Components of Salary Income

• Includes basic salary, dearness allowance, and bonuses.
  
• Covers house rent allowance (HRA), leave travel allowance (LTA), and special allowances.
  
• Perquisites such as rent-free accommodation, company car, or stock options are included.
  
• Gratuity, leave encashment, and pension may also be taxable.
  
• Salary is taxed on due or receipt basis, whichever is earlier.
  

Allowances and Their Taxability

• HRA is partially exempt if rent is paid and conditions are met.
  
• LTA is exempt for actual travel expenses within India, twice in a block of four years.
  
• Children education allowance and hostel allowance are exempt to a small extent.
  
• Transport and uniform allowances are exempt up to limits.
  
• Unutilized or unsupported allowances are fully taxable.
  

Deductions from Salary Income

• Standard deduction of ₹50,000 is allowed to all salaried taxpayers.
  
• Professional tax paid is allowed as a deduction.
  
• Contributions to provident fund, NPS, and life insurance are eligible under Section 80C.
  
• Section 80D allows deduction for health insurance premiums.
  
• Interest on housing loan can be claimed under Section 24(b).
  

Tax Calculation and Slab Application

• Total salary after exemptions and deductions becomes taxable salary income.
  
• Tax is calculated based on slab rates applicable to the taxpayer.
  
• Income up to ₹2.5 lakh or ₹3 lakh (based on regime) is exempt.
  
• Higher slabs attract 5%, 10%, 15%, 20%, and 30% tax rates.
  
• Health and education cess at 4% is added on the final tax.
  

TDS and Compliance by Employer

• Employer deducts Tax Deducted at Source (TDS) every month based on estimated annual income.
  
• Form 16 is issued by the employer as proof of TDS and salary details.
  
• Employee must verify the income in Form 26AS and AIS before filing return.
  
• Any excess tax deducted is refundable after filing the return.
  
• Non-disclosure of income or perquisites may lead to tax demand later.