Tax Ready Reckoner

Arrears of salary refer to payments received by an employee for work done in previous financial years but paid in the current year. These payments can significantly increase taxable income, potentially pushing the taxpayer into a higher tax bracket. The Income Tax Act, 1961, provides relief under Section 89(1) to mitigate this additional tax burden. What is […]

Section 17(3) defines “profits in lieu of salary” as payments received by an employee in connection with termination of employment or as compensation for any modification in employment terms. These amounts are taxable under the head “Salaries” even if they don’t strictly qualify as salary. Key Components of Profits in Lieu of Salary Termination Payments

Allowances form a significant part of salary income and are classified into three categories for tax purposes: Fully Taxable, Partially Exempt, and Fully Exempt. Below is a detailed breakdown: 1. Fully Taxable Allowances These allowances are fully added to taxable income: Dearness Allowance (DA) City Compensatory Allowance Overtime Allowance Fixed Medical Allowance Servant/Driver Allowance Non-Practicing Allowance (for doctors) Project

HRA (House Rent Allowance) is a salary component that helps employees cover rental expenses. Under Section 10(13A) of the Income Tax Act, 1961, and Rule 2A, a portion of HRA is exempt from tax if certain conditions are met. 1. Eligibility for HRA Exemption Only for salaried employees(not self-employed) . Must live in rented accommodation(not self-owned) . HRA must be part

Section 10(14) provides exemptions for certain special allowances granted to employees for specific purposes. These allowances are partially or fully exempt from tax, subject to prescribed limits and conditions. 1. Fully Exempt Allowances (No Limit) These allowances are 100% tax-free: Compensatory Field Area Allowance(Armed Forces) High Altitude Allowance(Defense personnel) Island Duty Allowance(Armed Forces in Lakshadweep/Andaman) UN Mission Allowance(For

1. Definition & Applicability Entertainment Allowance is a special allowance given to employees to cover expenses incurred for hospitality/entertainment of clients/business associates. Its tax treatment differs for: Government Employees(Partial exemption available) Private Sector Employees(Fully taxable) 2. Tax Treatment as per Income Tax Act For Government Employees [Section 16(ii)] Exemption:Least of: Actual Entertainment Allowance received ₹5,000

Certain professionals and government employees receive special allowances that are fully or partially exempt from tax under specific sections of the Income Tax Act. Here’s a detailed breakdown: 1. Government & Défense Personnel (A) Armed Forces Allowances (Fully Exempt) ALLOWANCE EXEMPTION CONDITIONS Border Area Allowance Full exemption Posted in specified border areas High Altitude Allowance ₹3,000-25,000/month Based

Here’s a detailed breakdown of fully taxable allowances for the computation of salary income in India, based on the latest tax rules (FY 2024-25/AY 2025-26): Fully Taxable Allowances These allowances are entirely added to your taxable salary income and do not qualify for any exemptions: Dearness Allowance (DA) Paid to offset inflation and cost-of-living adjustments. Fully taxable

Perquisites under Section 17(2) of the Income Tax Act, 1961, are additional benefits or amenities provided by an employer to an employee, over and above their salary or wages. These perquisites form part of “Income under the head Salaries” and are taxable unless specifically exempted. Below is a detailed breakdown of perquisites, their taxability, valuation rules, and recent updates

Under Section 17(2) of the Income Tax Act, 1961, certain perquisites are taxable for all employees, regardless of their designation or salary level. Below is a detailed breakdown of these universally taxable perquisites, along with their valuation rules and examples: 1. Rent-Free or Concessional Accommodation Taxable Value: For non-government employees: 15% of salary(cities with population >25 lakh) 10% of