Income from Salary refers to the compensation received by an individual from their employer in exchange for services rendered. In the Indian taxation system, it is one of the five heads of income under the Income Tax Act, 1961. This income includes basic salary, allowances (such as House Rent Allowance, Transport Allowance), perquisites (like rent-free accommodation, company car), bonuses, commissions, and other monetary benefits received as part of employment.
For tax purposes, the salary is considered on a due or receipt basis—whichever is earlier—and is fully taxable after allowing for certain exemptions and deductions. Common deductions include the standard deduction, professional tax, and eligible exemptions under Section 10 (like HRA and leave travel concession, subject to conditions).
Income from Salary is highly relevant in practical scenarios, especially during the annual income tax return filing process. Employers issue Form 16 to their employees, summarising total income and TDS deducted under this head, which is then used for filing the income tax return. Accurate disclosure of salary income is essential not only for individual compliance but also for maintaining a clean financial profile—especially if one seeks loans, applies for visas, or engages in business registration under a sole proprietorship.
Understanding salary income is crucial for small business owners and entrepreneurs transitioning from employment, as it helps them differentiate personal income from business income and plan tax-saving investments wisely.
To learn more about how salary income is taxed and how to manage your income tax obligations efficiently, visit FinTax24’s income tax solutions.