Page 222 - DCOM301_INCOME_TAX_LAWS_I

Unit 7: Income under the Head Salaries

7.10 Keywords Notes

Accommodation: It includes a house, flat, farm house, hotel accommodation, motel, service
apartment, guest house, a caravan, mobile home, ship etc.

Allowance: It 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.
Dearness Allowance, Additional Dearness Allowance and Dearness Pay: This is a very common
allowance these days on account of high prices.
Deputation Allowance: When an employee is sent from his permanent place of service to some
other place or institution or organisation on deputation for a temporary period, he is given this
allowance.
Gratuity: It is a reward for long and meritorious service. Earlier, it was not compulsory for an
employer to reward his employee at the time of his retirement or resignation.

Hill Allowance: It is given to employees working in hilly areas on account of high cost of living
in hilly areas as compared to plains.
Overtime Allowance: When an employee works for extra hours over and above his normal
hours of duty he is given overtime allowance as extra wages.
Perquisite: It includes all benefits and amenities provided by the employer to the employee in
addition to salary and wages either in cash or in kind which are convertible into money.
Remote Area: It means an area located at least 40 kilometres away from a town having a population
not exceeding 20,000 as per the latest published all-India census.
Salary: It is the remuneration received by or accruing to an individual, periodically, for service
rendered as a result of an express or implied contract.

7.11 Review Questions

1. Define Salary.
2. Write a note on basis of charge for salary.
3. Prepare short notes on:
(a) Profit in lieu of salary
(b) Entertainment Allowance

4. Differentiate between the following:
(a) Statutory provident fund and public provident fund.
(b) House Rent Allowance and Rent Free Accommodation.

(c) Allowances and Perquisites.
5. Mr. X is employed in P Ltd. getting basic pay of ` 20,000 per month. The employer has paid
him the following emoluments:

Bonus 6,000 per annum
Servant Allowance 500 per month
Project Allowance 1,000 per month

LOVELY PROFESSIONAL UNIVERSITY 217