Income of Salaried Employees which are paid under various nomenclature yet termed as salary

Income of Salaried Employees which are paid under various nomenclature yet termed as salary – Definition of Salary, Perquisite and Profit in lieu of Salary

“Salary”  includes:-

i.      wages,  fees,  commissions, perquisites, profits in lieu of, or, in addition to salary, advance  of salary, annuity or pension, gratuity,  payments in respect  of  encashment of leave etc.

ii.     the portion of the annual   accretion   to the balance at the credit of the employee participating in a recognized provident fund as consists of {Rule  6 of Part A of the Fourth Schedule of  the Act}:

a) contributions  made by the employer to the account of the employee in a recognized provident fund     in       excess   of   12%   of the salary of the employee, and

b) interest credited on the balance to the credit of the employee in so far as it is allowed at a rate exceeding such rate as may be fixed by Central Government. [w.e.f. 01-09-2010 rate is fixed at 9.5% – Notification No SO
1046(E) dated 13-05-2011]

iii.     the contribution made by the Central Government or any other employer to the account  of  the  employee  under  the  New  Pension  Scheme  as  notified  vide Notification F.N. 5/7/2003- ECB&PR dated 22.12.2003 (enclosed as Annexure VII) referred to in section 80CCD (para 5.5.3 of this Circular).

It may be noted that, since  salary  includes   pension,   tax  at  source would have to be  deducted from pension also, unless otherwise so required. However, no tax is required to be deducted from the commuted portion of pension to the extent  exempt under section 10 (10A).

Family Pension is chargeable to tax under head “Income from other sources” and not under the head “Salaries”. Therefore, provisions of section 192 of the Act are not applicable. Hence, DDOs are not required to deduct TDS on family pension paid to person.

Check also the following articles for more information on Income Tax 2015-16

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Download Income Tax Department Circular No.20/2015 (F.No. 275/192/2015-IT(B) dated 02.12.2015