"Salary" 17(1), "Perquisite"17(2) and "Profits in lieu of salary" 17(3)

The meaning of the term ‘salary’ for purposes of income-tax is much wider than what is normally understood. The term ‘salary’ for the purposes of Income-tax Act, 1961 will include both monetary payments (e.g. basic salary, bonus, commission, allowances etc.) as well as non-monetary facilities (e.g. housing accommodation, medical facility, interest free loans etc.).

‘Salary’ under section 17(1), includes

• wages, (The words “wages”, “salary”, “basic salary” are used interchangeably)
• Allowances like House Rent Allowance, Dearness Allowance, Leave Travel Allowance etc.
• any annuity or pension,
• any gratuity,
• any fees, commission, perquisites or profits in lieu of or in addition to any salary or wages,
• any advance of salary,
• any payment received in respect of any period of leave not availed by him i.e. leave salary or leave encashment,
• Provident Fund:

1. • the portion of the annual accretion in any previous year to the balance at the credit of an employee participating in a recognized provident fund to the extent it is taxable and
     
   • transferred balance in recognized provident fund to the extent it is taxable,

• The contribution made by the Central Government or any other employer in the previous year to the account of an employee under a pension scheme referred to in section 80CCD.
  
• The contribution made by the central government in the previous year, to the Agniveer Corpus Fund account of an individual enrolled in the Agnipath scheme referred to in section 80CCH.

Perquisites Section 17(2)

“Perquisite” may be defined as any casual emolument or benefit attached to an office or position in addition to salary or wages like supply of water, electricity and gas, rent-free accommodation, professional tax, the salary of domestic help hired by the employee, medical expense reimbursements, etc.

“Perquisite” is defined in the section 17(2) of the Income tax Act as including:

• the value of rent-free accommodation provided to the assessee by his employer 
  
• the value of any concession in the matter of rent respecting any accommodation provided to the assessee by his employer
• the value of any benefit or amenity granted or provided free of cost or at concessional rate in any of the following cases -
• • by a company to an employee who is a director thereof 
  • by a company to an employee being a person who has a substantial interest in the company 
  • by any employer (including a company) to an employee whose income under the head "Salaries", exclusive of the value of all benefits or amenities not provided for by way of monetary payment, exceeds eighteen thousand rupees;
  • any sum paid by the employer in respect of any obligation which, but for such payment, would have been payable by the assessee and
  • any sum payable by the employer, whether directly or through a fund, other than a recognised provident fund or an approved superannuation fund, to effect an assurance on the life of the assessee or to effect a contract for an annuity; 

Profits in lieu of salary Section 17(3)

• Compensation from the employer or former employer at or in connection with termination of employment or modification of the terms and conditions of employment.
• Any payment from the employer or former employer or from a PF or other fund, to the extent it does not consist of employee's contribution or interest thereon.
• Any sum received under a Keyman insurance policy including bonus on such policy.
• Any amount received in lumpsum or otherwise from any person before joining or after cessation of employment.