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Unit 7: Income under the Head Salaries

Gross Salary: 1,52,800 Notes
* Amount of HRA exempt is least of 3 amounts
(a) 50% of Salary (Basic Salary + DA granted under terms of employment + Commission
based on percentage of turnover – ` 48,000 + ` 24,000 + ` 10,000 = ` 82,000) = ` 41,000
(b) Actual HRA received: ` 1000 × 12 = ` 12, 000
(c) Rent paid (` 1200 × 12) – 10% of Salary (` 82,000) ` 14,400 – ` 8,200 = ` 6,200

Task Classify these allowances into the following three categories:
Project allowance, Out of station allowance, Dearness allowance, Servant allowance, Hostel
allowance, Uniform allowance, Dress allowance, Marriage allowance, Foreign allowance,
overtime allowance:

1. Fully taxable allowances
2. Partially exempt allowances
3. Fully exempt allowances

Self Assessment

Fill in the blanks:
9. ……………………………is defined as a fixed amount of money given periodically in
addition to the salary for the purpose of meeting some specific requirements connected
with the service rendered by the employee or by way of compensation for some unusual
conditions of employment.
10. Allowances are generally taxable and are to be included in ……………………… unless
specific exemption is provided in respect of such allowance.
11. …………………………. is a very common allowance these days on account of high prices.
12. ………………………. is given to employees for lunch as coupons or added as part of salary.

7.4 Perquisites

Perquisites are defined as any casual emolument or benefit attached to an office or position in
addition to salary or wages. It denotes something that benefits a man by going into his pocket;
it does not cover mere re-imbursement of necessary disbursements. Such benefits are normally
given in kind but should be capable of being measurable in money terms. Perquisites are
taxable and included in gross salary only if they are (i) allowed by an employer to an employee,
(ii) Allowed during the continuation of employment, (iii) directly dependent on service,
(iv) resulting in the nature of personal advantage to the employee and (v) derived by virtue of
employer’s authority.
As per Section 17 (2) of the Act, perquisites include:
1. Value of rent free accommodation provided to the employee by the employer.

2. Value of concession in the matter of rent in respect of accommodation provided to the
employee by his employer.

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