Meaning of Salary →salary is a form of periodic payment from an employer to an employee. →salary is fixed amount of money or compensation paid to an employee by an employer in return for work done. →salary is taken on due basis only

Defination of Salary :- Definition of Salary u/s 17(1) of Income Tax Act is inclusive, which means apart from general and popular meaning, also it includes those items which otherwise may not be considered as salary. 1. Wages; 2. Any annuity or pension; 3. Any gratuity; 4. Any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages; 5. Any advance of salary but not advance in the nature of a loan; 6. Any payment received by an employee in respect of any period of leave not availed of by him. 7. The contribution made by the Central Government or any other employer to the account of an employee under a pension scheme referred to in section 80CCD.

Characteristics of salary 1.Relationship of employer and employee :- →must exist between the payee and the receiver of the salary. →employer maybe a Government, Local authority, a Company or any other public body. →the provisions of this Act includes every kind of payment to every kind of servant, public or private. Remuneration payable to an employee of foreign Govt.

2.Salary from more than one employee → amount of salary due or received from more than one employee under this head. →employee is working with two employees simultaneously or serves with another employer after leading service with first employer. →salary from both the employees is taxable.

3.Salary from present,past or prospective Employer →salary received or due from present, past or future employer is also taxable. Under this head. 4.Tax free Salary →employer pays full salary to the employee and also pays tax on this directly to the department. →Employee’s assessment to be made not on the amount of salary he is drawing but on gross amount.

5.Salary Received as member of Parliament →it is Taxable under the head “salaries". Taxable as income from other sources. →Any allowance received by them is fully exempted.

6.Receipts from Persons other than Employer →Benefits or Any other remuneration received from persons other than the employer, would be taxable under the head ‘Salaries 'but under the head income received from other sources’. →E.g. Amount received by a professor of a college for acting as an examiner in a university.

7.Place of Accrual of Salary Income →Salary accrues at that place where services are rendered. if rendered in India the salary accrues in India and if in abroad, the salary accrues abroad. →e.g. if a person employed in India goes to England and gets his salary there. the salary is sad to accrue in india.If any person is employed in India and transferred to its branch in england,the salary received by him is not Indian income.

8.Deductions made by the Employer →If deduction is made by the employer out of the salary payable, amount so deducted s deemed to be received by the employee. →Such as:- ●Deductions made to cover up the loan. ●employee’s contribution towards income tax, provident fund. ●Deduction made to pay premium on life insurance policy of employee.

9.Salary as a partner →salary, commission or remuneration received by a working partner from a firm isnot taxable under the head ‘salaries’. →taxable under the head ‘profits and gains’.

10.Payments received by legal heirs of a deceased employment →compensation given to widow or legal heirs of a deceased employee is not taxable as family income. →it is treated as a family pension received is Taxable under ‘other sources’.

11.Salary grade/Pay scale →organizations like government offices,banks,post offices, railways employees is paid as per pay scales. →Fixing of starting salary and annual increment in future years. →e.g. if an employee joins his service on 1 st September 2010,he will be granted 1 st annual increment on 1 st september,2011.

12.Advance salary received →when salary is received in advance in a previous year which was actually not due in that year.

PROVIDENT FUNDS Government has set up various provident funds. Employee contributes a fixed percentage of his salary towards these funds he will get the payment out of his fund at the time of retirement. if the employee dies, his heirs will get the full payment. Provident funds are of four kinds : 1.Statutory provident fund 2.Recognised provident fund 3. Unrecognized provident fund 4.Public provident fund

1.Statutory Provident Fund →oldest type of fund started in a year 1925 through a provident fund Act of 1925.view of promoting savings amongst the government employees maintained by government departments like railways ●employees contribution-taxable as gross salary, deduction under section 80 c will be offered. ●employees contribution-exempt ●interest credited by fund-exempt

2.Recognised provident fund →maintained by the industrial undertakings, business houses,banks,etc. ●employers contribution-exempt upto 12% of salary. ●Interest credited by fund-exempt upto 9.5% ●lump sum received-exempt provided employee completes 5 year of service.

3.Unrecognised provident fund → it is the provident fund which is not recognised by the commissioner of income tax. employee and employer both contribute towards this fund. ●Employees contribution-it is added in the salary, deduction under section 80c will not be offered ●Interest credited by fund-it will be taxable as "income from other sources” not as salary income. ●Lump sum received-exempt

4.Public provident fund → This fund is started for self employed people.e.g lawyers,doctors,accountants etc. ●Employees contribution- ●employer contribution- excess of 12% of the salary of the employee. ●interest credited by a fund-over interest is calculated at 9.5%. ●Lump sum received-