What is definition of term ‘Salary’ under the income tax act 1961?
Section 17 income tax act defines term ‘Salary’, however in general term salary is defined as whatever amount received by employee from employer whether in cash or kind or as Facilities (Perquisites) is considered as Salary. In order to determine the correct Income tax, it is important to first determine what should be included in salary and what should not.
What is allowance and how is it treated under the income tax?
Allowance is fixed periodical amount given by employer to employee to meet some personal and office expense. For Example, Transport Allowance, Uniform Allowance, Education Allowance, etc.
Income tax act has divided allowance into three categories:
- Taxable allowances
- Exempted allowances
- Partially exempted allowances
What are perquisites?
Perquisites are the benefit received by an employee over and above the salary as a result of his/her official position. Perquisites are taxable and non-taxable depending upon its nature. Generally, perquisites are exempted to the extent of expenses incurred for official purpose.
Will reimbursement of expenses incurred for personal purpose is taxable?
Yes, Reimbursement received from the employer is taxable under the income tax act if it is incurred for non-official purpose.
My employer has not deducted my TDS and not giving me Form 16. Is there any need to issue Form 16 to me?
No, Form 16 is TDS certificate. If your TDS is not deducted, Form 16 will not apply in your case. You can ask your employer to issue salary statement or salary slip.
Is pension income taxable under the income tax act?
Yes, Pension income is taxable under the income tax act. When a person receiving only pension and his income exceeds the amount not chargeable to tax then he should file his ITR using Form ITR 1.
It is to be noted that pension is taxable and to be reported under the head of ‘Income form Salary’.
Under which head family pension is taxable?
Family income is a taxable income and it is taxable under the head of ‘Income from other source’.
I have let out my property and incurred losses during the year. Can I ask my employer to consider losses from house property and set it off against salary income?
Yes, Losses for house property is allowed to set off against salary income upto the amount of INR 2 lakh, however losses other than house property is not allowed to set off against salary income.
What will be taxability of House rent allowance (HRA) in my hands?
HRA is partially exempted allowance. Income tax act has specified the following method for determining taxable and not taxable part of HRA.
Least/minimum of the following is exempt (Not taxable/deducted from total HRA received)
(a) Actual amount of HRA received
(b) Rent paid Less 10% of salary
(c) 50% of salary if house taken on rent is situated in Kolkata, Chennai, Mumbai and Delhi
40 % of salary if the house is taken on rent is NOT situated in Kolkata, Chennai, Mumbai and Delhi.
What is Form 12BB?
As per the Rule 26C of the income tax act, Form 12BB is required to be submitted to employer declaring his estimated income and estimated deduction under chapter- VIA to be allowed during the year.
I have received arrear salary, will I need to pay tax on it?
Yes, Arrear salary in taxable and tax to be paid in the year in which it is received, However benefit of lower incidence of tax will be available to the year to which income is relate. The benefit is called as relief under section 89 of the income tax act.