Salary is an amount received from an employer to employee for the service rendered to the company.
Here are some must know facts for salaried individuals:
Apart from salary, some companies pay allowances which are fixed, for the purpose of meeting some particular requirements of the employee. Such as Tiffin allowance, transport allowance etc.
There are generally three types of allowances for the purpose of Income-tax Act - taxable allowances, fully exempted allowances and partially exempted allowances.
2) Pension Income
Pension income received from the United Nations Organization is exempt. Family pension is taxable as income from other sources.
3) Leave Encashment
It is taxable if received while in service. Leave encashment received at the time of retirement is exempt in the hands of the Government employee.
In the hands of non-Government employee leave encashment will be exempt subject to the limit prescribed in this behalf under the Income-tax Law.
4) PF and Gratuity
In the hands of a Government employee Gratuity and PF receipts on retirement are exempt from tax.
In the hands of non-Government employee, gratuity is exempt subject to the limits prescribed in this regard and PF receipts are exempt from tax, if the same are received from a recognised PF after rendering continuous service of not less than 5 years.
5) Form 16
Form-16 is a certificate of TDS. If no tax has been deducted from your salary, it will not be applicable to you. However, your employer must issue a salary statement.
If you have worked in three different companies in a financial year and none of them deducted any tax from salary paid. In such cases, if the total income exceeds the limit, you have to pay self-assessment tax and file the return of income.