Salary income is a broad category that encompasses various forms of compensation received by an individual for their services. Under the Income Tax Act of India, salary income includes:
Basic Salary: The core component of an employee’s compensation, which is typically a fixed amount paid regularly.
House Rent Allowance (HRA): An allowance given by employers to employees to meet their rental expenses. HRA may be partially or fully exempt from tax, depending on certain conditions.
Dearness Allowance (DA): An allowance meant to cover the cost of living and inflation. When it forms part of the basic salary, it is taxable.
Bonus: Payments made by the employer in addition to the regular salary, which could include annual bonuses, performance bonuses, etc.
Commissions: Earnings based on the sales or performance achieved, typically applicable in sales-related jobs.
Overtime Pay: Compensation for extra hours worked beyond the regular working hours.
Perquisites (Perks): Benefits provided by the employer, such as company cars, accommodation, or other facilities. Some perquisites are taxable, depending on their nature and value.
Allowances: Various allowances given by the employer, such as:
- Transport Allowance: To cover commuting expenses.
- Medical Allowance: For medical expenses, though this is often fixed and may be taxable depending on the actual expenses.
Gratuity: A lump sum payment made by the employer to an employee upon retirement or resignation, based on the length of service. Gratuity is exempt up to a certain limit under Section 10(10) of the Income Tax Act.
Pension: Regular payments made to retired employees. It can be either a monthly pension or a lump sum received upon retirement.
Other Fringe Benefits: Additional benefits such as stock options, which might be taxable depending on specific provisions and conditions.
All these components collectively form the total salary income, which is subject to income tax based on the applicable tax slabs and rules.
