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What is salary ?

Salary is basically the amount due from an employer or paid by an employer in the previous year/s (because we are filing income tax return for the previous years). If any arrear is due or paid in the previous years from/by an employer, the same is to be considered as salary.

For any amount to be considered as salary, who is taking amount must be employee of the person/institution who is giving the amount. In other ways we can say that following is considered as salary as per the present taxation law of the country:

• Wage
• Pension/Annuity
• Gratuity
• Fees, perquisites, profits or commissions in place of salary or wages
• Salary given in advance by the employer
• Encashment of leaves as per facility given by the employer
• Annual accretion in a provident fund {Accretion means  any amount provided by the employer above the stipulated limit (at present 12% of the salary) and interest credited in addition to the rate (8.10% for FY 2022-23) declared by the government from time to time}.
• New Pension Scheme- Contribution made by employer
• Pension from employer/contribution (Excluding family pension)

What is Perquisite ?

Followings are considered as perquisites as enumerated in income tax act of India:

• Rent free or concessional accommodation by the employer (Value in Rupees).
• Free/concessional amenities or benefits granted/provided to any employee who is a director or having substantial interest in that company.  
• Free/concessional amenities or benefits granted/provided to any employee whose income under the head “Salary”(excluding non monetary benefits/amenities) is above Rs. 50,000 (Rs. Fifty Thousand).
• Any obligation (value in Rupees) paid by the employer which was payable by the employee.
• Amount paid by employer to effect an life assurance or annuity ( other than from provident fund or superannuation fund).
• Fair market value of specified security (under scheme of Employee's Stock Options and as defined in section 2-h of the Securities Contract Act 1956) or Sweat Equity Shares (equity shares issued by a company to its employees or directors at a discount or for consideration other than cash) allotted by the present or earlier employer.
• Contribution of above Rs. 7.50 lakhs by the employer in provident / pension fund of employee in previous year.
• The value of any other fringe benefit or amenity as prescribed in Rule 3 of Income Tax Act.

Note: Following are not being considered as perquisites:

• The value of any medical treatment/expenditure provided/incurred to an employee or any member of his family in any hospital maintained by the employer or maintained by the Government or any local authority or any other hospital approved by the Government for the purposes of medical treatment of its employees.

What is profit in place of salary ?

Many of us already know the section in which “Profit” is defined which is section 17(2) of Income Tax Act of India. As per this Act, followings are considered as “Profit”:

1. Compensation received or to be received by any employee from the employer due to his termination of service or any type of modification in his employment.
2. Amount received or to be received from employer or provident fund or any other fund, above his own contribution including interest thereon.
3. Amount or bonus received by the employee from Keyman insurance policy outlined and funded by the employer.
4. Amount paid or due from any person before and after any employment with that person.