x BALANCE MONTHS OF
SERVICE LEFT

# SPECIFIED EMPLOYERS :-
a)COMPANY b)LOCAL AUTHORITY c)CO-OPERATIVE SOCIETY
d)ANY AUTHORITY ESTABLISHED UNDER CENTRAL/STATE/PROVINCIAL ACT
e)SPECIFIED UNIVERSITY f)INDIAN INSTITUTE OF TECHNOLOGY(IIT)
g)STATE GOVERNMENT h)CENTRAL GOVERNMENT i)NOTIFIED INSTITUTION
j)NOTIFIED INSTITUTION OF MANAGEMENT (IIM)
 Sec10(11,12,13) Any sum received from PF,RPF,SAF
Type of Employer Employer’s Employee's Employees Amount withdrawn
fund Contribution contribution Contribution Contribution on retirement
principal) interest) principal) interest)

SPF Exempt Exempt Deduction u/s 80 Exempt Exempt u/s 10(11)

c
RPF Exempt up to Exempt up to Deduction us 80 c Exempt up to Exempt subject to
12% of salary 9.5% 9.5% condition. If not
then RPF treated as
URPF
URPF Exempt Exempt No Deduction us Exempt Employees
80 c contribution exempt.
Interest on employee
taxable under IOS.
Employer contri
taxable as salary

PPF NA NA Deduction us 80 c Exempt Exempt

u/s 10(11)
Approved Exempt Exempt Deduction us 80 c Exempt Exempt
Super u/s 10(3)
annuation
fund
Approved Exempt Exempt NA NA Exempt
gratuity u/s 10(10)
fund