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Meaning of salary, perquisites and profit in lieu of salary Under income Tax Act

Section 17(1) : Salary includes

(i) wages; any advance of salary; paid leave; any annuity or pension; any gratuity;

 (ii) any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages;

 (iii) the annual accretion to the balance at the credit of an employee participating in a recognised provident fund,

(iii) the aggregate of all sums that are comprised in the transferred balance of recognised provident fund, to the extent to which it is chargeable to tax ; and

(iv) the contribution made by the Central Government or any other employer to NPS

(v) the contribution made by the Central Government to the Agniveer Corpus Fund account under Agnipath Scheme;

section 17(2): Perquisite includes:

(i) the value of rent-free accommodation, concessional accommodation, provided to the assessee by his employer

(ii) the value of any benefit or amenity granted or provided free of cost or at concessional rate

(iii) any sum paid by the employer in respect of any obligation of the the assessee;

 (iv) any sum payable by the employer, whether directly or through a fund, other than a recognised provident fund or an approved superannuation fund

 (v) the value of any specified security or sweat equity shares allotted or transferred, by the employer, or former employer, free of cost or at concessional rate to the assessee.

Provided that nothing in this clause shall apply to,—

   (i) the value of any medical treatment provided to an employee or any member of his family in any hospital maintained by the employer;

  (ii) any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family—

 (a) in any hospital maintained by the Government or any local authority or any other hospital approved by the Government for the purposes of medical treatment of its employees;

 (b) in respect of the prescribed diseases or ailments, in any hospital approved by the Principal Chief Commissioner or Chief Commissioner having regard to the prescribed guidelines

Provided that, in a case falling in sub-clause (b), the employee shall attachwith his return of income a certificate from the hospital specifying the disease or ailment for which medical treatment was required and the receipt for the amount paid to the hospital;

(c) in respect of any illness relating to COVID-19 subject to such conditions as the Central Government may, by notification in the Official Gazette, specify in this behalf;

 (iii) any portion of the premium paid by an employer in relation to an employee,

 (iv) any sum paid by the employer in respect of any premium paid by the employee to effect or to keep in force an insurance on his health or the health of any member of his family.

 (v) any expenditure incurred by the employer on—medical treatment including travel and stay abroad relation to that treatment of the employee, or any member of the family of such employee, outside India; travel and stay abroad of one attendant who accompanies the patient in connection with such treatment,

 (3) “profits in lieu of salary” includes—

   (i) the amount of any compensation due to or received in connection with the termination of his employment or the modification of the terms and conditions relating thereto;

  (ii) any payment  due to or received by an assessee from an employer or a former employer or from a provident or other fund, to the extent to which it does not consist of contributions by the assessee or interest on such contributions or any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy.

 (iii) any amount due to or received, whether in lump sum or otherwise, by any assessee from any person—

 (A) before his joining any employment with that person; or

 (B) after cessation of his employment with that person.


Income Tax Laws

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