Computation of Income from Salary Under Income Tax Law
By Ram Dutt Sharma
(As Amended by the Finance Act, 2025)
This specialized book by Ram Dutt Sharma, a renowned author and former Income Tax Officer, offers an in-depth and practical treatment of the provisions relating to income from salary under the Indian Income-tax Act, 1961. Meticulously updated with the amendments introduced by the Finance Act, 2025, the book is an invaluable resource for tax practitioners, HR professionals, academicians, and students of taxation.
Comprehensive Analysis of Salary Income
Detailed explanation of all components of salary including basic pay, allowances, perquisites, retirement benefits, leave encashment, gratuity, bonus, commissions, and more.
Updated Tax Provisions and Rules
Incorporates the latest changes in tax rates, standard deduction, and treatment of new tax regime under Section 115BAC, as per the Finance Act, 2025.
Clarification on Exemptions & Deductions
Coverage of exemptions under Section 10 (e.g., HRA, LTA), and deductions under Chapter VI-A relevant to salaried individuals.
Treatment of Perquisites
In-depth treatment of valuation and taxability of various perquisites as per Rule 3 of the Income Tax Rules, 1962.
Practical Approach
Includes illustrative examples, computation tables, employer-employee scenarios, and solved problems for better conceptual understanding.
Useful for Multiple Audiences
Beneficial for tax consultants, employers, payroll processors, and candidates preparing for CA, CS, CMA, and income tax departmental exams.
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Meaning of Salary
Basis of Charge
Employer-Employee Relationship
Due vs Receipt Basis
Basic Salary
Advance Salary
Arrears of Salary
Fees, Commission, Bonus, and Overtime
Fully Taxable Allowances
Partially Exempt Allowances (HRA, Transport, Education, etc.)
Fully Exempt Allowances
Detailed Treatment of HRA with Practical Examples
Definition and Taxability
Valuation of Perquisites under Rule 3
Rent-free Accommodation
Motor Car, Sweeper, Gas, Electricity, etc.
ESOPs and other fringe benefits
Tax Paid by Employer on Behalf of Employee
Gratuity
Pension (Uncommuted and Commuted)
Leave Encashment
Provident Fund: RPF, URPF, SPF, PPF
Voluntary Retirement Compensation (Section 10(10C))
Standard Deduction [Section 16(ia)]
Entertainment Allowance [Section 16(ii)]
Professional Tax [Section 16(iii)]
Relief for Arrears and Advance Salary
Computation with Practical Examples
Form 10E Filing Procedure
Step-by-Step Calculation
Illustration-based Computations
Multiple Employer Scenario
Optional Tax Regime – Features & Conditions
Comparative Tax Liability (Old vs New Regime)
Deductions Not Available under 115BAC
Form 10-IE and Opt-In/Opt-Out Provisions
Section 192 – Basics and Method of TDS
Annual Income Estimation by Employer
Declaration via Form 12BB
Salary Structuring and TDS Optimization
Section 10 Exemptions
Chapter VI-A Deductions (80C, 80D, 80E, 80G, 80TTA, etc.)
Tax Planning for Salaried Individuals
Realistic Salary Structures and Solutions
Tax Computation for Government and Private Sector Employees
Retirement Scenario Computations
Salary + Pension Income Taxation
Appendix I: Income Tax Rates (AY 2025–26)
Appendix II: HRA Exemption Chart
Appendix III: Valuation Table for Perquisites
Appendix IV: Relevant Circulars and Notifications
Appendix V: List of Forms (12BB, 10E, 10-IE, etc.)
Appendix VI: Important Judicial Pronouncements
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