LESSON 4 INCOME UNDER THE HEAD SALARIES - I
Dr. Gurminder Kaur

STRUCTURE
4.0 4.1 4.2 4.3 4.4 Introduction Objectives Heads of Income Meaning of salary Incomes forming part of Salary - I 4.4.1. Basic Salary 4.4.2 Fees, Commission and Bonus 4.4.3 Taxable Value of Cash Allowances Summary Glossary Self assessment questions Sources and further readings

4.5 4.6 4.7 4.8

4.0 INTRODUCTION
As discussed in an earlier lesson, income means a receipt in the form of money or money’s worth which is derived from definite source with some sort of regularity or expected regularity. These definite sources of income are salaries, house property, business or profession, capital gains and any other source. If an income is not derived from any of these sources, it is not taxable under the Income Tax Act, 1961 (hereinafter referred as ‘Act’). For example, if a person finds a purse containing Rs.1000 on road, it is not treated as income since it is not received from any definite source. We have also learnt that scope of total income is determined with reference to residential status of a person i.e. total income of each person is based on his residential status. Once we know what incomes of a person are taxable, then we need to know how to compute total taxable income according to the provisions of Income Tax Act. The present lesson starts with the classification of incomes into various heads. A detailed study of these heads of income is made lesson wise. This lesson is devoted to the first and most important head of income “Salaries”. The lesson is divided into various sections. First we define the concept of salary income i.e. what are the characteristics, which make an income fall under this head. Then, incomes falling under this head are enumerated, followed by the detailed 30

descriptions of income tax provisions regarding three of these incomes. The description of