Salary is the remuneration received by or accruing periodically to an individual for service rendered as a result of expressed or implied contract. In other words, salary includes wages, dearness allowance, bonus, gratuity, annuity or pension, advance salary, fees, commission perquisites, profits received from employer in addition to salary,, leave encashment while in service, employer’s contribution to provident fund in excess of 12% of salary of employee, Salary taxable only on individual.
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According to Sec.15, we can reason out the term salary as,
a) Amount of salary due in this year from the present or former employer
b) Amount of advance salary received from the current or former employer in this year
c) Arrears of salary received in respect of the previous year from the current or former employer during this year during the present and former
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Principles of Salary (Characteristics)
1. There must be an employer employee relationship
2. Salary from former employer eg: pension
3. Advance salary received
4. Tax free salary eg: salary (tax deducted at source)
5. Forgoing salary (surrender of salary to the central govt. so liable for tax deduction)
6 Accrual bases (taxable receipt and earned which ever is earlier)
7. Payment made after termination
SALARY= BASIC PAY+ ALLOWANCES+PERQUSITES+PROFITS IN LIEU OF SALARY - (ENTERTAIMENT ALLOWANCE +PROFESSIONAL TAX)
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Scope of salary
· Basic salary or wages
· Advance pay
· Arrears of salary
· Dearness pay (to meet cost of living)
· Annuity (payment for a contractual period)
· pension
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Form of salary
· Death cum retirement gratuity
· Pension and commuted value of pension
· Leave salary
· Compensation for retrenchment(compulsory retirement)
· Fees and commissions
· Bonus
· Receipts on voluntary retirement
· Annuity
· Salary and pension from UNO and Foreign national
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